The worst of Universal Credit

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CAB briefing on Universal Credit







Identifying some of the disadvantages...



This briefing looks at four particular financial changes for disabled children, adults and their families, and consider how they will interact with the broader universal credit changes. Whilst three of the changes are cuts and one is an increase, not all the people affected by the specific losses and gains will lose or gain overall in the way that might be expected. We aim to unpick some of that complexity in the scenarios for different groups. Please note that the Government has announced that existing benefit claimants will be provided with "transitional protection" to ensure that they will not face cash losses in their benefit entitlement at the point at which they are transferred on to Universal Credit, as long as their circumstances remain the same.


Change one: reduced disabled child additions


At present, families with a disabled child may be entitled to receive support through the disability element of child tax credit, currently worth £58 a week. Under Universal Credit, this support is to be provided through "disability additions" within household benefit entitlements but the proposal is to cut the help in half to just £28 a week.

This change will affect all families with a disabled child unless the child is receiving the higher rate of the care component of Disability Living Allowance (DLA) or is registered blind. Many families with disabled children will lose more than this £28 a week. For some, high childcare costs mean that the more paid work they do, the more they will lose. However some families with disabled children, who can work without incurring childcare costs, will be better off under universal credit, despite the £28 a week cut.


Abolition of the Severe Disability Premium


The Severe Disability Premium (SDP) currently gives additional support to disabled adults who receive the middle rate or higher rate of the care component of DLA and live on their own (or just with children) and no one is paid Carer’s Allowance for assisting them. This additional support helps to cover the additional costs of both living alone with a disability and having no carer. For disabled parents, receiving the premium can help reduce the pressure on their children, often of school age, to care for them.

The Government is abolishing the Severe Disability Premium with the introduction of Universal Credit. This will cost disabled adults with no-one to care for them, or with only a young carer, about £58 per week (over £3000 per year).


Additional support for disabled adults in the support group for Employment and Support Allowance


ESA is the benefit paid to those who are unable to work because of a disability or health condition. It was introduced for new claimants in October 2008 and all claimants of the benefits it replaced are currently being reassessed for ESA. The assessment process for ESA has three possible outcomes: claimants may be found fit for work; awarded ESA and placed in the work related activity group (WRAG); or awarded ESA and placed in the support group (the group for people with the highest support needs and no work obligations).

The Government has said that any savings from the reductions in the disability addition for children and the severe disability premium will be used to increase the means tested addition for those in the support group from the current £49 up to an eventual £80. Couples with someone in the support group will gain from this change but those in the support group who live on their own and don’t have a carer will still be worse off under universal credit.


Cuts to support for working people with disabilities


Tax credits currently provide in-work support for people on low incomes. The disability element of Working Tax Credit (WTC) is worth £54 a week and recognises that many disabled people have a reduced earning potential and are unable to work fulltime as a result of their health condition or impairment. They also frequently face extra costs which can’t be met by schemes such as Access to Work.

There will, however, be no extra financial help within Universal Credit for anyone found "fit for work" under the ESA work capability assessment. This means for example, that someone who relies on a wheelchair to move around, but can self propel their (non motorised) chair fifty metres, would be found fit for work under the assessment process and so will receive no more financial support than someone with no disability. Under the current system because they receive DLA they would be entitled to the disability element of WTC.


Other welfare changes likely to affect disabled people


In addition to these measures, other welfare reforms will also have an effect on the level of financial support disabled people receive.


 Contribution based Employment and Support Allowance, for those in the work related activity group (WRAG), will be time limited and only be payable for one year


 Pensioners with a working age partner could lose nearly £100 a week as they they will have to claim Universal Credit not pension credit. This will lead to particularly difficult cases where the person under pension age is seriously ill and unable to work and the person over pension age is the carer.


 The current system pays 95% of childcare costs to those on a low income who live in rented accommodation – Universal Credit will only pay 70%. This is likely to have a particular impact on parents of disabled children.


 Reduction in amount of housing costs paid


 Personal Independence Payment (PIP) - will replace Disability Living Allowance. There will be a 20% reduction in projected expenditure, so many people who are significantly disabled and are currently entitled to DLA will be entitled to less PIP or none at all.


 Carers will be able to keep the carer premium in Universal Credit, even when they earn more than the earnings limit for carer’s allowance. This will help couples where one is unable to work and the other is working and acting as carer.


Read the briefing here

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Here's a ministerial Universal Credit Policy Briefing Note...



There's plenty of scope for complication with Transitional Protection....


Transitional Protection


1. Core objectives


We have said that we will offer Transitional Protection to Universal Credit
recipients where circumstances have remained the same – to ensure that they
will not receive less as a result of their move to UC.

In the previous briefing note we stated that we would consider further the
changes of circumstance that will cause this protection to end. This updated
note provides that further information, and more detail on Transitional
Protection policy.

The principle of offering Transitional Protection which avoids cash loss at the
point of change and which erodes over time is an established one. It is similar
to the approach adopted when Income Support was introduced in 1988 and in
the current move from Incapacity Benefit/Income Support to Employment and
Support Allowance.


2. Considerations


The cause for claimants moving to Universal Credit will determine whether
Transitional Protection will apply. Once Universal Credit is launched, some
people in receipt of current benefits will be moved over in a process wholly
managed by DWP. Transitional Protection will be considered in this case and
will be applied where the total household Universal Credit entitlement would
otherwise be lower than total existing award of benefit and tax credit at the
point when they move. Other claimants will move to the Universal Credit
system as a result of a change of circumstance which makes them eligible for
Universal Credit, these claimants will not be entitled to Transitional Protection.


3. Key policy proposals


For many claimants Universal Credit will provide a level of support that is the
same as, or higher than, the current system. 2.8m households stand to
receive a higher amount under Universal Credit than they do now. There will
be no cash losers directly as a result of the migration to Universal Credit
where circumstances remain the same.

The Government will provide cash protection to claimants whose Universal
Credit award would be less than under the old system, in the form of an extra
amount to make up the difference between the old and the new. The
maximum amount will be fixed at the point of change, and cash protection will
continue to be paid until the value of the award under the new system
overtakes the levels of the pre-Universal Credit entitlement: paragraph 6
4 July 2012 outlines what happens to the cash protection as the amount of a
Universal Credit award changes.

The cash protection amount will not be uprated over time along with the rest
of the entitlement, and the protection will stop if a claimant ceases to claim
Universal Credit or has to be reassessed for a significant change of
circumstances.

Any cash protection will not be applied to future claims.


4. Who is entitled to Transitional Protection?


We believe it is right to cushion recipients who are affected against a change
where their circumstances have remained the same. Although the move to
Universal Credit will financially benefit many claimants, the move to a simpler
system will change the level of entitlements for some households who are
already in receipt of existing benefits. Where a claimant is moved to Universal
Credit, their circumstances have remained the same and their Universal
Credit award is lower than current receipt, we will provide Transitional
Protection as a cash top up to make up the difference. This Transitional
Protection will be provided until there is a significant change in circumstances
or the Transitional Protection is eroded to £0. This approach ensures
claimants have time to adjust to the move to Universal Credit.


5. How will Transitional Protection be calculated?


Transitional Protection will be calculated by comparing the total household
monthly benefit and tax credit receipt at the point of migration with the total
first household Universal Credit entitlement. Where the Universal Credit
entitlement is lower, Transitional Protection will be awarded as a cash amount
to make up the difference.

This calculation will be undertaken ignoring any sanctions or deductions to
which the household is subject to ensure that the Transitional Protection
amount is based on the household entitlement at the point of transition rather
than the payment amount.

The amounts of legacy benefit and Universal Credit for comparison will be
those calculated after application of the Benefit Cap. This will ensure that
Transitional Protection is not offered against the limits of the Benefit Cap.
However, Benefit Cap rules will still apply, and so those households who are
exempt from the Benefit Cap will be unaffected.

Transitional Protection will also not be offered to self-employed claimants
against the effects of the Minimum Income Floor. In these cases, the
Transitional Protection calculation will be carried out prior to the Minimum
Income Floor being applied. Once the Minimum Income Floor is applied the
household will retain their Transitional Protection amount, but no further
protection will be provided. This will ensure that claimants’ circumstances
other than those related to earnings are protected.


6. How will Transitional Protection change and when will it
end?


Transitional Protection will be eroded by changes in the underlying Universal
Credit Award as outlined below.

Subsequent increases in Universal Credit award: for example, if a claimant
qualifies for £20 cash protection and subsequently sees a rise in their
underlying Universal Credit award, perhaps through a small fall in income or
through uprating of the Universal Credit award, the total award will not
increase until the £20 cash protection is used up. This approach ensures that
people move eventually to their new rate but without seeing any cash
reductions in the amount.

Subsequent decreases in Universal Credit award: if a claimant sees a fall in
their Universal Credit award, maybe through an increase in their earnings, the
amount of cash protection given at the point of transition will be unaffected,
ensuring that work incentives are also protected.

As stated, we believe it is correct to cushion claimants who are affected by a
change that the Department for Work and Pensions is making when there
have been no changes in circumstance. However it is appropriate to end this
protection when circumstances underlying an award are no longer
recognisable as those on which the legacy calculation was made. Therefore
Transitional Protection will end altogether if a claimant’s circumstances
change significantly. The following occurrences are defined as a significant
change in circumstance.


• A partner leaving/joining the household


• A sustained (3 month) earnings drop beneath the level of work that is
expected of them according to their claimant commitment


• A sustained (3 month) increase in earnings which would lift the
claimant out of Universal Credit means-tested support


• The Universal Credit claim ending


• The loss or gain of any of the elements that make up the Universal
Credit award (for example, the childcare element, the housing element
etc)
Once Transitional Protection has ended it will not be applied to any future
awards.


7. Further work


We are working to plan the migration to Universal Credit so that claimants
experience as smooth a transition as possible while also ensuring that
Universal Credit is targeted on those claimants that are in most financial need.

www.dwp.gov.uk/docs/ucpbn-transitional-protection.pdf

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Universal Credit and Welfare Reform







Mr Liam Byrne begs to move....



"That this House notes that the Universal Credit is late and over budget; recognises that there is widespread unease surrounding the implementation of the £2 billion scheme’s IT system; further notes that the project is so badly designed that it is set to reduce work incentives for over two million people and hurt small businesses and the self-employed; believes that Ministers have failed to properly account for numerous basic details of how the scheme will work, such as its interaction with free school meals or what is to be done with 20,000 Housing Benefit staff; further believes that the project is poorly thought through and is now at risk of descending into chaos; and calls on the Government to publish the business case, so that the House can see a detailed plan of implementation, and urgently to set out a plan to address these deep flaws before it is too late.

At the heart of the debate is a very simple principle, which is that anyone in this country should be better off in work than they are on benefits. That is a principle in which we in the Opposition passionately believe. We are a party that was founded by and for working people and that is why we want universal credit to succeed. It is now, however, an open secret in Whitehall that universal credit is a flagship that is sinking fast. The Treasury, says Mr Nick Robinson of the BBC,

“have long had deep anxieties that”

the Secretary of State

“might not be able to control spending”

on universal credit. Last week, the Minister for the Cabinet Office and Paymaster General, who is an old friend of the Secretary of State, was asked how universal credit was going. He said:

“Are we there yet? Am I absolutely confident we are there yet?”

His answer? “No.” This morning, an unnamed Minister weighed in to support the Secretary of State in his own way with a ringing endorsement, saying that universal credit

“is another car crash waiting to happen”.

The Secretary of State is no stranger to friendly fire. Indeed, back in 2002, he described himself as the “quiet man” who was about to “turn up the volume”. Today, we are not asking the Secretary of State to turn up the volume. We are asking him to dial down the chaos and dial up the competence in his Department.

The Secretary of State and I share a faith. He, like me, believes that confession is good for the soul, and today is confession time. We need answers to a host of questions about universal credit and we cannot help to get this vital project back on track unless he comes clean about exactly what is going on.

Jacob Rees-Mogg (North East Somerset) (Con): While we are on a religious theme, I wonder whether the right hon. Gentleman might think about motes and beams, as there is rather a large beam in the eye of those on the Opposition Benches.

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Mr Byrne: It is unclear how I might respond to that. I hope I will be able to set out for the hon. Gentleman this afternoon what I think will be a shared set of concerns about how to get this vital project back on track. I hope we have a degree of clarity, honesty and openness from those on the Treasury Bench.

Mr Denis MacShane (Rotherham) (Lab): My right hon. Friend is starting at a macro level, but last Friday I had meetings with the people who have to apply the universal credit scheme in Rotherham. I also met the voluntary groups that deal with the people who rely on it and there are genuine fears. People want reform and they are not necessarily anti the Government for political reasons, but they do not think that the scheme will work as it is devised. The computer crashes for which our Governments are so famous—both those of which he was a member and this Government—are a legend in the computer industry.

Mr Byrne: Let me start with precisely that risk. We were told when universal credit was first proposed that the IT costs would be in the order of £2 billion. Some £200 million was taken off for subsidies for another problem with child care created by the Secretary of State’s friend, the Chancellor. The former Minister responsible for unemployment, the right hon. Member for Epsom and Ewell (Chris Grayling), before he departed for the Ministry of Justice, said that the cost had spiralled to £2.1 billion. Already, two years in, the project is £100 million over budget and we learned yesterday that universal credit, when it is introduced and fully rolled out in 2017, will demand an extra £3.1 billion in welfare payments each year. That was the figure that the Department for Work and Pensions gave to the Office for Budget Responsibility in July last year.

Yesterday, however, the Secretary of State told the House that he had agreed to a Treasury target of £2.5 billion, wiping £600 million off tax credits by so-called policy designs. Where on earth is that money going to come from? It is, I am afraid, a mystery. It is a mystery shrouded in further questions about whether people will be better off in work when universal credit is introduced. What on earth is going to happen to free school meals, which are worth £410 million a year to families in many of our constituencies and are a vital lifeline every week? The Children’s Society says that if universal credit integrates free school meals in the wrong way, that will wipe out incentives to work for 120,000 families. What is going to happen to that budget?

Then there is the question of council tax benefit, which is worth £5 billion for 6 million households in Britain. As it turns out, we are going to get not a national scheme but a local scheme because the Secretary of State lost his battle with the Secretary of State for Communities and Local Government. He was sat on by the right hon. Member for Brentwood and Ongar (Mr Pickles), which is a fate we would not wish on anyone. The result is that whether someone is better off in work or on benefits will depend on where they live. The Institute for Fiscal Studies says that universal credit “severely undermines” the simplification.

Then there is the question of how universal credit will interact with increases in personal allowances, which were introduced with such a great fanfare over the past year or two. Last week, Gingerbread said that because

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universal credit is calculated on post- tax income, the lowest paid would see most of the increase in personal allowances wiped out. In fact, when universal credit is introduced, the low paid will lose two thirds of the increase in personal allowances. Somehow the Chancellor of the Exchequer forgot to tell us that when he unveiled the proposal in his last Budget.

Then there is the question of how universal credit will lock in the cuts to tax credits that hit so many of our constituents this April. Those cuts now mean, according to answers given to my hon. Friend the Member for Stockport (Ann Coffey), that a couple with kids working part time—and goodness me, there are more people working part time these days—will now be more than £700 better off on benefits than in work. How on earth can that send the right signal?

Mr John Redwood (Wokingham) (Con) rose —

Mr Byrne: Perhaps the right hon. Member for Wokingham (Mr Redwood) will be able to tell us.

Mr Redwood: Will the right hon. Gentleman give the House some of his ideas on how we could make it more worth while for people to work, given that all parties in the House think that that is the right aim and that it is not worth while enough at the moment?

Mr Byrne: That is very much the point of bringing the debate here today. We need from the Government transparency about the business case, which is being kept secret. Until we get to the heart of how the policy will be rolled out, until we get some answers to these basic questions, it is difficult for us to offer some constructive advice—advice we would offer for free.

John Healey (Wentworth and Dearne) (Lab): Will my right hon. Friend take a look at the Rotherham citizens advice bureau survey, which I have sent to the Secretary of State today? The bureau questioned more than 100 people who had been through employment and support allowance assessments last year; more than half said that the assessment was rushed, nearly two thirds said that the assessor did not listen to them and only a quarter felt that the assessor was fully qualified to assess their medical condition. Does he agree that a fair benefits system and a fair universal credit depend on a fair and accurate system of assessment?

Mr Byrne: It absolutely does. Our chief concern is that that open and fair system of assessment will not fall into place for universal credit, with enormous consequences for our constituents.

The final point about the basic principle of whether people will be better off in work or on benefit is the evidence published by the Secretary of State’s own Department in the impact assessment that he signed earlier in the Parliament. The evidence shows that the marginal deduction rates will not go down for many people but will go up—2.1 million people will see their marginal deduction rates go up when universal credit is introduced. The incentive for them to work does not increase with universal credit; it goes into reverse. We have problems with free school meals and with council tax benefit, a short changed personal allowance, the lock-in of cuts to tax credits and a worse incentive to

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work. That raises fundamental questions about a system that is about to go live in 150 days. That is why in this debate we want some answers on how these problems will be solved.

The Secretary of State for Work and Pensions (Mr Iain Duncan Smith): I will just give the right hon. Gentleman some answers on the marginal deduction rates. The fact is that 1.2 million people will receive a reduced marginal deduction rate as a result of what we are doing with universal credit. At the moment, 500,000 families see marginal deduction rates of well over 80%. Virtually nobody will see that once universal credit comes in. Some 2.8 million households will gain and 80% of those gains will go to the bottom 40%, improving their life chances dramatically.

Mr Byrne: But the Secretary of State refuses to admit that the marginal deduction rates will get worse for 2.1 million people. Until he answers the question about what will happen to free school meals and to council tax benefit, he cannot give us the assurance that that number of people will be better off in every single part of this country. He has to come clean about a system that is about to go live in 150 days. He is cutting it too fine, which is why No. 10 is worried, why the Treasury is worried and why his old friend the Minister for the Cabinet Office is worried.

Charlie Elphicke (Dover) (Con): The fact is that 1.4 million people have been on out-of-work benefits for nine of the past 10 years. Rather than fear-mongering, shroud-waving and trying to frighten people, why is the right hon. Gentleman not working with the Government to get the best result and tell those people, “You’re needed in the workplace. We want you to play a part in building up the economy for future generations”?

Mr Byrne: If the hon. Gentleman was serious about wanting to get unemployed people in his constituency back to work—goodness knows there are enough of them—he would support Labour’s proposal for a tax on bankers’ bonuses that would get 110,000 young people back into work over the course of the next year.

Mr John Denham (Southampton, Itchen) (Lab): Those of us who were here when the Child Support Agency was introduced know the dangers of introducing legislation that everyone agrees with in principle but that is badly carried out. My right hon. Friend is doing the right thing by raising these questions, but does he not agree that it is a little odd that it was the Secretary of State who was in danger of being forced out of his job when so many of the problems with the system lie with the Treasury, the Department for Communities and Local Government and the Department for Education, all the bits of the Government that are refusing to play ball with this vision?

Mr Byrne: My right hon. Friend is precisely right. That is why we are here to help the Secretary of State this afternoon by setting out some of the questions on which, if he was only a little clearer with the House, we would be happy to engage and help. One of the issues in which we share an interest is the way we support the enterprise spirit in this country. The CBI and the Chartered Institute of Taxation have flagged up their worry that

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universal credit will be a car crash for Britain’s entrepreneurs. The number of self-employed people in this country increased by 280,000 over the past couple of years and many people must now look to their own resources for work, but what is being prepared for self-employed people is frankly chaotic.

Mrs Anne Main (St Albans) (Con): Will the right hon. Gentleman give way?

Mr Byrne: I will in a moment.

We have heard from the Chartered Institute of Taxation that the system proposed for entrepreneurs will require self-employed claimants to report their transactions each month and that they will have only seven days after the end of the month to file them. They will have to put all that information into a great big IT system and calculate their earnings using a system that is different from the one they use to calculate their tax bill. How on earth does the Secretary of State think Britain’s entrepreneurs, who are busy doing other things day to day, will deal with the new system? I thought that the Government were committed to cutting red tape, not swaddling entrepreneurs with it if they want any chance of help with tax credits. Perhaps the hon. Member for St Albans (Mrs Main) can explain a way through it.

Mrs Main: The right hon. Gentleman should take a little while to consider that not everybody who is self-employed is the entrepreneur he is talking about. The reason that degree of scrutiny is needed is that people who sell The Big Issue for a certain period of time can suddenly declare themselves to be self-employed, so the scrutiny is not something he should want to remove; it is a question of whether it is reasonable. If he wishes to help my right hon. Friend the Secretary of State, he might like to propose a constructive way forward for how we can stop people abusing the system by declaring themselves to be self-employed when all they are doing is a minimal amount.

Mr Byrne: Members on both sides of the House want this to work, but if the hon. Lady looks at the evidence submitted by the CBI and the Chartered Institute for Taxation to the Work and Pensions Committee on Friday, she will see that there is now a real worry that this is going to be a catastrophe for the many entrepreneurs who rely on tax credits for help to balance the books at the end of the month. What I want from the Secretary of State is clarity about how this is going to work in practice.

This is the start of a whole series of risks that have been brought to the attention of hon. Members here and in the Select Committee. Flagged up in the evidence submitted on Friday was the decision to deny people a choice about who receives the money. I hope that the Secretary of State will reform this before implementation of universal credit, because many people who run women’s refuges say that the system is so badly thought through that refuges for women fleeing from domestic violence will have to close. In fact, Refuge tells us—[ Interruption. ] This is not scaremongering by me; it is evidence submitted to the Select Committee by Refuge, which says that the idea is so badly thought through that unless changes

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are made, 297 refuges will have to close. This is not scaremongering; it is bringing to the House’s attention information and arguments provided by one of the most important charities in the country.

The Minister of State, Department for Work and Pensions (Steve Webb): Yesterday in oral questions, at which I think the right hon. Gentleman was present, the Secretary of State gave categorical assurances about refuges, so to repeat the smear after receiving those assurances is scaremongering.

Mr Byrne: If the Minister is accusing Refuge and Women’s Aid of a smear, I am afraid that he has got his facts seriously wrong. This element was not in the original design. Yesterday we finally extracted from the Secretary of State a commitment to change; now we want to know how it, along with a host of other things, will work in practice.

Some of these issues are now bedevilling local authorities. There is a serious risk that direct payments of universal credit, which includes housing benefit going to the individual, will result in local councils’ arrears bills and eviction rates beginning to rise. We are still no clearer about what will happen to the 20,000 housing benefit staff who work for local councils and will no longer have to process housing benefit claims once the DWP takes over the task. Are they going to be sacked or made redundant? Who will pick up the bill? Is it yet another bill that will fall on the shoulders of hard-pressed council tax payers?

Jim Shannon (Strangford) (DUP): In my constituency, housing benefit applications are up by between 10% and 15% and extra staff have been employed. The waiting list for applications to be processed takes anything from six to eight, or even 10, weeks. Yesterday the manager of the housing benefit office told me that only six months into the scheme he is already cutting back on the moneys that are allocated to try to make them last until next April. Does the right hon. Gentleman think that in the case of housing benefit, chaos is knocking on the door?

Mr Byrne: I am afraid that that is absolutely right. That is the message that is coming back from local authorities all over the country. In fact, the Local Government Association told the Select Committee on Friday that there is

“a real risk that the central Government universal credit IT systems will not be ready on time”.

That was part of an array of evidence submitted about the mounting risks. The CBI said that the

“tight delivery timetable…is a risk to business”.

Citizens Advice said that universal credit

“risks causing difficulties to the 8.5 million people who have never used the internet”.

The Chartered Institute of Taxation said that for many people

“The proposed procedures for self-employed claimants…will be impossible to comply with.”

Shelter has said:

“Social landlords and their lenders have voiced considerable concern at the implications of direct payments for social tenants”.

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The Association of Directors of Adult Social Services says that the abolition of severe disability premium is an

“apparent contradiction of the Government’s stated aim to protect the most vulnerable.”

Alison Seabeck (Plymouth, Moor View) (Lab): On direct payments to landlords, last night I met representatives of south-west housing associations, and to a person they all expressed serious concerns about the implications for them, their lenders and their loan books.

Mr Byrne: My hon. Friend is absolutely right. Once arrears build up, it becomes far more difficult for social landlords to raise the money they need to build much-needed social housing. These are very serious risks.

Dame Joan Ruddock (Lewisham, Deptford) (Lab): I am grateful to my right hon. Friend for reciting the concerns of a whole range of people and organisations. One of the things that has surprised me most is that every employer in the country will have to report to Her Majesty’s Revenue and Customs on the circumstances of every employee on a monthly basis and sometimes, perhaps, even on a weekly basis instead of annually. Is this not going to be an incredible burden on British business, which is already in difficulty?

Mr Byrne: Exactly—as if British businesses were not struggling enough. The point is that the 500 pages of evidence submitted to the Select Committee on Friday present to the Secretary of State a whole range of issues to which we have received no answers, despite the fact that the system will go live in 150 days. The system is already over budget and late, and I am afraid that we now need some urgent answers from the Secretary of State this afternoon.

Kate Green (Stretford and Urmston) (Lab): Does my right hon. Friend agree that one of the great concerns of the many agencies that he has mentioned—they are worried about how universal credit will affect the client groups that they work with—is that the funding of those advice agencies that could support individuals is being squeezed and that there will simply be no access to support, either to make applications or to sort out problems when things go wrong?

Mr Byrne: That is a real concern. I know from the fact that a number of advice centres in Birmingham have been forced to close that advice is simply not available for many people in some of the most deprived parts of our country. They are being asked to contend with a new benefit system that is complicated and vital to their living standards, so that is a real worry. I hope that the Secretary of State will take that into account in his response.

I am going to draw my remarks to a close, because I know that many hon. and right hon. Members want to contribute to the debate. All I will say to the Secretary of State is that, following the recent attacks on him by the Treasury, the Cabinet Office and No. 10, he could be forgiven for wanting to retreat to the deepest, darkest bunker in Whitehall. The truth is that his Department is already one of the most secretive in Government. He is refusing to publish information about the Work programme and he has refused Labour’s freedom of information request to release the business case for universal credit.
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I know that he does not always see eye to eye with the Minister for the Cabinet Office, but I hope that he will pay heed to his words:

“Transparency is at the heart of our agenda for government…We are unflinching in our belief that data that can be published should be published.”

Unflinching indeed.

Universal credit is a massive project—it is too big to be allowed to fail. We need to make sure that it is on track and I hope that the House will join us in sending an unequivocal message to that effect this afternoon.

4.7 pm

The Secretary of State for Work and Pensions (Mr Iain Duncan Smith): This debate cannot take place in a vacuum, as the right hon. Member for Birmingham, Hodge Hill (Mr Byrne) would wish. Let me start by saying that he is wrong: we are not over budget on the programme and we are not out of time. Both are proceeding much according to the plans that we laid. He referred to a report or note that mentioned £3.1 billion. That was considered as a possible end position and the Office for Budget Responsibility, which is independent, looked at it well before Members of both Houses had completed their scrutiny of the legislation. It was done in July of last year. Since then we have had a series of discussions with the OBR. It has looked at the modelling in detail, and continues to do so.

Mr Byrne rose —

Mr Duncan Smith: Wait a minute.

As far as the OBR is concerned, we are progressing in the right direction and the modelling seems to be about right. We are committed to the £2.5 billion a year and the £2 billion of investment in our IT programmes.

Mr Byrne: I am grateful to the Secretary of State for being characteristically generous in giving way so early in his remarks. Will he explain what policy designs resulted in the £3.1 billion estimate, made by his own Department, dropping down to £2.5 billion? Will he also confirm to the House that everybody affected will be on universal credit by 2017, as initially planned?

Mr Duncan Smith: First, I will answer the second question. That is exactly what we intend and we believe that we are on track to do just that. The right hon. Gentleman and the House should realise that this is not, as has been the case with previous IT programmes, a “waterfall” approach whereby everything explodes and is launched on one date, which I think the previous Government used to realise was probably not a good idea. This will be a progression over four years, so that, as we bring in different groups, such as jobseeker’s allowance recipients, and first address the flow, then the stock, and then look at tax credits and how they fit in, we can make sure that we get this absolutely right at every stage. We know that there are important things to consider so that people do not suffer as a result of universal credit. We want to get this right, even as we do it.

We agreed on the £2.5 billion figure. That is our position. As we look at all these things, including the disregards, we see that we can realise better ways of

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doing them. It is a work in progress. That is how we are able to achieve these things, just as when we looked at them originally.

The right hon. Member for East Ham (Stephen Timms) has peppered us with freedom of information requests, which is exactly what an Opposition Member should do. However, it does him and the shadow Secretary of State ill to lecture us about releasing business cases. When they developed employment and support allowance, a system about as large and complicated as this one—I think that the right hon. Member for East Ham was a Minister in the Department at the time—at no stage, despite the request, did they ever release their business plan to us.

Kate Green: I wonder whether the Secretary of State will clarify something that he said in response to my right hon. Friend the Member for Birmingham, Hodge Hill (Mr Byrne). He said that the change would be implemented in stages, with first the flow, then the stock and then tax credits. Surely the tax credits for the first claimants to receive universal credit will have to be brought in on the first day of universal credit.

Mr Duncan Smith: No; it has always been part of the process that jobseeker’s allowance will be the first to move across. I am happy to discuss that further. Universal credit will run in parallel with the other systems until we shut them down and move them across. That is the way it will work. That has always been clear. I think that the Chair of the Work and Pensions Committee knows that, because I have been open with her about it from the word go.

John Healey: Will the Secretary of State give way on that matter?

Mr Duncan Smith: I have explained the plan that we have and I want to make some progress, but I will give way.

John Healey: The Secretary of State maintains that the project is on track, when everybody else seems to think that it is in serious trouble and way off track. Rotherham Jobcentre Plus staff have told me that he has told the public that jobseeker’s allowance and new claims for out-of-work support will be treated as new claims for universal credit from October 2013. Is that still the case?

Mr Duncan Smith: I thought that I had been pretty clear about that. The plan is that, starting in October 2013, we will move through the different groups of benefits and tax credits progressively over the four years, bringing in different groups at different stages. That is how it will work. We will be giving a big presentation next week for members of the media.

John Healey: Has the timetable not slipped?

Mr Duncan Smith: The timetable is not slipping at all. We are on target. The right hon. Gentleman needs to be happy about that.

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It is all very well for the Opposition to carp, while saying that they support universal credit, but let me be absolutely clear why I believe that we have to do this. First, we inherited a complex mess of 30 different benefits. There are seven additions relating to disability alone, which are complicated for people who are disabled. They are often confused about what to do. Some payments are available when a person works for 16 hours, some at 24 hours and some at 30. Some are withdrawn at 40%, some at 65% and some even at 100%. Some are net and some are gross. One needs to be a mathematician to figure them out.

My previous permanent secretary admitted that one day, when he was listening to a lone parent who had come in for guidance on what benefit she would receive and how it would work if she took extra hours beyond the 16 hours at which she was already being supported. It took the adviser about 40 minutes to figure out whether she would be better off, marginally in the same position or marginally worse off because of the dramatic rise in the deduction rates. How can we expect every lone parent who is worried about authority and may not come in for help to understand what these things mean? The complexity and confusion are a problem. The decision whether to go to work is often a marginal one, and many people do not feel that it is worth while.

It is small wonder, therefore, that even before the recession there were over 4 million people on out-of-work benefits and 1.4 million people who had never worked at all. Things then got a lot worse because of the recession. The inheritance that we received included 5 million people on out-of-work benefits, youth unemployment already high and more children in workless households in this country than in the rest of the EU—that is a staggering thought. And that came after years of growth and plenty, which the previous Government wasted.

Ending that failure is a monumental task, and we have undertaken it because it has to be done, whether there is a Labour Government, a Conservative one, a coalition one or even a Liberal one. Universal credit is one of the most fundamental reforms to the welfare system, and it deserves to be supported and helped.

Luciana Berger (Liverpool, Wavertree) (Lab/Co-op) rose —

Mr Duncan Smith: I have given way quite a bit. If the hon. Lady will give me a little leeway I will give way again later, but I want to make some progress.

A single payment, withdrawn at a clear and consistent rate when people move into work, will make work pay at each and every hour and remove the stumbling block in the current system whereby, as I said earlier, some people lose out dramatically. They lose 96p in every pound that they earn, which cannot be an incentive to go to work. Nobody here would take work at that rate, and trying to get the deduction rate down has to be a good reason for our reform.

The Opposition say that they are concerned about work incentives under universal credit. I reassure them that, as I said earlier, the flat 65% withdrawal rate will mean reduced marginal deduction rates for 1.2 million households. What is more, 80% of those gainers are in the bottom 40% of the income distribution. Why am I, as a Conservative, having to stand here and tell the

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Opposition that that is positive? Surely they should have ensured that it happened during all the years when they were in power.

Stephen Lloyd (Eastbourne) (LD): The Opposition have mentioned the Work and Pensions Committee a few times. I am a member of that Committee, and although the Opposition are absolutely right to say that there were some concerns about universal credit, the Secretary of State might be interested to know that the Committee universally supported the concept of universal credit to make work pay.

Mr Duncan Smith: I thank my hon. Friend for those comments.

Luciana Berger: I listened closely to what the Secretary of State said about 1.2 million people having better marginal deduction rates, but his Department’s own impact assessment shows that 2.1 million people will be worse off in work as a result of universal credit.

Mr Duncan Smith: The reality about marginal deduction rates, as I have just said, is that the massive majority of the money that we are investing will go to those in the lowest income groups, which has to benefit them. People who would otherwise not enter work because of the margins will now find that it is beneficial to do so. Despite what the hon. Lady and the right hon. Member for Birmingham, Hodge Hill, have said about marginal deduction rates, the median increase will be just about 4%. The truth is that there will be a massive improvement in the marginal deduction rate for vast numbers of households. As I said earlier, half a million people who struggled under the previous Government’s complicated taxes had marginal deduction rates of well over 80%. That will not happen under universal credit, which is a critical point.

Mr Byrne rose —

Mr Duncan Smith: I am going to make some progress, and I will pick up on some of the points that have been made as I go through my speech. If the right hon. Gentleman will bear with me, I will certainly give way to him later.

I turn to the delivery of universal credit. As I said earlier, its implementation is on time and on budget. Of course, the process is challenging, and I have never said anything else. The right hon. Member for East Ham knows that I have a huge amount of time for him and believe that he was an effective Minister. When we have discussed universal credit I have always told him that all our programmes have challenges and risks to them, but the job of Ministers and our officials is to manage that risk. Life has risks, and we deal with them and manage them. The universal credit programme is challenging, but we are investing £2 billion—I say again to the right hon. Member for Birmingham, Hodge Hill, that the figure is £2 billion—to get the infrastructure and IT systems right.

Mr Byrne: But the Secretary of State must have seen the parliamentary answers that his ministerial colleagues have provided stating that the implementation costs for parts of the programme are now running at £103 million, £391 million, £600 million and £1 billion. By my maths,
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that adds up to £2.1 billion, which is £100 million more than the budget that he has set out. Is the programme on budget or over budget?

Mr Duncan Smith: I am never keen to rely on the right hon. Gentleman’s maths—that is what ran us into trouble in the first place. Maybe this is a confessional now, and I will take that as a confession from him. All I can say to him is that we are investing £2 billion, but I will drop him a note about any detail that he is concerned about.

As I said earlier, we are making progress. We completed our first testing stages in August and have already held two open sessions with MPs, peers and the media and intend to hold many more. We will demonstrate the IT front-end systems next week and will do so again afterwards for many hon. Members.

Chi Onwurah (Newcastle upon Tyne Central) (Lab): Will the Secretary of State give way?

Mr Duncan Smith: Perhaps the hon. Lady will give me a little time. I think I have been reasonably generous—I am trying to be because I hope that we can discuss this issue in the right spirit. I will give way to the hon. Lady in due course, but first I would like to make a little progress.

We will be ready to roll out universal credit across the country in October 2013, and before that we will launch the pathfinder scheme in Greater Manchester in April 2013—perhaps some hon. Members do not know that yet, but that is the reality. As I have said, the phased transition from current benefits and tax credits is expected to be completed by 2017, and the safe delivery of universal credit will be my primary objective throughout. For what it is worth, I take absolute, direct and close interest in every single part of the IT development. I hold meetings every week and a full meeting every two weeks, and every weekend a full summary of the IT developments and everything to do with policy work is in my box and I am reading it. I take full responsibility and I believe that we are taking the right approach.

Dr Eilidh Whiteford (Banff and Buchan) (SNP): Will the Secretary of State give way?

Mr Duncan Smith: Perhaps I could make a little progress, and then I will give way because I know that hon. Members have questions.

I believe that we are taking the right approach; we have supported the scheme and our methods have received support elsewhere. Our use of the “agile” process has received good support from the independent Institute for Government, which in “Fixing the flaws in government IT” stated:

“The switch from traditional techniques—”

those used by the previous Government, and others—

“to a more Agile approach is not a case of abandoning structure for chaos. Agile projects—”

those used in the private sector—

“accept change and focus on the early delivery of a working solution.”

I do not underestimate the scale of the undertaking. Some 8 million households will be affected because they are in receipt, either wholly or in part, of some kind of

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support. I believe, however, that the Department is capable of implementing programmes of this kind. It has the best record, just as it did when the Labour party was in government, as Opposition Members will recall. The delivery of employment and support allowance was a good example of that, and the right hon. Member for Birmingham, Hodge Hill who was involved in that knows too well the quality of the Department for Work and Pensions. Although the scheme is not without risks, the Department understands that and we have brought in a huge number of people and bodies from outside the Government to help implement it.

Several hon. Members rose —

Mr Duncan Smith: I will give way to two people, first to the hon. Member for Newcastle upon Tyne Central (Chi Onwurah) because she was first, and then to my hon. Friend the Member for Gainsborough (Mr Leigh).

Chi Onwurah: The Secretary of State was speaking about his pride in the investment in IT systems that his Department has undertaken, but is he concerned that by making universal credit available primarily—and eventually solely—online, he will be dependent on investment by other Departments in the broadband infrastructure in this country? By abandoning Labour’s universal promise of broadband availability, many vulnerable people will not have access to broadband, and will not be able to benefit from universal credit.

Mr Duncan Smith: I was coming to that point, but I will deal with it now because the hon. Lady has a legitimate interest and all hon. Members will want to know about this issue. Two things are important. First, we must understand that the Government and the benefits system must move alongside what is happening in work. Those in receipt of benefits—often long-term benefits—are often outside and excluded from the workplace because of their lack of ability to work with and manage IT systems. We want to help them to enter the world of online work.

Secondly, the vast majority of people claiming benefits today already use computers and the internet—around 80% of those who claim jobseeker’s allowance use computers. Importantly, however, not all of them use their computer for claiming benefits, which they often do on the telephone. Over each month we intend to move more of those people to an online process of claiming—already more than 30% of people have started on that, and we intend to increase that figure first to 50% and eventually to 80%. We know, however, that to do that we may need to help people enormously, so jobcentres will be fitted out—we are doing trials—with computers and telephones that connect people directly to contact centres. My plan is for contact centres to get people on to their computers and work through the process with them. One reason people are worried and do not want to go online is that the present online system is not good. It is notchy and difficult—I have used it myself—and difficult to get through. We are developing and designing with claimants, jobcentre staff and local authority staff a front-end system that will be much simpler and easier. I will demonstrate it to colleagues on both sides of the House when we have time—I will

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do so next week, but on other occasions, too.

The whole idea is to move people to the new system, but we will of course retain the scope to deal with those who have difficulty.

Several hon. Members rose —

Mr Duncan Smith: I am dealing with those who have difficulty with the new system. I will give way twice more—first to the hon. Member for Banff and Buchan (Dr Whiteford) and then to my hon. Friend the Member for Gainsborough—and then get on.

Dr Whiteford: Will the Secretary of State address the question of implementation in the devolved Administrations? A wide range of policy areas is affected. UK Ministers have held informal discussions with the Scottish Parliament’s Welfare Reform Committee, but will he make a commitment that his new ministerial team will engage with the Committee, which has expressed concern in the past that such engagement has lacked substance?

Mr Duncan Smith: Absolutely—nothing makes me happier than getting out of London to visit the devolved Administrations, whether in Cardiff or Edinburgh. I shall spend a day in Edinburgh next week speaking to that Administration about this very subject, as I have done on a number of occasions. I am engaging in the same way in Wales, as are my colleagues. I can absolutely give the hon. Lady that guarantee.

Mark Durkan (Foyle) (SDLP): Will the Secretary of State give way?

Mr Duncan Smith: If the hon. Gentleman will forgive me, I said I would give way to my hon. Friend the Member for Gainsborough.

Mr Edward Leigh (Gainsborough) (Con): The problem with IT systems in the public sector, rather than the private sector, is the sheer scale of numbers—8 million households will use the new system—the complexity of the issues and the lifestyle of the recipients. I saw more failed Government IT systems in my time on the Public Accounts Committee than I have had hot breakfasts. I beg the Secretary of State to be cautious, to test and re-test, to pilot and re-pilot, and not to believe a word spoken to him by IT companies or his civil servants.

Mr Duncan Smith: My hon. Friend was an excellent Chairman of the Public Accounts Committee—he is highly respected among Members on both sides of the House—and I absolutely agree with him. That is how I see my role. One thing I have done is brought into the system a red team, whose job is to go through and doubt everything I am told, and to ask questions. Being a sceptic and not believing are part of the process of delivering. I absolutely understand that. We are involving others in the process—that is our purpose.

Mark Durkan rose—

Charlie Elphicke rose —

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Mr Duncan Smith: I will give way once more, and then I am done.

Charlie Elphicke: Does my right hon. Friend share my concern that much of the Opposition case is based on the idea that people are basically thick—too thick to use the internet, too thick to budget monthly and too thick to pay the rent? A cornerstone of universal credit is that we trust people and believe in them. We want to encourage people to work and to manage their own affairs.

Mr Duncan Smith: I understand what my hon. Friend says. He refers to the fact that people need to be helped—that they are often more intelligent than we give them credit for, but that they lack local knowledge and instruction. A legitimate concern of Members on both sides of the House is to protect those who are the most vulnerable. I will always assume their best intents. It is our job to ensure that we meet those concerns—that is my purpose and I intend to meet it. He is right that we should assume that people are intelligent enough, but that we have to get them to the point at which they use the system.

Several hon. Members rose—

Mr Duncan Smith: Let me make a bit of progress, because others might want to speak.

We have discussed finances. The Government have always made it clear that the £2.5 billion is additional and that that was how it would work. We have always agreed on that. The nature and design of universal credit means that this is an iterative process. The reality is that we learn as we do the developing. One thing that “agile” allows us to do is to rectify previous assumptions that things have improved because of changes. I can confirm to my hon. Friend the Member for Gainsborough that, as we proceed with the IT project, “agile” will allow us to ensure that we do not wait to the end moment to test it; we are testing stuff pretty much the whole time.

Mr Michael McCann (East Kilbride, Strathaven and Lesmahagow) (Lab): Will the Secretary of State give way?

Mr Duncan Smith: May I make a little progress? I think I have been reasonably generous in giving way. I promise that I will try to get the hon. Gentleman in later.

On our engagement, it is clear from what I have just said that the independent OBR has open access. We have been in regular discussions. The right hon. Member for Birmingham, Hodge Hill described it yesterday as a think-tank, but it is not a think-tank. It accredits and decides whether the Government’s calculations and projections are correct. No one has a perfect view of the future, but at least it is independent of all political positions and positioning. It is working with us at the moment. I can assure hon. Members that the process is robust and will continue until the Government announce the final rates for universal credit and the OBR includes them in its forecasts. That is what we are working to."


Regrettably the motion was defeated by the Government meaning that Universal Credit continues on track, hurtling out of control and heading towards one almighty train crash. You can read the rest of the debate on Hansard here; note in particular how Iain Duncan Smith assures us all is on track, on budget and on time. - I have a feeling he'll be eating those words in years to come.

- The Universal Credit debate started at 3.45 on the 11th September 2012.