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Universal Credit (Wales)

Volume 558: debated on Tuesday 5 February 2013

It is a pleasure to serve under your chairmanship, Mr Sheridan. It is delightful to see that so many colleagues from across Wales have joined me here, and some of them will undoubtedly wish to intervene during my speech.

We have been repeatedly told by Ministers that universal credit would ensure that work pays, improve incentives to work, simplify the benefits system and be easy to introduce. I am afraid to say that the widespread consensus is now that it might be fine in theory, but that it will seriously backfire in practice, with serious consequences for some of my most vulnerable constituents and those of my hon. Friends throughout Wales. I applied for this debate to draw attention to my sincere worries about the potential impacts on people across Wales of what one colleague has described as a car crash waiting to happen.

Is not part of the problem the whole climate of uncertainty and insecurity in which benefit claimants are living? In particular, the bedroom tax means that carers cannot have a bedroom available for night sitters, people on home dialysis cannot have a room for that purpose and, more worryingly, parents without custody of their children during the week cannot keep a room so that they can have custody of them at weekends. Should the Government not have sorted that out before introducing yet more changes?

Order. In anticipation of the number of interventions that may be coming, it would be acceptable if they were brief.

I agree with my hon. Friend the Member for Bridgend (Mrs Moon). I will come to the issue of uncertainty, but that point has certainly been reflected to me by many constituents and organisations that work with those affected by the changes. I have spent much time speaking to constituents. One of the benefits of standing in a by-election is spending an awful lot of time speaking to people, and the issue regularly came up on the doorstep. I have spoken to housing associations and other registered social landlords, to local authorities—specifically Cardiff council—and to other experts. Although there are a variety of views about whether the simplification of welfare payments is desirable, there are clearly consistent fears and forecasts of dire consequences that Ministers and the Department for Work and Pensions have not adequately answered or addressed. Perhaps the Minister will do so today.

To be brief, it seems to me that the Government have simply not considered the inflexibility in the housing market, or if they have considered that, they do not seem to care. Is that the hon. Gentleman’s view, too?

Indeed. I agree with the hon. Gentleman’s comments.

Coming on top of two of what my right hon. Friend the Member for South Shields (David Miliband) has called “rancid” measures—the bedroom tax, and the tax on people in work in the Welfare Benefits Up-rating Bill that we saw a few weeks ago—I am deeply fearful about the impact of the changes on many of our most vulnerable constituents, not to mention the organisations that support them.

Let us look at some of the headline figures. On Monday 10 December 2012, the Government published their new impact assessment for universal credit, which showed several very worrying facts. First, 800,000 more people across the UK face lower entitlements. The original assessment, which was published in 2011, said that 2 million people would face lower entitlements under universal credit, but that number has now risen to 2.8 million, with an average loss of entitlement of £137 a month. I will come to the specific statistics for Wales in a moment. Of those losers, 400,000 will be concentrated in the two lowest income groups.

We expect 600,000 more parents to lose out under universal credit. Households will also lose more: the original impact assessment said that only 200,000 families would lose more than £75 a month, but the latest one states that 1.3 million households will lose more than £100 a month and that an incredible 300,000 families will lose more than £300 a month, which amounts to £3,600 a year. The impact assessment points out that higher administrative costs will result from the changes. The Department has also dropped its claim that universal credit will tackle poverty, which has been removed from the 2012 impact assessment.

There have been delays, and we might hear the reasons for some of them when the Minister speaks later. The roll-out of universal credit is already a significant number of months late, and the DWP has been unable to confirm the timetable. Indeed, there is a great lack of clarity on the part of my local authority and others about how universal credit will be rolled out and when.

Does my hon. Friend agree that the Government have still not given any real answers about how those without bank accounts or internet access will be helped to adapt to the new monthly payments? Such answers are long overdue.

Absolutely, and I will come on to that point in due course.

It is not only those whom I have spoken to who have sincere worries about universal credit. As we have several times seen in the press, one Cabinet Minister has reportedly said in private:

“The information technology for the new system is nowhere near ready. It’s a disaster waiting to happen.”

Who knows whether such rumours are to be believed, but I understand that a number of Cabinet Ministers share that view, which is perhaps one reason for the delays.

What is the specific impact on Wales? Based on an analysis of the December impact assessment and some rough calculations, we estimate that a staggering 140,000 people across Wales might lose £1,600 a year. That is based on an estimate of the Welsh population that will be affected. I would be grateful if the Minister shared the Government’s figures and estimates about how many will be affected in Wales and how much they will lose. Will he provide a breakdown by local authority to help local authorities prepare for the impact of the changes?

Aside from the raw figures, which are shocking in themselves, I want to share the key fears that people have raised with me about the implementation of universal credit in Wales. First, there is the challenge of budgeting for many families; secondly, as my hon. Friend the Member for Newport East (Jessica Morden) mentioned, there is the digital divide; thirdly, there are power relationships within the home; and, finally, there are the risks posed to local authorities, housing associations and other registered social landlords.

First, on budgeting, the Secretary of State for Work and Pensions frequently appears to suggest that those of us who raise the issue are patronising our constituents. Rather than taking so entirely complacent an approach, I commend the work that organisations such as the citizens advice bureaux, the Cardiff and Vale credit union, housing associations—for example, Cadwyn in my constituency—are doing to support tenants by helping them to set up bank accounts, jam jar accounts and similar facilities in credit unions. I also commend the Welsh Government’s work to support those efforts.

Levels of financial literacy––let alone access to a bank account––are not, unlike this measure, universal, and we need to be realistic about the impact of the changes on many people. Rather than making huge assumptions, perhaps the Minister would tell us what risks he sees in relation to the problems in the area and what his Department is doing to assist. I can certainly tell him that many of the organisations that I have mentioned, let alone individual constituents, have experienced varying or little support from his Department, and that relates only to those who are aware of such support.

I want to touch on direct payments and the data from the direct payment pilots that the Department has conducted. A couple of days ago, “Inside Housing” published an article entitled, “Direct payment pilots report increased arrears”, by the journalist Carl Brown, which states:

“Landlords testing direct payment of benefit failed to collect 8 per cent of rent on average in the first four months of the six pilot projects.”

Will my hon. Friend also ask the Minister what assessment has been made of the effect on local councils of all those arrears, because they will have major cash-flow problems?

Indeed, I absolutely agree with my hon. Friend’s point, which I will move on to later.

Mr Brown also stated:

“Data released today by the Department for Work and Pensions showed 6,220 tenants across the UK were paid directly in the first four months of the projects. Of these, 92 per cent of rent was collected on average overall, meaning arrears were around double the normal figure. A total of 316 tenants have been switched back to payment of benefit to the landlord.”

To give a figure that is specific to Wales, in relation to Bron Afon Community Housing and Charter Housing in Torfaen, 535 tenants were involved in the first payments and there have been 59 switchbacks so far, which is about 11%. Those figures are obviously of deep concern and they raise wider issues: there are deep worries about how universal credit will work in practice and about the support provided to people, and there are also major implications for organisations, whether they are local authorities or housing associations, that are supporting those tenants.

Secondly, on the digital divide, my colleague the Welsh Minister for Finance, Jane Hutt, has repeatedly warned that people with few or no IT skills might have difficulty applying for universal credit. In 2010, figures suggested that about a third of adults in Wales did not use the internet regularly, and recent figures from the Office for National Statistics suggest that about 20% have never used it.

Speaking as the former deputy Minister for digital inclusion, may I say that my hon. Friend makes a strong point? In my borough of Caerphilly, some 37% of the population are excluded digitally. The borough is making provisions to ensure that those people have access to computers, but many local authorities have had, for example, cuts in library services and excluded people will have no access to computers whatsoever.

My hon. Friend also makes a strong point. What assessment has the Minister made of the problem? I quote to him evidence submitted by Community Housing Cymru to the Work and Pensions Committee last year, which said:

“The presumption of a predominantly online self-service process is concerning since it is our experience is that a large percentage of people lack not only the knowledge and accessibility to make on-line claims but also the confidence…We know that a large percentage of social housing tenants do not have access to the internet at home, for example, in 2010 Tai Calon, a housing association based in Blaenau Gwent found that 42% of their tenants have access to the internet.”

That is shockingly low. The evidence continues:

“Blaenau Gwent remains the most digitally excluded area in Wales”

which I know from conversations with my hon. Friend the Member for Blaenau Gwent (Nick Smith). Finally, the evidence states that there is

“a lack of clarity in Wales as to where independent advice can be sought on Universal Credit. Citizens Advice Bureaux are already inundated and welfare benefit enquiries have now overtaken debt enquiries in number.”

The concerns are serious.

Thirdly, in the spirit of openness, I announced on Twitter that I would be holding this debate and asked constituents to come forward with concerns. One such concern, which was shared by many others, is that there will be particular risks for women as relationships in the home may be affected by changes to payments and to who will have control of the money, especially given that child benefit was always paid to the mother in the past and provided some security. Will the Minister reassure my constituents and others who have raised such concerns?

Finally, I turn to the real concerns of organisations working with vulnerable clients, particularly those in the housing sector in Wales. Last week, I met representatives of Cadwyn, a housing association with significant numbers of homes and tenants in the Grangetown and Butetown areas of my constituency, and they are deeply worried about what they see as a perfect storm with the coming together of the bedroom tax, the benefit cap—by which only London is affected more than Cardiff—and universal credit. They showed me some extremely worrying figures about rent payment, the risk of arrears, high-risk customers and the challenges that the proposal will create for them and other registered social landlords across Wales. What forecasts has the Department for Work and Pensions made of the financial challenges that registered social landlords may face as a result of increasing rent arrears?

The hon. Gentleman has made some strong and valid points. I know that what I am about to refer to took place before his time in this place, but does he agree that it was a serious political miscalculation of the Labour party to abstain on Second Reading of the Welfare Reform Act 2012 that led to the changes being implemented?

As the hon. Gentleman says, it was before my time in this place, so I will refrain from commenting and make some progress.

I am happy to report that Cadwyn is taking proactive measures to help its tenants adapt to the swathe of changes, including help with jam jar accounts, visits in person to vulnerable tenants and organising property swapping mechanisms on Facebook. Those are the types of methods to which it is resorting. There is, however, a limit to what it can do to mitigate the impact of all the changes coming together, particularly with the hard core of tenants who will prove difficult to access, reach and support and who will find it difficult fundamentally to adapt to universal credit and other changes. On the bedroom tax, there are simply not the properties to move into.

If that is not enough, let us take the perspective of Cardiff, the largest local authority in Wales. I know that its concerns are shared by many neighbouring local authorities, including Vale of Glamorgan, which is also in my constituency. Last week, I spoke to officials at Cardiff council last week who said:

“With regard to Universal Credit, this is expected to start in Cardiff from February 2014 but there is still considerable uncertainty about when this will be fully implemented. This will affect 140 jobs in Cardiff.”

They face concerns such as a

“lack of clarity about how face to face services will be delivered. Cardiff currently sees 1000 customers a week about housing benefit face to face. The insistence on digital by default fails to recognise how many low income households cannot afford broadband and how much help is needed by vulnerable tenants to claim benefits. Payment direct to tenants in social housing…is likely to result in arrears, evictions and homelessness. Indications from the pilots are that tenants are falling into arrears.”

I have already mentioned that evidence. The concerns continue:

“There is still no clarity about the circumstances in which payments will be made to the landlord.”

Like me, my hon. Friend is a supporter of the Co-op’s campaign against legal loan sharks. Does he agree that, in the case of his and my constituencies, legal loan sharks are positively rubbing their hands and waiting for residents to come to them?

I absolutely agree with my hon. Friend. I have seen an explosion in legal loan-shark activity on our streets, whether that be people knocking on doors or opening up offices on the high street. I commend the work of organisations such as the Cardiff and Vale credit union that are trying to provide alternative options.

Cardiff council was also concerned about the following:

“Budgeting issues are also a concern as Universal Credit will be paid monthly in arrears. This is one of the major concerns expressed by customers visiting our roadshows.”

It has been taking proactive steps. It was also concerned that:

“Low income families who depend on this money will have no resource at all if there are any problems with receipt of the payment.”

I do not want to guess the future, but a serious concern is that the record of all Governments in implementing large-scale IT projects leaves much to be desired.

Lynda Thorne, the cabinet member for housing at Cardiff council, wrote to me just yesterday and said:

“I am concerned that the end result of many of these changes will be an increase in homelessness and the transfer of extra financial burdens falling on local council tax payers in terms of picking up the cost of a reduction in the collection rate of council tax, the extra cost of providing help and support to those who need support completing claims and a rise in homelessness created from direct payments.”

She makes the point that Cardiff has

“more private Landlords providing accommodation to those on benefits than all the RSLs, housing Associations, put together. Private Landlords have indicated that they are likely to revert back to only letting to those in work resulting in even more families and individuals becoming homeless thus costing council tax payers more. We currently have more than 500 families and individuals in temporary accommodation at any one time.”

What are the Minister’s reflections on those legitimate concerns raised by a major housing association in my constituency and the largest local authority in Wales?

My hon. Friend is being generous. Would it not be ironic were the Government to bring about a situation in which, as he describes, private landlords cannot rent out their accommodation to those most in need, because it cannot be guaranteed that they will receive their rent? Is that not the sign of a policy that is ideological and not based on evidence and common sense?

Order. I recognise that the hon. Gentleman is new to the Chamber, but we would like to leave some time for the Minister to respond.

Thank you, Mr Sheridan. I will give the Minister some time to respond very shortly.

If the examples I gave before the intervention are not good enough, the Minister can look at the example of National Energy Action in Wales, which works extensively on fuel poverty. It recently stated:

“Sweeping changes to welfare reform including Universal Credit…will be hitting Welsh households hard in the coming months and will have major implications for the Welsh Government's plans to tackle poverty, including fuel poverty, in Wales.”

My friend, Huw Lewis, the Housing Minister in Wales, has said:

“We can't make any distinction here. I think it would be foolish if people were under the impression that it's just going to be something that affects people in social housing.”

There are huge concerns, which are shared by not only me or the people who have raised them with me on the street or in correspondence to my constituency office, but also the largest local authority in Wales, a number of housing associations, the bodies representing such people and a wide range of other experts. Wales will be hit disproportionately by the measures and by what could be an extremely chaotic set of reforms. I am seeing, frankly, poor evidence of support and engagement from DWP Ministers and others, and I fear that many unintended consequences will affect some of the most vulnerable people across Wales.

I congratulate the hon. Member for Cardiff South and Penarth (Stephen Doughty) on securing the debate. He raised some important issues, but I counsel some caution. It is easy to create uncertainty among constituents by mentioning such stories in a way that is not balanced and does not reflect the support that will be in place. He actually identified the answer to his problems in one of the quotes he gave from a housing association about the additional work that it will do to help to support its tenants, such as jam jar bank accounts and additional support for budgeting, both of which we intend to deliver. The support around the introduction of universal credit will not only make the transition easier but improve families’ quality of life and financial stability. He should not overlook the beneficial impact that the proposal will have in improving financial capability.

I have 12 minutes and many questions to answer in that time, and I want to correct some of the misapprehensions and misunderstandings that have been raised in the debate.

Universal credit is a cornerstone of the Government’s welfare reform programme, and it will simplify the benefit system and tackle welfare dependency by making work pay. Our aim is to offer seamless support for people making the transition into work. No longer will people find themselves in the absurd position where their benefit is disrupted the moment that they start work. Our reforms will ensure that people are better off in work than they are on benefits.

In Wales, we estimate that once universal credit is fully up and running some 200,000 households will be eligible for higher payments under it, typically seeing an increase of almost £160 per month, and we also estimate that the proportion of people in Wales who would stand to lose more than 70% of their increased earnings by moving into work for 10 hours a week will reduce under universal credit from 32%—as it is under the system we have inherited from the previous Government —to 3%. That is why delivering this reform is important for the people of Wales. It will make people better off in work, it will make work pay and it will reduce the risks involved in taking up work or doing more work.

Let me deal with some of the specific concerns that have been expressed. The hon. Member for Cardiff South and Penarth raised the issue about benefits being paid in arrears on a monthly basis. It is important that the new system is designed around the patterns of modern working life. Given that three quarters of the employed population are already paid on a monthly basis, receiving payments monthly will be something that people are familiar with when we move to universal credit.

Of course we recognise that some people may struggle to budget, and we are making provision to ensure that they do not fall through the cracks. We are working with banks and credit unions, such as the ones the hon. Gentleman quoted, to explore suitable financial products that may help people to budget and to put money by each month to fulfil their responsibilities to pay their rent and other household bills. Around 4.2 million Department for Work and Pensions claimants already have a bank account. We know that historically some people on a low income have experienced difficulties in accessing and using banking products. We want to ensure that claimants have access to a basic bank account with safe and secure standing order and direct debit facilities.

Let me move on to the point that was made about online services. As the hon. Gentleman indicated, the service will be online. We want people to be able to make a claim and to report changes, as they would with online banking. If people are going to participate effectively in today’s modern labour market, they will have to be conversant with digital tools. In the words of Lord Freud, digitisation is a “social imperative”. Of course we can and must do more to ensure that people can access services online. We do not want the digital divide in his constituency and others to persist. We must tackle it and this process is a very good way of tackling it. I am surprised that Opposition Members are so resistant to the actions that we can take to help tackle that digital divide and improve social inclusion.

We are already looking at some of the local authority pilots that have been carried out. Two of them are in Wales, with one in Caerphilly and one in Newport. The pilots are helping us to understand what support we need to give to help people to move into universal credit. We will use the pilots to learn the lessons, and we will apply them as we develop future stages of delivering universal credit, because we have ambitious targets for digital take-up of our services.

No, I will not give way. The hon. Gentleman had more than his fair share of time, so let me try to deal with more of the questions that he put.

The hon. Gentleman talked about this project being behind schedule. I have no idea where he got that idea from. The programme is not behind schedule; it is actually on time. I counsel him, and he will learn this more as he is in this House, never to believe what he reads in the paper. The programme is on time and on schedule. The first stage will start at the end of April in the pathfinder area in Greater Manchester and the north-west, and the programme will continue to roll out nationally.

The hon. Gentleman rightly made a point about the failure of previous Governments to deliver big IT projects on time. We saw that under the previous Government. I think that all of us in this House who have had to work with the complexity of tax credits on behalf of our constituents will recognise the failure of that system and the problems that it created for our constituents.

The way that we are working through the implementation of this programme is through our pathfinder approach, which enables us to proceed with implementation in phases. It is an approach that we have used in other large programmes. For example, in the new child maintenance scheme we have used the pathfinder process. In implementing the personal independence payment, which replaces the disability living allowance, we will begin with a few thousand new claims in April, before rolling it out. So the staged and methodical approach that we take to rolling out programmes—“prove before you move”—means that we will fully implement a change once we are satisfied from experience in a live environment that it is safe to do so.

That is why we are rolling out the pathfinder in April in Greater Manchester and Cheshire, to allow us time to test during this period and with a view to successful implementation nationally later this year. This thoughtful and considered approach to rolling out is important. It will ensure that we test the operation to run universal credit; the people capabilities required to support the service; communications; implementation; the behaviour of claimants; and how to ensure that we respond effectively to unintended consequences.

Let me touch on direct payments. I understand the concerns about the payment of housing costs directly to claimants, but we remain of the view that paying housing costs directly is an important way of helping people to manage their own finances and to become more independent. The emerging evidence from the demonstration projects, including the one in Torfaen, does not suggest that large numbers of claimants will suddenly fall into arrears. On the contrary, because the take-on of claims is going to be gradual—over a period of years—there will be no big bang effect, and there is no real evidence of any likely sudden impact on landlords’ incomes.

There will be lessons to learn from those projects, and we will continue to monitor the position very carefully. They will enable us to test trigger points at different levels of arrears, so that if a tenant does fall behind with their rent, action can be taken, including—if necessary—switching back payment to the landlord for a period and offering additional support to the tenant.

We should treat people receiving universal credit as adults. We should encourage them to stand on their own two feet and to manage their money as others manage their money, particularly as they will have to do so as they move into a situation where they increase their earnings. Nevertheless, the support mechanisms that are in place are very important. They give landlords a real incentive to work with their tenants around employment issues to help them into work, and encourage landlords to work more closely with their tenants to understand their financial capabilities and what support might be needed. We should not infantilise universal credit recipients in the way that Opposition Members seem to be suggesting.

There has also been discussion about local support services. We are working in partnership with local authority associations, including the Welsh Local Government Association, on a local support services framework. That will ensure that effective local partnerships are put in place to help claimants with getting online and to learn how to manage their household budgets. As I said earlier, we will learn a great deal from the pathfinder phase of universal credit.

To ensure that we have taken into account the concerns of authorities in Wales, Wales is also represented in the development of the universal credit across a number of forums, pilots and projects, including a senior stakeholder group, a local authority transitional working group, a local authority finance and commercial group, a local support services taskforce, a direct payment demonstration project and local authority-led pilots.

Let me say just a little more about the pilots. We are currently running 12 local authority-led pilots and we aim to conclude those by the end of September. The aim of the pilots is to test and inform the development of a face-to-face delivery model. The pilots will provide important practical lessons on delivering services in an innovative way at the local level, including triage, which is working with claimants to identify their needs, how those needs can be met and where support can be accessed locally; improving online access, so that we can get more claimants using online resources and, where they cannot use them, providing assisted support to get online locally at libraries, community centres and other community buildings where personal computers may be accessible; budgeting support, so that people can manage their finances independently; and, of course, all underpinned with a work focus, to help claimants to find work and stay in work through a range of training and support networks. We have been working very closely with local authorities on a framework for delivering local support to those who need it, and we will announce further details of this very shortly.

We recognise the valid point that the hon. Gentleman made about ensuring that support is available at a local level. It is in none of our interests for claimants of universal credit to be left high and dry. That is why we are working to ensure that the support is in place, whether it is about getting online, debt advice, managing money, or setting up the right bank account or jam jar account to enable people to manage their money. We want to provide the infrastructure around universal credit to help claimants.

By doing it that way, and focusing on how we tackle those problems rather than simply throwing our hands up in horror and saying that it is all doomed to fail, we will provide the right outcomes for the hon. Gentleman’s constituents and for mine. That is because it is absolutely right that we do all we can to ensure that people know that work pays, that people in Wales will be better off as a consequence of the introduction of universal credit and that people do not see the disruption that happens at the moment when they move from out-of-work benefits to in-work benefits. The system is here to ensure that people understand that it is better to work than not to work, and better to earn more than to earn less. There will not be the situation that many people are in now, of having to turn down bonuses from their employers because it does not work with the benefit system. We need to tackle some of the problems of the past, to give our people hope for the future.

Sitting adjourned without Question put (Standing Order No. 10(13)).