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Universal Credit

Volume 545: debated on Wednesday 9 May 2012

Motion made, and Question proposed, That this House do now adjourn.—(James Duddridge.)

May I say what a lucky honour it is to have the first Adjournment debate of the new Session?

In October 2013, we will see one of the biggest changes to the welfare benefits system since the second world war with the introduction of the new universal credit. The Welfare Reform Act 2012 has gone through, and there was a lot of focus on the fairness and unfairness of various benefit changes, but there was not much focus on the administrative changes involved in the move to universal credit—the changes to the process of applying for benefits and being assessed for them. We should all welcome to some extent the rationalisation of a series of disparate benefits that have grown up over the decade. The administrative components of universal credit will include the tax credit system, housing benefit, income support, income-based jobseeker’s allowance, employment and support allowance and so on.

Tonight, we are not debating the principle of universal credit, but considering the roll-out of the administration for the new arrangement and, of course, the massive consequences for our constituents. If it goes well—hopefully, it will—they may not notice anything untoward, but there are massive risks if the administrative transition is not handled competently and carefully. That is essentially the purpose of my set of questions for the Under-Secretary in the short time available today. I sent a list of the issues that I broadly wanted to raise to her private office earlier today because some of the questions are technical. I hope that we can get a little more on the record because there has not been that much opportunity to debate those issues so far, and we are talking about a change that will affect a million people in the first six months of the roll-out of universal credit from October 2013.

One of the most interesting facets of universal credit is the Government’s decision that it should be digital by default: in other words, they are working on the assumption that the vast majority of claimants will access their claims online. I think that the Government’s assessment is that 80% of those claims will be made online. My first question therefore is whether the Under-Secretary can reaffirm that that figure still represents the Government’s assumption. Could she perhaps also give us a logical explanation of how that beautifully neat and round figure of 80% was reached?

Many people who apply for universal credit are not exactly frequent internet users: 15% of council tenants have no access to the internet; one in six adults generally have never used it—that figure is as high as one in four in Northern Ireland, and one in five in the north-east and in Wales—and 4 million disabled people have never used it. Consumer Focus research shows that 69% of people want the ability to have face-to-face transactions for benefit claims at post offices and so on. I therefore want to get a sense from the Under-Secretary of her contingency plan if the 80% target is missed. How will we move towards such a major shift in the way in which people apply for their benefits? We are considering the livelihoods of many people.

Universal credit will be a household, not an individual benefit. It will be assessed on a whole household, so a vast amount of supporting documentation will have to be processed when individuals change their entitlements. Again, how can that supporting documentation be assessed online? How will it be assessed centrally, given that we will move away from the localisation of many applications? That online assumption must be tested significantly.

As a corollary, the next issue is the extent to which the Government commit resources for the minority, who they accept will struggle with applying online. What resources will be available for face-to-face advice and support for claimants who cannot go down the digital route? I understand that the Department is planning some sort of 0845 hotline numbers, but they are expensive, especially for people with mobile phones. However, I am particularly interested in knowing how much money has been put aside for the face-to-face service.

A recent survey of the many district councils in England and Wales suggests that they believe that 50% of people coming through their doors and applying, for example, for housing benefit, need to do that face to face. Obviously, that is at odds with the Government assessment of presumably only 20% needing some sort of support other than the online arrangement. Investing so much in the online arrangement is clearly a dangerous ambition. I understand the logic of wanting greater take-up of digital applications, but I am anxious that the target is so high, and I want to get a sense of the scenario planning and the arrangements that the Government have considered if it is simply not deliverable.

We should cast our minds back to the difficulties with online tax credit arrangements. There was significant fraud, which had to be addressed and meant the arrangements had to be changed. Will the Minister say on the record that she is happy with the anti-fraud measures and the robustness and security of the new online universal credit system? Clearly, it would be a tragedy if so many people were directed to an online system that had to be scaled back at the last minute because individuals found a way of fraudulently fleecing it because it was not secure or robust.

Will the Minister give an assurance—her noble Friend Lord Freud was unable to do so during the passage of the Welfare Reform Act 2012—that the Government’s intention to move to a monthly payment arrangement will have a degree of flexibility? In theory, it is desirable for everybody to plan their budgets and household expenditure on a monthly basis, to mimic in-work salary arrangements, but the trouble is that it is not the experience to date of many people. Many of my constituents in Nottingham, who have suffered a great deal of deprivation or who are not on significant amounts of money take the parcels of money that come in housing benefit or other benefits and hypothecate them for rent, bills or other things. We are asking a great deal of people, sometimes later on in their lives, to change their habits and take payments at the beginning of the month and ensure that they budget so that their rent is fully paid for the rest of the period and beyond.

The danger that people will accumulate increasing arrears to pay for the roof over their head worries me significantly, never mind local authorities, which already say that they have concerns about the collection of rent payments. Currently, housing benefit can be paid directly to the landlord, the local authority or the housing association, but that is ending, so there is a great deal of anxiety about the continuity of housing entitlement.

As I have said, 15% of council tenants do not have access to the internet. In fact, 15% have no access to a bank account and a further 15% have only a basic post office account with limited functionality. Therefore, nearly a third of social tenants might not have mainstream banking capabilities available to them, yet we expect them to move in fairly short order to that monthly budgeting arrangement. Hundreds of thousands of people up and down the country, particularly those who do not have bank accounts, are massively mistrustful of the banking system—they are fearful of the overdraft charges that can hit them if they are unable to plan or manage their cash flow over that monthly period.

It is with those points in mind that I ask the Minister this: is there any flexibility in the roll-out of universal credit to allow weekly or fortnightly payments for those who absolutely need them, or is she absolutely firmly sticking to monthly payments for everybody? That is a crucial question and I would be grateful if the Minister addressed it.

It would also help if the Minister could give us a better sense of the dates for transition to the central system as we move away from local authority administration. There are currently 380 localised IT systems in local authorities up and down the country, largely to deal with housing benefit. They will be phased out as we move towards a central system, with one IT system at the Department for Work and Pensions and one at Her Majesty’s Revenue and Customs. What resources have been available for the transition for councils that have a residual responsibility for some activities over the period—it will be 2017 before full roll-out?

We are starting the process of passing over responsibility to the DWP in October 2013, but some councils will process housing benefit until April 2014, and full migration will not happen until 2017. How will councils be able to do this? It will remain a significant burden for local government, and local council tax payers need to know whether Ministers will meet those costs. It is not necessarily as big an issue in my area as Nottingham city council is a unitary metropolitan authority that has several different functions, but for some district councils housing benefit is 25% of their turnover, so it is a somewhat mission-critical activity. They need to know to what extent they will still be in the business of such administration. What really is the commitment of the Government to a local roll-out of universal credit? Will it still be a local service or will they shift in short order to that central arrangement?

As I read through the documentation, several secondary issues arose. What about pensioners? Many are still reliant on housing benefit, but universal credit is an in-work benefit, so who will be responsible for the administration of housing benefit to pensioners? That is a specific question and I would be grateful for the Minister’s clarification. Obviously, if local authorities are no longer involved in the administration of housing benefit, how will pensioners continue to receive it?

There will be two vast centralised computer systems, and the Chair of the Public Accounts Committee and the National Audit Office are already voicing anxieties about these arrangements. The DWP is moving to the “Agile” methodology, and Computer Weekly had a report recently in which it said that a leaked report from the Cabinet Office major projects authority suggested that the

“Agile methodology remains unproven at this scale”.

An amber risk rating was attached. Is that the case? What is the Government’s assessment of the risks of the change to this system by the DWP? The HMRC computer system will take a real-time approach to the PAYE process, but again reports suggest that the time scale has slipped beyond the April 2013 target. Can the Minister say whether that is true?

If we are to contract out much of this activity, will it be sent offshore? Will the work under these new arrangements be done in the UK, or will much of the IT or contact centre work be done in India or other countries? That would be another helpful clarification.

Another important issue has to be the many thousands of staff who currently work on housing benefit in local authorities up and down the country. Unison and other representatives of the work force have also asked about this. I gather that the Government have decided that TUPE will not apply to those who work in housing benefit administration in local authorities. So there will be a massive redundancy programme in local authorities and no take-up of those staff in the new, centralised arrangements. If that is the case, how will the Government respond to the massive redundancy costs involved? Will the Government compensate local authorities for those costs? Can the Minister say how much that will cost and how many staff will be affected? A lump of money was set aside at the beginning of the spending review period for the transition to universal credit. Have the assumptions behind that sum stayed the same or have they changed?

As the Minister will know, the Opposition have spotted that she and many of her colleagues are under the shadow of the omnishambles and that the Government’s record on competence has already been questioned. When it comes to universal credit, their reputation for competence is definitely on the line, and it has to be proven that they can fulfil their promises. This is a major risk not only to the Government’s reputation but to all our constituents, especially the most needy.

I congratulate the hon. Member for Nottingham East (Chris Leslie) on securing this debate. He is fortunate to have secured such an important debate.

It is fitting that the first Adjournment debate of the Session is on universal credit, because the Gracious Speech today underlined the Government’s commitment to building a fairer, more responsible society, to supporting families to do the right thing, to making work pay and to ending the something-for-nothing culture that gained a foothold in this country for too long under the previous Administration. Universal credit is at the heart of delivering on that commitment.

Universal credit will deliver a simpler and fairer system, and our reforms will put work, whether full time, part time or for just a few hours a week, at the centre of the welfare system. As such, it will extend a ladder of opportunity to those previously excluded or marginalised from the world of work. The current system has an array of 30 different benefits, each with its own rules and criteria and characterised by overlaps, duplication and complication. We all know from our constituency surgeries how bewildering that can be for many individuals.

Claimants need to submit several claims to different agencies to get the support they need and are required to communicate changes in their personal and financial circumstances time and time again. Universal credit will create a much simpler system, by reducing the number of benefits and agencies people have to work with, smoothing their transition into work and making it easier to understand the available support. From 2013, universal credit will provide a new single system of means-tested support for working-age people, whether in or out of work, and will include housing, children, child care costs and additions for disabled people and carers.

As I set out, the main purpose is to help people into work. The new system will remove the distinction between in-work support for those working 16 hours a week or more and out-of-work support for those working fewer than 16 hours a week, eliminating some of those problems we have seen in our constituencies and the need to claim a different set of benefits when starting or ending a job, or when changing working hours.

How a benefit is paid to claimants is important because it will encourage people to manage their budgets in the same way as households. Claimants should be treated as they would if they were experiencing working life. The greater the difference between being out of work and in work, the greater the barrier to returning to work. Universal credit will therefore be administered in one single monthly payment, as the hon. Gentleman mentioned. We will be able to administer the payment on a more frequent basis, where necessary, but we will work closely with the people advising claimants to ensure that the support is there to keep this sort of atypical payment to a minimum. I think he would accept that that is important.

The greater simplicity of universal credit will result in a substantial increase in the take-up of currently unclaimed benefits, with the greatest impact being on poorer families. As I am sure Members know, the combined impact of this increased take-up will lift 900,000 individuals out of poverty, including more than 350,000 children and about 550,000 working-age adults.

The hon. Gentleman did not touch on one child care issue that I would like to bring to the attention of the House. I am sure he will know that child care costs can often be a significant issue for people trying to remain close to the workplace. Universal credit will introduce a new way of supporting families. An extra 80,000 extra families will be eligible to receive support for the first time, because people who are working shorter hours will be able to claim child care support.

The hon. Member for Nottingham East rightly talked about the importance of the digital process—

Motion lapsed (Standing Order No. 9(3)).

Motion made, and Question proposed, That this House do now adjourn.—(James Duddridge.)

As I was saying, the hon. Gentleman rightly picked up on the importance of the online aspect of universal credit. It is designed to be an online service, providing access and support to claimants 24 hours a day. Importantly, it will also provide the service where constituents are, as opposed to where jobcentres are.

I thank the Minister for giving way, and I apologise for not being here for the beginning of the debate. I was at another engagement down below, and I did not realise that the Adjournment debate had started.

I feel that certain people in the middle class are going to fall into the child poverty bracket as a result of the introduction of universal credit. What assurance can the Minister give me that such people will not be adversely affected by the changes that the Government are proposing?

I welcome the hon. Gentleman’s intervention. At the point of transition to universal credit, we want to ensure that people will continue to receive the support that they were receiving before, if there have been no changes to their circumstances. It is important for everyone to understand that, as a result of universal credit, we will be making work pay. We will ensure that more people can stay close to the labour market, which will help them not only to get out of poverty but to stay out of it. We all know that families can cycle in and out of poverty; it does not affect a static group of people. It is therefore important that we have that support in place.

I want to get back to the digital nature of universal credit. We make no apology for the fact that this is designed to be an online service. It is designed to be available 24 hours a day, and to be available where claimants are and when it is most convenient for them to use it. The hon. Member for Nottingham East is right to say that that will not be the right approach for absolutely everyone, but let me stay with the group for which it will be the right approach. Estimates show that about 80% of individuals are already accessing services in an online scenario. We are not assuming that 80% will use the online service at the outset; we have always recognised that not everyone will be able to claim online. However, we expect that the proportion who do so will grow over time. We will supplement all of that with a face-to-face and telephone service that will always be available, for just the kinds of groups of people whom the hon. Gentleman referred to.

To ensure that we resolve any issues in advance of the system going live, and that we have the right kind of support in place, we are already working with local authorities on a number of pilot schemes. I urge the hon. Gentleman to look at the work that we are doing with the Local Government Association. We have also recently issued a joint prospectus calling on local authorities to deliver pilots to support residents in preparation for the introduction of universal credit in 2013. The pilots are expected to start in the autumn of this year and to end by September 2013. We will focus on delivering the kind of face-to-face support that individuals might need when claiming universal credit. I hope that he will agree that we will have a wide range of support available. It will be available online, as well as face to face and on the telephone.

The hon. Gentleman is right to say that it is important to get the IT right for this, and we are well under way in our designs and in testing the system to ensure that universal credit is introduced in 2013. Our ambition will, of course, always be to move the majority of people on to use of the online system, and we are working closely with other Government Departments and beyond to ensure that the best possible support is there to enable access to the internet for many people, supporting claimants to get even more value from being online.

The hon. Gentleman expressed an interest in the issue of fraud and the work being done to ensure that safeguards are in place. It will come as no surprise to him to hear that we take the issue of fraud very seriously indeed. Its prevention has been built into the heart of all policy and service design development. Universal credit will be protected by comprehensive and sophisticated cyber-defence and counter-fraud systems, which are currently under development with leading suppliers. I am sure that the hon. Gentleman will want to stay close to the sorts of issues that we are dealing with, but he will understand if I do not go into the details of those systems, as they are sensitive and not for open discussion.

The hon. Gentleman raised the issue of monthly payments, which I have touched on a little already. To be absolutely clear, we believe it important for universal credit to reflect what people experience in the workplace when they are working full time. For the most part, that means being able to budget around a monthly payment, a monthly salary or a monthly amount of money coming in. We will ensure that there is flexibility in the system for those who find that exceptionally difficult, but we believe that this will be an exception and not the rule.

I can see the logic behind the change to monthly payments, but it is clear that some who get weekly payments are not knowledgeable enough to know how to manage their moneys. Will the Government give any help to those who will depend on single weekly payments to start with, who will then have to manage on monthly payments, on how best to manage their money?

The hon. Gentleman will be reassured to know that my noble Friend Lord Freud is looking at exactly those issues. We know that changing people’s behaviour cannot happen overnight. People need support and we will make sure that we understand the sort of support that will prove the most effective, as the hon. Gentleman would expect us to do.

The hon. Member for Nottingham East talked about the importance of banking in this process. Direct payments to bank accounts are an important part of helping people to prepare for work. We will encourage claimants to use bank accounts, and we are discussing this very issue with the British Bankers Association. We recognise, however, that it will not be suitable for everybody, so we expect to continue to pay rent directly to landlords in some cases and we will continue to ensure that suitable payment arrangements are in place for everybody. The hon. Gentleman is right that we need that nuanced approach for some individuals. The bulk of individuals, we believe, should be able to cope with the sort of monthly payments that I mentioned earlier.

I am sorry to intervene, as I know we are getting short of time. The analysis of the support needs of an individual, either face to face at the first point of application or subsequently in recognition of exceptions such as weekly payments or direct payments for landlords, is a key point. How will it be done? Will it be a local service? Is it assumed that predominantly local authorities will pick up those responsibilities? I want to gain a sense of who will be dealing with these things, as the Department for Work and Pensions in Whitehall will not be doing the face-to-face work.

I think the hon. Gentleman is right, and in the pilots we shall pick up some of those issues, particularly the sorts of support that local authorities could provide. Jobcentre Plus will also be involved from the launch of universal credit as an on-site, readily available resource. The hon. Gentleman is right that we have to make sure that the appropriate support is there for the people who might need it, and we want to ensure that such systems are available so that universal credit becomes the success we know it will be.

The hon. Gentleman spoke of the importance of understanding the phased migration fully. We recognise that the move from one welfare system to another needs to be managed carefully, so that no one is left without the support that they need. The transition from the old benefit system to universal credit will therefore take place in three phases over four years, ending in 2017 when between 12 million and 13 million benefit and tax credit claims will become 8 million universal credit claims.

In the first phase, beginning in October 2013, all new claims to the current benefits and credits will be phased out by April 2014, with new claims to housing benefits and tax credits being the last to end in that month. Natural migrations to universal credit as a result of a significant change of circumstances will also be taken from October 2013.

In the second phase, which will begin in April 2014, existing claimants whose circumstances have not changed will start to be transferred to universal credit through managed change. It is expected that, as most of the households whose members are actively seeking work will have been moved through the new claims or natural changes route by April 2014, the households involved in that phase will generally be those with people in part-time work and those that are economically inactive. Priority will be given to households the nature of whose work makes them most likely to benefit from universal credit.

In the third and final phase, from the end of 2015 until the end of 2017, the remaining households will be moved into the new system. Local circumstances, such as staffing turnover, contractual obligations and demography, will be taken into account. The households will be moved on to universal credit in good time before housing benefit loads become too small to be viable. Within those parameters, the focus on work and poverty will be retained. That should allow local authorities to plan with more certainty over the medium term.

The hon. Gentleman rightly sought clarification of the important issue of housing benefit for pensioners. Following the abolition of housing benefit, help with rent and child costs will be provided through pension credit, and will broadly follow the existing rules.

The hon. Gentleman mentioned a number of information technology issues. I am not sure that I can cover all of them today, but I can assure him categorically that there will be no offshore outsourcing of the administration of universal credit, that the Department will send no existing British jobs overseas, and that no personal data are held or can be accessed outside the United Kingdom. Many sub-contractors started using overseas staff under the last Government. We are considering how jobs that used to be sent offshore could be moved back to the UK in the future. I hope that the hon. Gentleman would welcome such a move.

I do not think that the hon. Gentleman raised the issue of real-time information, but I shall bring him up to date in case he is interested. Real-time information is being introduced in HMRC to improve the operation of the pay-as-you-earn system, which will make it easier for employers and HMRC to share information. Under universal credit, entitlement for people who pay tax on their earnings through PAYE will correspond directly with earnings information received through HMRC’s automatic real-time information PAYE data transfer.

HMRC began pilot-testing RTI in April, and has already introduced 10 employer schemes representing a range of sizes with the aim of ironing out any wrinkles. I understand that the initial pilot stage has gone well, and that a further 310 employers joined the pilot yesterday. We are working closely with HMRC to ensure that systems are in place for the introduction of universal credit.

The hon. Gentleman rightly mentioned the important role of local authorities. They have been, and will continue to be, integral to the development of universal credit. We have undertaken extensive work with authorities to ensure that they help us to develop universal credit, and to tap into their expertise. I would like to take this opportunity to thank the local authorities associations of England, Scotland and Wales for their constructive engagement with us, especially those authorities that have already committed time and resources to helping to make universal credit a success.

On 21 March the permanent secretaries of my Department and the Department for Communities and Local Government wrote to chief executives informing them that local authorities will be expected to provide face-to-face support for certain universal credit claimants who will need more intensive help to access the new benefit.

The hon. Gentleman raised the important issue of staff. Local authorities will want to ensure that they deal with that issue correctly. When universal credit comes into force in October 2013, local authorities will have an important role to play, and that role will begin to change, too, so they will go through a period of transition. They will need to make sure they continue to work with us through this process. The Local Government Association and the DWP recently issued a joint prospectus calling on local authorities to work on the pilots I have mentioned. We recognise that costs will be associated with that process and the wind-down of housing benefit, and we will discuss that with DCLG and the local authorities in due course.

The Minister says that there will be a negotiation and that she will discuss this matter with local authorities, but she has to accept that central Government have decided to introduce the universal credit, and that a number of housing benefit and local authority staff will be made redundant. In a sense, the Government are forcing local authorities to make their staff redundant. The Minister has to accept that they must be compensated by central Government for that.

The hon. Gentleman has made a number of assumptions. As I have outlined, the introduction of universal credit will take place over a number of years. Local authorities already know it is coming, so it would be prudent of them to be planning for the changes and to make sure that they cause as little disruption as possible to their staff. Local authorities will have an important role to play in the future, whether in respect of their staff or of minimising any costs associated with the change. I urge the hon. Gentleman not to make assumptions as to how local authorities will deal with this process. I think most of them will want to plan the transfer sensibly and avoid any unnecessary costs.

I hope I have covered the majority of the points the hon. Gentleman raised. This debate has provided us with a tremendous opportunity to discuss an important part of the Government’s reform agenda, which is based on making sure that work pays, and that we have a strong and robust benefit system that supports families in the right way in order to make sure they can lift themselves out of poverty and that people, both disabled and non-disabled, have the opportunity to go to work. These reforms are a central plank of Government policy.

Question put and agreed to.

House adjourned.