Pensions: British Pensioners Overseas

Lord Freud Excerpts

Wednesday 11th March 2015 Lords Chamber

[Baroness Benjamin]

To ask Her Majesty’s Government what consideration they are giving to uprating fully or partly the state pensions of British pensioners currently living overseas whose pensions are frozen.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)]

My Lords, there are no plans to change the current arrangements for payment of state pension to those recipients who live outside the UK. The policy of this coalition Government is to uprate UK state pensions where they are legally required to do so under the terms of EU law or through a bilateral social security arrangement which covers uprating. Changing the policy as suggested would incur significant costs—moneys which are currently just not available.

[Baroness Benjamin (LD)]

My Lords, I thank my noble friend for that Answer, but it is unbelievable that British pensioners who have paid in their full contribution do not receive their full pension when they retire to many parts of the world, including to the Commonwealth. If full uprating is thought to be costly and a liability for back-payment claims, will the Government adopt the solution of partial uprating of frozen pensions at their current level, since this involves neither of these barriers? It is affordable, it is cost effective and it will stop the gradual decline of pensions year on year. I beg the Government to include a partial uprating option in the Budget and put an end to this injustice once and for all.

[Lord Freud]

I regret I cannot give my noble friend any comfort. Full uprating to today’s levels would cost us more than £0.5 billion and while partial uprating—in other words, just starting to move current levels of pensions up by the increases—would start off being much less than that, those costs would rise in the medium term to a level similar to the full uprating.

[Baroness Turner of Camden (Lab)]

My Lords, is it not really rather unfair? I have a relative who retired to South Africa, where there is no reciprocal agreement. He is very upset that he paid the appropriate contributions before leaving this country and his pension will nevertheless be frozen. Should not people who have made some contribution at least have some gesture from the Government in favour of fairness, which is, apparently, not available at the moment?

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[Lord Freud]

This policy has been running now for 60 years. It has been upheld in the European Court of Human Rights. We have made pensions available to many pensioners abroad, which is different from many OECD countries which do not do so. Most pensioners migrated well before they became pensioners and have built up rights in their adopted countries.

[Baroness Gardner of Parkes (Con)]

My Lords, your Lordships will not be surprised that, with my Australian origins, I have been approached many times about this, and successive Government after successive Government have given me exactly the same reply over the 30 years that I have been asking this question—that it simply cannot be afforded. But when I followed this up at the Australian end, I was assured that they top the pensions up, or did so. Does my noble friend know whether it stills happens that a number of the Commonwealth countries take on and give the extra pension?

[Lord Freud]

This is the reason why this is a complicated area: it is about a bilateral agreement with another country. In practice, to take the example of Australia, I estimate that for any extra amount that we paid to ex-UK pensioners or UK pensioners living in Australia, more than 25% of that money would go straight into the Australian Treasury.

[Lord Rooker (Lab)]

My Lords, I fully accept the position that the Minister is in by answering this Question, but how often do the Government check and audit that the recipients of these pensions who are thousands of miles away are still alive?

[Lord Freud]

The noble Lord will be very pleased to know that we now have a system, which has been introduced reasonably recently, of checking that rather more regularly than it used to be done.

[Lord Shipley (LD)]

My Lords, could I add to my noble friend’s example of Australia that of Canada, which uprates the pensions of its pensioners who are living in the United Kingdom? Given also that in some countries in the Caribbean pensioners from the UK have uprated pensions whereas in other countries in the Caribbean they do not, does the Minister not agree that it really is time to get this sorted out and that the partial pensions uplift route is the way to go?

[Lord Freud]

The reason for those differences in Caribbean countries and elsewhere is that we have historic bilateral agreements. Interestingly, to pick the Canadian example, no Canadian pensions were paid in the rest of the world when we were looking to do a bilateral in the 1960s. That is the reason that we do not have one today with the Canadians.

[Baroness Scotland of Asthal (Lab)]

My Lords, is there not a difficulty because, while I accept that there has been an iterative process over time, what we now have is a situation of fundamental unfairness? A number of British citizens who worked in this country all their lives, making a considerable contribution, are going to be treated differently if they choose to return to the countries of their birth. For example, if someone from the Caribbean was, happily, a Barbadian or a Jamaican, they would be treated in one way; if they were not, they would be treated in another way. Does the Minister not think that there is now absolute necessity for us to address this unfairness, as opposed to allowing it to continue?

[Lord Freud]

My Lords, bluntly, this is about money. The approach in this policy has been in place for 60 years —effectively, the current structure dates from 1955—and, as far as I am aware, during the discussion that we had on this during the passing of the Pensions Act 2014, both the Government and the Opposition confirmed that they had no desire to change current arrangements.

[Baroness Hooper (Con)]

My Lords—

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[Baroness Hooper]

My Lords, can my noble friend tell us about the situation for British pensioners in the overseas territories, such as the Falkland Islands, St Helena, Gibraltar and so on? Would it be possible for the scheme of partial uprating described by my noble friend Lady Benjamin to apply at least to the small number of pensioners who live in our overseas territories, which are, after all, a very special case?

[Lord Freud]

Of the 14 overseas territories, two are uprated—that is, Gibraltar and Bermuda, where we have bilateral agreements—but the other 12 are not. The reason that we cannot go ahead and treat them differently is that that would open the door for us having to do it elsewhere.

Personal Independence Payments

Lord Freud Excerpts

Tuesday 10th March 2015 Lords Chamber

[Lord Touhig]

To ask Her Majesty’s Government how many people are awaiting assessment for personal independence payments.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)]

I am pleased to update the House that the average claimant is waiting 14 weeks for an assessment. This is within the 16-week target set by the Secretary of State. In any high-volume business, we would always expect to have a significant number of cases moving through the system at any one time.

[Lord Touhig (Lab)]

My Lords, anyone making an application for a PIP assessment today will have time for 16 return journeys to the moon or 35 flights around the world before they will get their assessment. In fact, they would be back in Britain a week before their assessment was due. The timeframe announced by the Minister is simply not acceptable. However, when this was debated in the Commons in January, a number of Members of Parliament said that when they intervened the process was reduced considerably. Is the system so broken that the best way to get a short and quick interview for a PIP assessment is to involve a Member of Parliament? What does he say to his own independent reviewer, Paul Gray, who said that the delays were doing a disservice to disabled people and their families?

[Lord Freud]

The backlogs that we suffered earlier have been reduced very substantially. The 14-week wait I referred to is down from 30 weeks in June 2014. We are now putting through 52,000 cases a month.

[Baroness Campbell of Surbiton (CB)]

My Lords, PIPs are intended to assist with disability-related expenses. The disability charity Scope estimated in a recent study that these amount to an average of £550 a month. Given that the Government have reasserted their commitment to protecting the value of the state pension through the triple lock, what consideration has the Minister given to affording PIPs the same protection?

[Lord Freud]

We are maintaining our spending on disability and disability payments and services are running at £50 billion a year. Indeed, our disability payments have been moving up right the way through this Parliament in real terms.

[Baroness Jenkin of Kennington (Con)]

My Lords, will my noble friend the Minister tell us how effectively the fast-track service for terminally ill claimants is performing at the moment?

[Lord Freud]

People who are terminally ill are fast-tracked through the process and the median end-to-end clearance time is now, as of this January, seven working days compared with 11 days in January last year.

[The Lord Bishop of Leicester]

My Lords, can the Minister tell us how many 16 and 17 year-olds are awaiting reassessment? What action do the Government propose to take to meet the additional needs of that group, including providing support for them through the reassessment process?

[Lord Freud]

I will have to write to the right reverend Prelate on that matter. I do not have the data on 16 and 17 year-olds so I shall write to him.

[Baroness Farrington of Ribbleton (Lab)]

My Lords, will the Minister please answer the question asked by the noble Baroness, Lady Campbell? This is supposed to be not just Question Time, but questions and answers.

[Lord Freud]

My Lords, I have made answers to the questions.

[Lord German (LD)]

My Lords, the reliability criteria used for the personal independence payment assessments —that is, whether people can undertake tasks safely, acceptably and repeatedly—are crucial for people with fluctuating conditions. In their response to the Gray review the Government say that everybody involved in assessing those criteria should have training, yet later they say that the DWP will undertake training separately from Atos and Capita, which will do their own training. Does my noble friend not think it would be much better if all three worked together on the training so that we have consistency of outcome and avoid outcomes such as the inappropriate loss of a Motability car?

[Lord Freud]

We have been working very closely with the providers to make sure that there is an identity of approach in training, right the way through the two different providers and DWP.

[Baroness Sherlock (Lab)]

My Lords, the Government have taken to using a variety of unpublished statistics in relation to PIP. When my noble friend Lord Dubs asked a Question on this very subject on 15 January, the Minister answering said that the backlog was down to 107,000—but was then obliged to write and say that that was not the case at all. So can the Minister tell me something very specific? The latest published figures cover only new applications for personal independence payments, not reassessments of the kind mentioned by the right reverend Prelate the Bishop of Leicester. People suspect that those on disability living allowance are having much slower assessments in order to enable the Government to fast-track new claims. Can the Minister reassure the House that that is not true and also tell us what the waiting times are for DLA?

[Lord Freud]

The two processes, for PIP and for DLA—or rather, for the WCA, which I imagine is what the noble Baroness meant—are separate, and separate contractors operate them. Indeed, Maximus has come in to run the WCA process. As for the figures, statistics will be released next week, on 18 March, giving the PIP clearance times and the waiting outstanding times. That statistical release has been preannounced, in accordance with the normal protocols.

[The Countess of Mar (CB)]

My Lords, I express my thanks to the Minister for the excellent revision that was made of the training manual for CFS/ME. What checks are made of the assessors to ensure that they are not bringing their preconceived ideas about CFS/ME to the assessment that they make of people with that condition?

[Lord Freud]

This is an area into which we have looked very closely, helped by the noble Countess. We have an audit system for all of these tests whereby we test that they are being conducted to the quality that we require.

[Baroness Hollis of Heigham (Lab)]

My Lords, of those people who are going from DLA to PIP, how many does the Minister expect will lose their Motability car? Will it be 50,000 or 100,000?

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[Lord Freud]

My Lords, I am not in a position to give exact figures. We debated this in some detail when we went through the Bill. I can say what the award rates are at the moment. Thirty-two per cent of people have been on both the enhanced daily living allowance and the enhanced mobility allowance, which I hope gives some direction as to where we are going with these tests.

Employment Levels of Older People

Lord Freud Excerpts

Thursday 5th March 2015 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)]

My Lords, like other speakers in this debate, I am grateful to the noble Baroness, Lady Greengross, for bringing this question to the Committee. I am really pleased to acknowledge the work she has done in this area. She has been director general of Age Concern and is now chief executive of the International Longevity Centre. I am also very pleased to be able to respond to as many of the points made by colleagues in the Committee as I can.

We are today talking not about a potential increase in the employment of older people but about a very real and sustained improvement. The past year has seen the number of over-50s in work exceed 9 million for the first time. It has risen by nearly 250,000 in the past 12 months and by more than 1 million since 2010. That is not just about the number of older people rising. The proportion of over-50s in work has also reached the highest on record.

The question of whether the increase in the number of old people in work has an impact on other groups is one that I think we are all in violent agreement on—the lump of labour fallacy. The figures that we have just seen demonstrate that it is a fallacy. If we exclude young people who are in full-time education, the employment of under-25s has risen by nearly 70,000 in the past year alone and by 140,000 since 2010.

I will pick up on the point made by the noble Lord, Lord Shipley, and the noble Baroness, Lady Sherlock, that 16% of young people are still unemployed. The actual figure, if students are excluded, is 6.8% of young people unemployed at that level. So we should not worry about a rise in employment in one group damaging the chances of another. We are not in a zero-sum game. A recent report for the European Parliament which looked at employment trends for older and younger workers across the EU found no trade-off between rates of employment. The IFS study which the noble Baroness, Lady Sherlock, quoted looked specifically at the UK. It concluded:

“When looking at the entire 1968 to 2005 period … we find no evidence of long-term crowding-out of younger individuals from the labour market by older workers”.

It is interesting how Governments used to think like this. The 1970s and 1980s programmes such as the Job Release Scheme, which positively encouraged older people to leave the market so that it would free up jobs for the young, had their origins in that thinking. It is interesting that the IFS concluded that that particular programme did achieve one of its aims. It reduced employment among older workers but there was no evidence of a corresponding effective employment of young people.

The noble Baroness, Lady Greengross, raised the Saga report on how over-50s make an important and growing contribution to society. It made the point that she was making that encouraging people to leave the labour force early reduces spending power and demand in the economy.

Evidence from research goes in the entirely opposite way to the lump of labour fallacy, because older and younger workers are likely to complement each other. A study by the RAND organisation in 2009, using data from 22 OECD countries, suggested that there was a positive effect. In other words, for every one additional older person in work, the overall effect was nearly 1.1 more people in work. Far from the substitution effect, firms may choose to hire both because this brings a healthy mix of skills, qualities and experiences.

I want to outline briefly what the Government are doing for older workers. We abolished the default retirement age in 2011; we extended the right to request flexible working for all; and we have introduced Fit for Work, which helps with sickness absence and provides an occupational health assessment and health and work advice to employees, employers and GPs. In Jobcentres, work coaches have the flexibility to offer all claimants a comprehensive menu of support. In addition, in last year’s Autumn Statement we announced two pilots, which will support 3,000 people who need help to move back into work or start a new career in a different sector. These will be based on our current sector-based work academies and work experience programmes—currently more orientated at youngsters—but tailored to the needs of older people.

We are planning two further trials that will explore what may provide effective support for these older claimants. The first will look at support through a career review-based approach and the second will look at providing IT and digital support. We will also introduce regional champions in Jobcentre Plus, as referred to by the noble Baroness, Lady Greengross. That champion role will start later this month. I want these roles to work with local employers and share good practice so that we can promote activity for older claimants in the regions.

The noble Baroness raised the issue of those made involuntarily workless and talked about there being 1 million of them. We published Fuller Working Lives to set out what the Government and others are doing to tackle this. We are making good progress on the commitments in respect of it.

The noble Baroness, Lady Sherlock, asked about the Work Programme. That treats everyone as an individual rather than looking at this on the basis of age. Up to September 2014, there had been 300,000 referrals of people aged 50 and over, which resulted in more than 42,000 job outcomes.

The noble Baroness, Lady Sherlock, made a point about flexibility in pension schemes. That is key, in that it enables more flexible retirement options. We are bringing in new flexibilities in April for people with defined contribution pension arrangements by introducing new freedoms in terms of how and when they access their pension payments.

As for policies for younger workers, sector-based work academies are available in England and Scotland. That has been a very successful programme, with a combination of pre-employment training, work experience and guaranteed interviews. They are local and demand-led, so you have different sectors depending on where you are running those schemes. There have been more than 88,000 sector-based work academy starts for 18 to 24 year-olds since the scheme began in August 2011. We have had 247,000 work experience placements for 18 to 24 year-olds, and various healthy outcomes, with half of work experience participants off benefits 21 weeks after starting their placements. The noble Lord, Lord Shipley, raised the issue of the success of apprenticeships. There have been more than 2 million since the election.

This is more of a theoretical debate than a political one, but I will just pick up very gently the description given by the noble Baroness, Lady Sherlock, of some of the Labour policies, such as the jobs guarantee. I am in despair about all that, because that is the kind of top-down approach of saying, “We can produce the jobs for the people and put them into them”, which is exactly the wrong way to go about creating a dynamic economy. You want to have people put into real jobs that will last. I just express my despair and move on.

To pick up the point about apprenticeships again, we clearly need to see how that works for older people. It has worked really well for younger people and is something that Ros Altmann has been championing for older people. As noble Lords have pointed out, there are schemes now, from Barclays for example, to do that. In response to the noble Lord, Lord Bhattacharyya, they have been successful: 89% of employers report that that process has helped their business and improved their quality and standards. Last year the Education Secretary announced a new careers and enterprise company for schools to transform the provision of careers education and advice for young people. I repeat my thanks to the noble Baroness, Lady Greengross, for bringing this Question to the House. Today’s contributions have been interesting and I think we are all fundamentally in agreement, apart from my one point of despair.

Youth unemployment is a really serious matter and this debate has been another opportunity for us to emphasise that increasing the number of older workers does not have an adverse effect on youth employment.

Universal Credit

Lord Freud Excerpts

Wednesday 4th February 2015 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)]

My Lords, I am grateful to my noble friend Lord German for bringing this Question to the House. As noble Lords have said, I promised to come back with the findings of the review that I committed to undertake as we went through the Pensions Act 2014. Noble Lords have referred to my Written Statement on 23 October. The regulations for the measures were brought into force last November.

Let me remind noble Lords of the context. Concerns were raised by Peers, particularly by the noble Baroness, Lady Finlay, and my noble friend Lord German about the universal credit requirements placed on the parents of bereaved children. I have to say that the noble Baroness’s speech during the Committee stage of the Pensions Bill really resonated with me personally. She highlighted the fact that difficult circumstances can cause a substantial and varying amount of distress for children, and that parents and carers need time to provide them with additional care, support and stability. We have built a clearer, more demanding welfare system which places robust requirements on claimants. But placing robust expectations also means recognising that we should suspend these requirements at certain times, providing temporary relief from conditionality to deal with the situation without moving claimants too far away from the world of work.

I should like to mention that I have been ably supported in my considerations of the review findings by two external expert advisers—which is one up from the number recommended by my noble friend Lord German. They are Dr Jane Callaghan from the British Psychological Society and Karina Dancza from the College of Occupational Therapists. I am very grateful to them for their invaluable support. I should add that I also gained enormously from the insights from our own people on the front line, in particular Colin Cottingham and Graham Sandilands, who know what it is to help parents in this situation.

The review concluded that there are particular situations—bereavement or a child witnessing or being a victim of violence or abuse—where there is compelling evidence that children were very likely to experience a period of acute distress following such an event and where additional support would be required from the parent. These situations cover a wide range of circumstances where child distress can occur. There will be other circumstances that are not covered where we would expect our work coaches to use the current tailoring and discretion available in exactly the same way.

I decided to make these policy changes through regulations, as recommended by the review, as opposed to doing so purely in guidance. These regulations establish a clear and consistent framework for work coaches, which is so important when exploring such sensitive topics. More circumstances, such as homelessness, as my noble friend mentioned, could be included in regulations at a future time if evidence suggests that that is appropriate.

The review found that a six-month suspension of requirements for parents of children in cases of bereavement and domestic violence would normally be appropriate. We have therefore extended, from the previous three months to the current six months, the suspension of conditionality requirements for victims fleeing domestic violence where they are responsible for caring for their child. As the noble Baroness, Lady Finlay, noted, child distress is not a linear process and families may experience late effects of dealing with grief. To help support their children in these circumstances the parent will be able to access a new one-month suspension of requirements once in every six-month period for a period of up to two years following the death or incident of violence or abuse.

I want to be clear: we will not seek to assess the child’s distress. Instead, we will look to identify the situation that has occurred and the impact it is having on the family unit. In terms of evidence, I do not want to introduce an overly bureaucratic system. When a claimant first accesses the one-month easement for the reasons set out in the regulations, if the work coach is satisfied that the situation is having an impact on the claimant’s ability to fulfil their conditionality requirements they will allow the easement. The work coach will at the same time ask the claimant to provide appropriate evidence. But unless work coaches think that it is necessary, we will not delay this first one-month easement because of waiting for evidence.

The form of that evidence is not set in stone. We do not expect evidence to detail the child’s distress but it should provide work coaches with information on the additional caring responsibilities that the claimant is undertaking. The types of acceptable evidence are varied and could include appointments at the child’s school, social services, healthcare professionals in connection with the child, additional childcare responsibilities or support arrangements. To help provide subsequent and ongoing support to families where longer than a month is needed to get them back on track, work coaches will make use of the discretionary tailoring available to personalise requirements in the light of individual circumstances. This helps to ensure that claimants can move on in a way that is appropriate to those circumstances.

When a parent has had a previous easement, this makes it easier for work coaches to identify the need for ongoing support and, as a result, to apply discretionary conditionality easements. I hope that that will provide the flexibility that the right reverend Prelate the Bishop of Portsmouth and my noble friend Lady Miller were looking for. I echo the words of admiration of the noble Baroness, Lady Sherlock, for those deeply personal contributions and experience in this area.

We have strong evidence that shows that work has a positive impact on individuals and their families. Focusing on bereavement, the review found that the existing six-month conditionality easement is appropriate. It did not find evidence that extending the six-month period would benefit the majority of those who have been bereaved. My experts advised me that this, combined with very clear and supportive tailored conditionality, should help parents to cope. I am not saying, by any means, that the grieving process is over by six months. But the evidence shows that usually by this time, a person’s grief is no longer a barrier to their continued life, although it may not be normality as they used to experience it. Many parents facing difficult circumstances want to return to work, for themselves and for their children.

I recognise the concerns that noble Lords have expressed about the level of work coach capability in this whole area, which is why, as part of this review, my officials worked with experts in the field to develop guidance for jobcentre staff. The stakeholders we worked with include the Childhood Bereavement Network, WAY, Gingerbread, Child Poverty Action Group, Grandparents Plus and Refuge, to name but a few.

The universal credit learning programme ensures that work coaches have up-to-date skills to deal with any claimant interaction and support them in making relevant and appropriate decisions on an individual basis. The training focuses on providing a personalised, flexible service to claimants and treating them as individuals, building strong relationships with them. To ensure that work coaches adhere to standards, we have put in place a quality assurance framework which managers use to monitor the service and to ensure a high-quality level of support. I hope that that gives some reassurance to the noble Baroness, Lady Finlay, in this area.

Let me now pick up on a few of the questions that have been asked in the short time we have had for this debate. In response to the noble Baroness, Lady Sherlock, the six-month bereavement provisions can be found in regulation 99(3)(d). As to my noble friend’s concern about transitional protection in UC, this would be not affected by invoking this particular relief. In numbers terms, we expect that no more than 10,000 claimants a year will take up the easement when universal credit is fully rolled out. We do not have information on the numbers currently affected but they are likely to be extremely small. People subject to in-work conditionality will be able to access the same conditionality easements. However, I emphasise that in-work conditionality is at the beginning of its exploratory phase for getting it right. It is therefore currently not a policy with hard edges.

I think that I have dealt with all of the issues. I shall look through the debate and if there are one or two questions that I have not had time to deal with, I shall write to noble Lords.

We are building a new welfare system at the moment, which is a major endeavour. We cannot do so without talking and listening to people. I am extraordinarily grateful for all the help that I have had in this House over the past few years to get to a positive result in this and other areas. In this particular case, I thank again the noble Baroness, Lady Finlay—she made her point so effectively that it convinced me that action was needed—and I thank my noble friend for showing such tenacity in pushing for the process to be taken forward at speed. It has meant that the changes were introduced at the same time as we are now rolling out universal credit to families in the north-west. We are now up to 26 jobcentres where families are part of the process.

I am grateful to the House for trusting me to do this exercise without all the normal paraphernalia. It has meant that we have been able to do it quickly and I hope that noble Lords are satisfied with the outcome.

Universal Credit (Work-Related Requirements) In Work Pilot Scheme and Amendment Regulations 2015

Lord Freud Excerpts

Thursday 22nd January 2015 Grand Committee

Moved by

[Lord Freud]

That the Grand Committee do consider the Universal Credit (Work-Related Requirements) In Work Pilot Scheme and Amendment Regulations 2015.

Relevant documents: 16th Report from the Joint Committee on Statutory Instruments, 21st Report from the Secondary Legislation Scrutiny Committee

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)]

The regulations before the Committee today introduce powers to test a range of approaches to establish how we can best support working universal credit claimants who are on low earnings to progress in work and earn more. This is a core principle of universal credit.

I take this opportunity to update noble Lords on where we are with universal credit. Universal credit is now in almost 100 jobcentres. Some 55,000 people have claimed and almost 27,000 people—including couples and families—currently benefit from the much enhanced support that it provides. For example, we are seeing that universal credit claimants spend twice as long looking for work than claimants on current benefits. Two-thirds of claimants surveyed believe that universal credit provides better financial incentives to work and earn. Early evidence shows that universal credit claimants are taking up more work when compared to those people on jobseeker’s allowance.

Universal credit is working for not just claimants but for employers, too. It removes the inflexibilities that exist in current systems and means that employers will now have access to a more engaged and flexible workforce—people willing to take up more hours as they are available without the fear of having to stop and restart their benefit claims. This is excellent progress and from next month we will roll out universal credit nationally. By the spring, universal credit will be in one in three of the country’s jobcentres.

A key question we are now looking to address is how we will support working claimants who are on universal credit and in some of the lowest-income households, typically earning less than £12,000 a year. Our aim is clear: we want to help encourage, influence and support low-paid claimants who can earn more to progress in work and increase their pay. The potential benefits of this support are significant and wide-ranging. There will be more people working and earning more, and living more independently of benefits. We will strengthen our ability to tackle and reduce poverty. Employers will benefit, too. They will have a more engaged and motivated workforce and will benefit from the rewards that that will bring. To realise these benefits, it is crucial that we put in place the right help and support. It is a key reform, a unique challenge and it is transformational.

I want to be open about the challenge that we face. It is no easy task. This is the first time any nation has attempted to support working claimants in such a large-scale way to increase their earnings. Because we are one of the first nations to try to do this, there is very limited evidence on what works. For this reason, we must run trials to learn what is effective. We must do things differently if we are to succeed. The approaches of the past—static trialling of rigid, fixed approaches—will simply not work here. We therefore must look to do things differently. Our approach to trials needs to be more flexible. We need the ability to tweak and change things as we learn about what works and what does not. This is about trialling to refine and perfect our approach. Having broadly defined trialling regulations, as we are discussing today, with clearly defined parameters and safeguards will allow this tailoring and tweaking. On the other hand, a traditional approach of defining every element of a trial would have left us locked into one approach, even if it proved to be ineffective. To test changes and variations, we would then have to stop and come back to Parliament to secure brand new powers to test something slightly different.

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[Lord Freud]

I thank noble Lords for what has been a series of good contributions to this debate. These regulations are driving at a very simple question: how best can we support lower-earning, universal credit claimants to progress in work and increase their earnings? Let me try to deal with all the questions.

My noble friend Lord Farmer asked how many people would be affected in relative terms. As he said, there are about 1 million universal credit claimants in low-paid work and that is as a proportion of a total of 7.7 million people. We cannot at this stage quantify the monetary benefits of that in-work support. One of the reasons for these trials is to find out whether it is cost effective to provide support above the bare minimum and whether we get a return. However, universal credit has, bluntly, astonishing returns on its investment, saving the Government and the taxpayer £38 billion from now until 2022-23. When it is fully in, it will have an economic benefit of £7 billion a year.

I was urged by my noble friend Lord German and the noble Baroness, Lady Sherlock, to give extraordinarily precise figures on this. We are ramping up very rapidly now, and by spring, as we said, we will be in one in three jobcentres; we are currently in about one in eight. Clearly that implies that the 15,000 people will be a much smaller proportion of the current 27,000 that we see. However, I am not in a position to give more numbers.

As to the balance between sticks and carrots, an issue raised by my noble friend, most of the areas we are looking at will focus on how we support and help people. We need to learn how to do that. At the same time, we are working closely with employers. We have implemented a couple of programmes to find out what kind of support and incentives work. There is a great deal of emphasis on the support element. Basically, the intensive work coach discussions are a kind of mentoring process in which one goes through the options.

All noble Lords who have contributed are interested in the safeguards that we have in place. There are a number of regulatory safeguards to ensure that conditionality is applied to claimants only when it would be appropriate. The trials are limited to those in the all-work requirement conditionality group. In other words, they explicitly exclude those who are disabled, an issue which was of some concern. Claimants in the other conditionality groups will not be part of these trials and those in specific circumstances, such as recent victims of domestic violence, will be excluded from the outset.

Beyond that, as a more formal protection, we realise that claimants will have individual circumstances and it will be for the work coach, after discussions, to work out what the tailoring requirements should be. That will give the work coach the scope to set reasonable, achievable requirements and earnings goals, taking into account the kind of commitments mentioned by the noble Baroness, Lady Sherlock, in regard to caring responsibilities and so on. The result will be a personalised claimant commitment that places reasonable expectations on clients.

My noble friend made a point about transparency to Parliament. Given that we are trying to ensure that we have an accountable and flexible process—that is the delicate balance that we are trying to achieve—for transparency we will share information as we change the trials with the Social Security Advisory Committee. We will do that by letter and I shall ensure that the information is placed in the Library so that Parliament can see what is happening.

In response to a question from my noble friend, we are discussing with SSAC the issue of self-employed people trying to start businesses. We will take account of that circumstance, among others, and people building businesses will be able to do so and guidance will be provided.

In response to the noble Baroness, Lady Sherlock, the regulations expire after three years of being in force. Where we need to gather more evidence, we can extend these regulations by a further period of up to 12 months without returning to Parliament. Such an extension does not expand the powers within the regulations, which strictly define limits to testing work-related requirements and will have been subject to full scrutiny. All it does is extend the period.

My noble friend and the noble Baroness, Lady Sherlock, asked about the business case, the question asked by Steve Timms. A letter has been sent to Steve Timms, which I can give chapter and verse on. The strategic outline business case approved contained a light-touch regime and £15,000. The objective of that £15,000 was to find out, against the control of that light touch, whether we can do better.

The core of the question asked by the noble Baroness, Lady Sherlock, was about how we treat people. The real protection, which is not explicit in the regulations but is nevertheless there, is that under these regulations our expectations of in-work claimants cannot exceed what we expect from out-of-work claimants. The level and extent of sanctions will therefore be within those existing constraints. That is the constraint we have for this trial.

Getting into some of the detail of the trial, the reason there is a figure of 15,000 is that 5,000 are the control. We are looking at two main types, which I described in my opening remarks. Then we will segment that 5,000, looking at four or five different categories and geographically. That is how the numbers add up as we run this trial to 2016.

As we see people, we will start supportive conversations with them almost immediately. We will start to have tougher conversations after a person has been in work for two months. That is the initial testing. I think I have dealt with carers.

Ethics are a very interesting issue as we move into other, more elaborating trialling. This first trial is rather straightforward and is within the context of the kind of conditionality we do anyway, and we have a requirement to be reasonable to the individual with the safeguards I have described. However, I appreciate the point the noble Baroness made that for future trials and as the system develops we may have to think about ethical controls more on a medical model. For this trial, we have SSAC overseeing it, which means there is a group of experts having a look as we run along.

The noble Baroness asked about couples versus individuals. Members of a couple are treated as joint claimants so their earning threshold is set on a joint basis and conditionality is imposed on the basis of their combined income. If that exceeds the household threshold, neither partner will be part of the trial. That reflects the underlying philosophy of universal credit.

--- Later in debate ---

[Baroness Sherlock]

The Minister has done very well. I do not like all the answers, but he has done very well at trying to address many of the points. I will just pick up a couple of them.

First, can he tell us who will deliver the support? Will it be Jobcentre Plus staff or others, and what are the resource implications for the public sector? On the business case, if the £15 million and the light-touch control group are in the original business case, what about the rest of it? I may have misunderstood his comments on that, but where is that to be found?

As for tracking outcomes, obviously RTI works for those who are paying tax and national insurance, but for this to work properly the Government would also need to track people who were not to be found on the system and to find out why not. I am sure the Minister would rebut this, but there is a growing concern—he will have seen both recent media reports and the work of the Work and Pensions Committee—that the ways in which sanctions are being imposed at the moment are completely arbitrary. The only success measure for Jobcentre Plus staff is how many people are driven off the benefit rolls rather than into work. No one bothers to find out the numbers, but the suggestion is that only about one-fifth of people leaving benefits go into work—nobody knows what happens to the rest.

This was a real issue, as I am sure the Minister is aware, in one well known phase of welfare reform in the United States. Researchers tracked people longitudinally and found that a lot of them had simply ended up dropping out of the system completely. At this stage I am not making a value judgment about that, but for this to be properly effective the Government would need to follow those people through and find out what had happened to them to understand what the consequences of that were.

The Minister mentioned skills and the kind of support that is available. If one of the barriers to someone’s progression that is identified is a lack of skills, will the pilots be able to provide skills, or resources to enable people to get skills, which might enable them to earn more and break free of the threshold that would be constrained by this? I also asked whether the same income threshold would be applied for entry to or exit from all the pilots. Is that one of the things that is going to be flexed in any way? Is it the same for all of them?

On the question of ethics, the Minister said at the start that these regulations comprise strictly defined limits. In a manner of speaking they do, but only in the sense that I am strictly defined by the law of gravity, which still gives me quite a lot of latitude in how I go about behaving. The Minister also said that he will give us no information on numbers. Presumably, that could theoretically mean that the entire universal credit population could be put into this without any need for further recourse to Parliament. Is that right? In other words, when does this stop being a pilot? I am trying to establish whether the regulations were really designed to be able to pilot something. The scale of this is such that I am beginning to wonder whether Parliament would really see this as being a pilot. Although I am very glad that the Minister is going back to the SSAC, there is no obvious way to scrutinise this here. Will he give some more thought to that?

Finally, I want to clarify something relating to the sanctions. If the Minister is saying that the requirements will be no worse for people in work than for those out of work, my response would be that I would hope not, otherwise the incentive for getting a job would seem to be rather small. However, that presumably means that somebody could lose all their universal credit for three years for a failure to comply with a brand new requirement exercised by his staff—something that has never been done before. Is the Minister confident about that? I realise he has said that nobody will be sanctioned without good cause, but we both know that there are plenty of examples of people who have been simply because there is a significant amount of error in the way that the guidance has been applied. Cases are constantly being brought forward, and he will be aware of that. How will he check up on that? How will he quality-test the nature of that?

I am aware that I have asked a lot of quite specific questions. I would be grateful if the Minister, with his normal customary kindness, would allow his officials to go through the record and write to me on anything that has not been picked up.

[Lord Freud]

I will certainly go through the record but I am doing my best to answer everything. There is a technical question about income in and out. At the top end, a single person stops being in this trial when he or she hits 35 times the minimum wage—I think, from memory, that it is £116-something. I may be corrected, but that is the top end. The bottom end for a single person is, effectively, £76, and for a couple it is £116, we think.

Essentially, we are trialling this group because people would have come off the out-of-work benefits system at 16 hours times the minimum wage up to where they would get out of conditionality entirely because they would have satisfied 35 hours times the minimum wage. We do that for singles and couples. My figures are being hastily checked but that is the principle behind the answer.

[Baroness Sherlock]

Is that for all pilots? It is not a variable?

[Lord Freud]

Yes. Let me make absolutely sure that I have got the figures right. It is £76 for the individual. However, it is not £116 but £126 for the couple. The figure for an individual at the top end which gets you out of conditionality is £230. So it is within that range of earnings. Clearly quite a lot of people may be doing fewer hours if they are earning rather more.

[Baroness Sherlock]

I am grateful to the Minister and I thank him for establishing those ranges. However, what I am trying to get at is whether exactly the same ranges will be applied in all the different pilots, or are the Government testing whether the ceilings should be set at different levels?

[Lord Freud]

We are going to stay in that range because that is the group for which in-work conditionality would apply. There is no point in testing other ranges. However, we will have information, which I think is the underlying point of the noble Baroness’s question, on how different segments of earnings within that range respond to the different types of regime.

[Baroness Sherlock]

The Minister is being incredibly helpful. I apologise for my having to work this out on the hoof, but I think the Minister is saying that only people whose earnings are within that range will be subject to a pilot. I am trying to establish whether people who are at different points in that range may be subject to different trials. I will say that again. Will people on the same income within that range be subject to different pressures or levels of support requirements?

[Lord Freud]

The answer to that is no. We will put people in within that range. We will then have a process of personalising and tailoring the claimant commitment, which may contain an element of what their earnings are or could be. So I can answer no and yes. It will not be done at a mechanical level but may be done at an individual level.

[Baroness Sherlock]

I am very grateful to the Minister—I had not understood that at all. In that case, we are saying that each of these 15,000 people might have a different target of earnings that would allow them to exit from the conditionality and the programme. That raises some very significant ethical questions and I would strongly ask the Minister to consider giving more thought to this. I am very slowly doing a PhD. Before I am allowed to do anything involving other people—human subjects—I have to go to an ethics committee which puts me through my paces quite carefully. The consequences here are not just differential levels of support but that, potentially, two people in almost identical circumstances might do the same things, but one would lose three years’ worth of universal credit while the other loses nothing. That is a radical step for the Government to take. Has the Minister really thought through the ethics of that?

[Lord Freud]

This is how one delivers personalised support. The claimant commitment is in the system. Elements of the claimant commitment have a mandatory aspect but with others it is just an agreement. In reality, in the trials we will set the claimant commitment rather carefully. It is an agreed document between the work coach and claimant. Elements of that claimant commitment may be mandatory but quite a lot of it will not be. The likelihood is that as we run the trials we will look extraordinarily closely at making sure that we do not have any unsatisfactory sanctioning behaviour. We will test for that. This is a trial.

Although 15,000 people sounds a lot, when universal credit is fully rolled out, we will be dealing with 20 million people—8 million-odd households, comprising 12 million-odd adults and then a number of children. We are talking about a very small number so that we can micromanage it in terms of that kind of concern. The noble Baroness, rightly, is focused on us getting that right, and we are utterly conscious of that particular issue. The numbers will allow us to make sure that there are not those kind of arbitrary differences, as she described them, particularly when the sanctioning regime can move quite rapidly.

Skills is clearly one area where we could do a lot more development as we find the programme beginning to work. In this first trial, we plan to signpost the National Careers Service and colleges. There will be money available to support that through the adviser discretionary fund.

On RTI, the figures are that around 94% of people in formal employment are captured in the PAYE process. Some self-reporting may be required but we will get the bulk of them. Clearly, we will look at other things than just the RTI, but the RTI should give us a good feel for this. We will look at whether there are some anomalies going on where people fall off the system. That is one of the most important things that we will find out from the trial.

The light-touch regime in the business case is funded. Clearly, we will only introduce a less light-touch regime if it offers value for money. That will be part of a negotiation, if we discover it is worth doing. We will not spend hundreds of millions of pounds on a regime that somebody made up in a darkened room when it has no effect. That is why we are doing these trials. Who will deliver these trials? To start with, it will be Jobcentre Plus, as I have described. That is the first iteration; we could go on to other iterations. I described, I hope, the light-touch regime, which involves two work coach conversations. One happens when someone enters work and the other occurs eight weeks later. That is what the control is based on.

I think that I have dealt with the question of sanctions. The noble Baroness will be quick to correct me if I am wrong, but I think that I have covered everything. However, on her point about the numbers, by March, we will have moved to one in three jobcentres. I am sure that she will be the first to acknowledge that, and she will have seen the escalation: 54,000 have already applied for universal credit and the figure is moving up rapidly. That is when we will start pulling out the people on universal credit who are in work to test them.

This is about the commitment by this Government to deliver a universal credit that genuinely supports working-age people when they are out of work and then in work. It gets rid of the distinction which, in my view, has been invidious in our support system. If we are going to do that, we have to understand how best we can support the in-work claimants and get them to get their earnings up. The regulations before us today combine oversight and flexibility in the optimum way.

During the passage of the Bill I was very clear that, in driving through this approach, we would do it through a regulatory structure, so that we could have these debates, keep an eye on it and get that balance. It is a very delicate balance but we will build an evidence base on how we can improve people’s careers and improve earnings among the low-earning. If we get this right and learn how to do it properly, this piece of research will be a key element in improving the economic performance and productivity of the country. That and the fact that people’s lives will be better when they earn more are the two fundamental reasons that I commend these regulations to the Committee.

Motion agreed.

Employment

Lord Freud Excerpts

Wednesday 21st January 2015 Lords Chamber

[Lord Holmes of Richmond]

To ask Her Majesty’s Government what assessment they have made of the latest United Kingdom employment figures.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)]

We are seeing a strong, broad-balanced and sustained recovery of the UK labour market. Employment is at an all-time high and the number of vacancies is at a record high. The main out-of-work benefits are at their lowest level since 1990.

[Lord Holmes of Richmond (Con)]

My Lords, average earnings up, unemployment down, more people in full-time—yes, full-time—employment since 2008: this is an economic recovery. Does my noble friend the Minister agree that a high-employment, low-inflation economy is the only way for us to dig ourselves out of deficit and that we need to ensure that everybody is enabled to have meaningful employment—not least young people and disabled people?

[Lord Freud]

One of the best things about this recovery in jobs is that they are going to some of the people who in the past have not taken part in these recoveries. That includes the disabled, where there is a strong improvement of 250,000 jobs over the past year with some 3 million now in employment. We are in a really healthy position in reducing long-term unemployment among youngsters.

[Baroness Uddin (Non-Afl)]

My Lords, notwithstanding the Government’s election bandwagon rhetoric, what assessment does the Minister make of the changes to employment support for disabled people, in particular those with autism spectrum disorders, in light of the Access to Work review by the Work and Pensions Select Committee?

[Baroness Uddin]

I am reading out the details of that Select Committee.

[Lord Freud]

I hope that noble Lords in the House will agree that I was not using rhetoric but gave the facts and figures. As I have just said, disability employment has improved strongly over the past year with 250,000 more disabled people now in work. The employment rate for disabled people now runs at 46%, up 2.5 percentage points on the year. That is strong improvement for the people who need it.

[Baroness Bakewell of Hardington Mandeville (LD)]

Given the encouraging increase in the employment figures, will the Minister comment on the disappointing fall of 84,000 in the 16 to 24 age bracket? Can he give any information about regional variations? For example, is the problem worse in rural areas?

[Lord Freud]

My Lords, one of the myths about the improvement in employment is that it is concentrated in the south, particularly in London. The reality is that the bulk of the improvement—75% to 80% of it—has taken place outside London. The youth figures are extremely encouraging, because youth JSA figures are now running at some of the lowest levels we have seen for many years.

[Baroness Sherlock (Lab)]

On youth unemployment, maybe the Minister could look again at the figures. I welcome any rise in employment, but there are 763,000 young people out of work. Last summer, when the Government scrapped their youth contract wage incentive, youth unemployment started going up straight away and it has now risen for three months in a row. Will the Minister tell the House what he plans to do about it? Maybe it is time for him to look at Labour’s compulsory jobs guarantee for young people.

[Lord Freud]

My Lords, the trouble with Labour plans in this area is that they are extraordinarily expensive. The Future Jobs Fund, on which some of them are based, cost 20 times what Work Experience costs—and that produces just as good results. We cannot afford to have these artificial job creation schemes: we want real jobs in the real economy, and I am pleased to say that we now have the highest level of private sector employment that we have ever had.

[Lord Dobbs (Con)]

May I take this opportunity to apologise to noble colleagues on the Labour Benches, because a little while ago, on the subject of unemployment, I suggested that Labour Governments always end office with unemployment higher than when they went in? Is my noble friend aware that, according to the Office for National Statistics, since the war every Labour period of government has indeed ended with more people out of work? Is he further aware that those same statistics show that every Conservative Government have ended their period of office with more people in work? May I apologise to those on the Labour Benches for not having made that point clear enough in the first place?

[Lord Freud]

I am very pleased to answer my noble friend’s question. I was aware of those figures, and they underline the point: it is how you run the economy effectively that drives the employment figures, not how you manipulate those figures later with odd schemes.

[Lord Lea of Crondall (Lab)]

My Lords, will the Government announce an independent inquiry into the evidence reported in today’s Guardian that Ministers in the Minister’s department have been instructing officials to manipulate the unemployment figures downwards?

--- Later in debate ---

[Lord Freud]

My Lords, I do not need to make an inquiry into that; I can give an assurance right here and now that Ministers have not been doing anything like that at all.

[Lord Winston (Lab)]

I speak as somebody who does not regard himself as a politician. Does the Minister not agree with me that discussions like this come very close to what we hear on a Wednesday in another place? Would it not be much more sensible to look very carefully at the statistics we are discussing and, when we talk about employment and unemployment, to look carefully at how much people earn, and at what kind of job security, and what kind of training, they have? Then we could arrive at a sensible discussion that would reflect much better on this noble House.

[Lord Freud]

The noble Lord makes an excellent point. This is a complicated area. We have had some large-scale debates in which we have had some very interesting contributions from all over the House. One of the most important things that the Government are trying to do is restructure the market so that we have sustained genuine employment. One of the most encouraging figures that we have seen is that the number of untrained people who have moved into the middle section of the market has improved quite strongly over the past four years.

[Baroness Whitaker (Lab)]

My Lords, I welcome what the Minister said about genuine employment, but following the questions from the two noble Lords opposite, which he must have welcomed, can he say what is the median annual pay of those new jobs?

[Lord Freud]

All I can say on what is happening in the market in terms of real disposable incomes is that we are now seeing inflation falling below the level of pay increases. In the latest set of figures, regular pay went up by 1.8%, compared to a 1% rise in inflation in the same period. We have seen some extremely encouraging forecasts. I cite the Ernst & Young ITEM Club forecast that real disposable incomes were likely to rise by 3.7% in 2015.

Universal Credit

Lord Freud Excerpts

Wednesday 10th December 2014 Lords Chamber

[Lord Clinton-Davis]

To ask Her Majesty’s Government what is their response to the recent analysis by the Office for Budget Responsibility on the rollout of universal credit.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)]

In the OBR’s independent forecast of public spending, it has assumed a modest adjustment to the rollout for universal credit, which it says has a comparatively small impact on forecast expenditure. We maintain our determination to deliver the plan already set out which has been assured by the Major Projects Authority and signed off by the Treasury. The plan is on track. Universal credit will bring economic benefits of £7 billion every year.

[Lord Clinton-Davis (Lab)]

Both eminent bodies, the OBR and the IFS, forecast that the policy of the Government is reducing the state to its lowest level since the early 1930s. That is utterly different from what the Minister is predicting. Is not that dire consequence possible? It is utter madness, is it not? Does the Minister dispute the conclusions of both bodies? What is his prognosis?

[Lord Freud]

Well, my Lords, I will talk about universal credit and what it aims to do for the people who need support from the state system. It directs our funding far more efficiently to people who need that support. It produces economic benefits of £7 billion every year and it does so at an investment cost of £1.8 billion. That investment cost is down from the £2.4 billion that we originally envisaged.

[Baroness Eaton (Con)]

What is my noble friend doing to ensure that the most vulnerable are supported through universal credit?

[Lord Freud]

One of the things that we need to do with universal credit is to make sure that everyone can take part in it. We are creating a system to do that through universal support, where we go into partnership with local authorities to help people, concentrating particularly on financial and digital inclusion. We then pull in all the other third sector companies, such as landlords, Citizens Advice and credit unions, to make sure that support is holistic.

[Baroness Sherlock (Lab)]

I do not doubt the Government’s intentions or the Minister’s commitment, but this has to be delivered to work. To go back to the original Question, the OBR said at the time of the Autumn Statement that, despite having already been delayed repeatedly and reset last year, it was assuming an extra six-month delay on top of the Government’s current plans because of what it called “optimism bias” in the DWP. Just right now, as the Public Accounts Committee is hearing from the Treasury, it was confirmed by the chair that the Treasury has not signed off the DWP’s business case for universal credit. What can the Minister say to the House? Universal credit is running almost four years late. It is costing money to taxpayers and vulnerable clients. It risks, frankly, making a laughing stock of the department. What can the Minister tell us to reassure us and how can we believe him?

[Lord Freud]

I re-emphasise that the Treasury has signed off the strategic outline business case. This plan is being done in a way that makes sure that we do it safely and securely—not the big bang method. As I said, it is being done more cheaply than originally envisaged. It is vital that we do not do the kind of thing that happened with tax credit when it was opened on one day and was a total shambles for millions of people.

[Lord Forsyth of Drumlean (Con)]

Will my noble friend resist the carping criticism coming from the opposition Benches and take credit for the fact that when they were in government for 10 years they did nothing about the fact that some people were worse off in work than out of work? My noble friend and his colleagues are to be congratulated on taking very difficult and complex decisions to solve this problem and seeing more people coming into work as a result.

[Lord Freud]

My Lords, I have developed an extraordinarily keen appreciation of why politicians do not like to do fundamental reform, but this reform is absolutely essential because the present system is a shambles. It does not encourage people into work or reward them systematically for doing that. The whole point of universal credit is that you join up the out-of-work and the in-work systems so that there is a smooth progression that everyone can understand.

[Lord McFall of Alcluith (Lab)]

My Lords, £40 million has been written off with IT in this system with a further £40 million being used on the old IT system. The useful IT life has now been downgraded from 15 years to five years. Given that this information was extracted painfully from the department by the NAO, is it not the case that warning lights have been flashing for two years and that only an objective assessment of the scheme will do in order to determine whether this architecture is fit for purpose?

[Lord Freud]

My Lords, the NAO has recognised the savings to government of going the way that we are going, with a live service showing us how it works and a properly designed digital service coming out behind. The NAO has recognised that the savings to government of that approach are £2 billion.

[Lord Harris of Haringey (Lab)]

My Lords, the Public Accounts Committee has pointed out that the Government are too trusting of quasi-monopolistic private providers such as G4S, which is to have a major role in the development of universal credit. Have the Government forgiven it for overcharging the taxpayer £130 million for tagging people who did not exist or had died?

[Lord Freud]

G4S has no role in the run-out of universal credit.

[Baroness Farrington of Ribbleton (Lab)]

My Lords, the Minister was given a very gentle question from his noble friend. Will he tell the House how much taxpayers’ money in this country is being paid to people to subsidise employers who do not pay a living wage, particularly those employers who fail to pay taxes properly here? I appreciate that this is a wide question. I would like a detailed written answer about how much each one of us is subsidising people who are tax shy.

[Lord Freud]

I will give an oral answer, not a written one. The whole system was invented by the previous Government under tax credits where £170 billion was spent.

Child Poverty Act 2010 (Persistent Poverty Target) Regulations 2014

Lord Freud Excerpts

Tuesday 25th November 2014 Grand Committee

Moved by

[Lord Freud]

That the Grand Committee do consider the Child Poverty Act 2010 (Persistent Poverty Target) Regulations 2014.

Relevant documents: 10th Report from the Joint Committee on Statutory Instruments, 11th Report from the Secondary Legislation Scrutiny Committee

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)]

My Lords, the regulations laid before the Committee today introduce a new persistent child poverty target, as required by the Child Poverty Act 2010. At the end of this Parliament, as at the start, the coalition Government remain committed to tackling the key drivers of child poverty and improving the lives of the most vulnerable people in our society. We remain committed to the goal of ending child poverty in the UK by 2020 and, despite challenging economic conditions and fiscal restraint, we are making significant progress: under this Government, 300,000 fewer children live in relative poverty.

The evidence is clear that work remains the best route out of poverty. We know that children are about three times as likely to be in poverty if they live in a workless family. Therefore, at the centre of our child poverty strategy is a commitment to tackling worklessness, and it is clear that our reforms are making a real difference. With employment up by nearly 1.7 million since 2010, there are now around 390,000 fewer children in workless households, and both the number and the proportion of children in workless households are at the lowest levels on record. Through our structural reforms to welfare, we are lifting people out of poverty, putting in the right incentives to get people into work and to make work pay.

We are not stopping there. We are helping people to progress in work through universal credit and the next phase of the Work Programme with a clear focus on skill development. Before they reach the workplace, this Government’s commitment to improving educational outcomes has seen poor children do better than ever at school. Between 2010 and 2013, the proportion of children on free school meals getting good GCSEs, including English and maths, has increased by 7% to 38%. These are substantial leaps in educational attainment, which will make a real and lasting difference to children’s lives as they develop.

Today, we are publishing the Government’s response to the Social Mobility and Child Poverty Commission’s State of the Nation 2014 report. This reiterates our goal to end child poverty and achieve lasting change for the poorest in our society. This, along with the regulations before the Committee today, demonstrates our ongoing commitment to tackling child poverty and helps us to meet our obligations under the Child Poverty Act 2010. The Government firmly believe that, in the long term, a revised set of child poverty measures are needed which underline our commitment to reducing child poverty but better reflect the evidence about its underlying causes. We are not yet in a position to put these new measures forward. In the absence of these new measures, we therefore remain committed to meeting our existing obligations under the Act and to introducing a persistent child poverty target by the end of this year.

This fourth child poverty measure will complement the three existing child poverty measures which are already in statute. These are on relative poverty, absolute poverty, and combined low income and material deprivation. There are compelling reasons for introducing a persistent poverty measure. This Government recognise that persistent poverty can be particularly harmful to children’s life chances. We know that children living in persistent and long-term poverty have a radically different experience of growing up, compared to other children. The longer that a child remains in poverty, the more likely it is that he or she will experience poor outcomes such as social exclusion, below average attainment and reduced life chances. This was a view shared in the majority of responses to our consultation on the target. Reponses from the Social Mobility and Child Poverty Commission and others put particular emphasis on the damaging effects of persistent poverty and urged the Government to continue to put this at the centre of policy ambition.

We are steadfast in our commitment to addressing child poverty in all its forms and our Child Poverty Strategy 2014-17, published in June, sets out the action that we are taking as a Government. We will continue to focus action on breaking the cycle of persistent poverty and exploring what further steps can be taken to reduce persistent poverty as far and as fast as possible. So in June this year, the Government launched a consultation on setting a persistent child poverty target of less than 7%. This means that the percentage of children living in households that are in relative poverty in at least three of the four years up to 2020-21 must be less than 7% of all children in the UK.

The Secondary Legislation Scrutiny Committee queried why we are not setting this target at zero per cent. According to all measures, child poverty is assessed using robust and well established statistical surveys to capture information about household income. However, like all sample surveys, this one contains some naturally occurring error. For example, some people will give inaccurate reports of their income when interviewed, or are between jobs at the exact point when they respond to the survey. It is therefore not statistically feasible for these surveys to report that zero per cent of children are in poverty and does not make sense to set a target at this level. That is the same reason that the existing Act’s targets were not set at zero per cent.

Our decision to choose a target of less than 7% is both evidence-based and consistent. First, it is based on analysis of the historical relationship between persistent poverty and relative poverty. Secondly, it is consistent with the ambitious relative poverty target of less than 10%, as set out in the Child Poverty Act 2010. The evidence shows that in a given year, levels of persistent poverty are typically 50% to 70% of relative poverty. According to past trends, therefore, when relative poverty reaches around 10% persistent poverty should be somewhere between 5% and 7%.

However, we must also take into account how future trends might affect the relationship between relative and persistent child poverty. As the number of children in relative poverty reduces, the children from harder-to-reach families who face most disadvantage are likely to make up a greater proportion of the group. These children are more likely to suffer from persistent poverty, which means that the historical relationship between relative child poverty and persistent poverty is likely to shift. Therefore, when levels of relative child poverty are about 10%, children in persistent poverty could make up a high proportion, if not the entirety, of the group. In such an event, the proportion of children in persistent poverty could be much closer to 10% of all children.

--- Later in debate ---

With regard to tackling the poverty that children suffer, a tighter target of 5% would have been useful. We have an indication of the Government’s real intent. Any good things that the Government are doing in this or any other field have to be seen against a background of the massive switch in income from the poor to the rich that has taken place over the past four years.

[Lord Freud]

My Lords, I wish that the noble Lord, Lord McAvoy, had not gone rather crudely political on what is a difficult area, especially as the facts that he used are simply not true. There has been an absolute cut in income for the richest 20% and an increase for the lowest, as has been put out by the Government. This is not the forum to have that kind of crude debate and I do not want that.

Some really important points have been made today. This is a difficult area at a difficult time. My noble friend Lord Kirkwood looked at the national debt and blanched, for very good reason. I look down my nose at him because, when looking at the performance of the last Government on poverty, one saw that they achieved the trajectory for people who were out of work, and they were able to do that through income transfers, but for people at the next level who were just in work and at the next level of income, there was very little movement. That is the problem that we are addressing. We are looking at a problem that cannot be solved just by moving money around particular areas. I commend the noble Lord to look through those figures, which are very interesting and illustrate the fact that we have got to the limits of what you can do just by income transfers, which is what the previous Government did.

[Baroness Lister of Burtersett]

I was not part of that Government, but will the noble Lord not accept that part of their child poverty strategy was also to move people into work? Part of the problem with the current situation, as the noble Lord, Lord Kirkwood, said, is that, although it may not be completely new, this is certainly the first time where more people in poverty are in work than out of work. We all agree that work is a good route out of poverty; but it is not necessarily a route out of poverty. Both Governments have faced the same problem of what you do with a labour market which is not providing enough to keep people out of poverty.

[Lord Freud]

I speak here from a somewhat privileged position, in that I advised the last Government in exactly this area and now speak for the current Government on it. So I am in a position—

[Lord Kirkwood of Kirkhope]

A very Liberal position.

[Lord Freud]

So I am in a position, slightly embarrassingly, to do this. The trouble with statistics is that you can get very confused by them. When you have had a massive increase in employment and a lot of people entering the market—2 million people into the private sector—you have some very substantial distorting data relating to those new entrants, which change the averages. You have also had massive changes because of the biggest financial crash since the 1930s—it used to be since the 1920s. I looked through the figures, and one-third of the fall in average income, for instance, can be roughly explained, as far as I can tell, by the reduction in bonuses in the City. Before one looks at these average figures, one really needs to dig under them to understand them. Otherwise, people in the Opposition will get into some cheap points that do not really stand up and which will just look foolish when people do the research properly, which they will do in the years to come.

I come off the generality into the specifics and the very difficult set of problems involved in solving child poverty, which we remain absolutely committed to. I will go through the points raised. The noble Baroness, Lady Lister, asked about the qualifying households. Surveys work by taking data from private households, so there are a relatively small number of children—it is a small number—who are not in there. They are, as she said, children in children’s homes, Travellers and one or two other categories, as she mentioned.

The after-housing-costs point has been very thoroughly debated. My noble friend will remember the thoroughness of some of those debates; the noble Lord, Lord Northbourne, was there too. Costs before housing are the set of measures in the Act, which is why we are using them. To change the measures would be to rewrite the primary legislation. Also, clearly, if you use a different base, you might think about what the right percentage figure is. That is the reason that we use before housing costs as a standard measure and as an international comparison. It was chosen because after housing costs reflect, or can reflect, choices that people make to spend more on rent or mortgages because that is what they value more than other things. Therefore there was a good reason that that set of measures was chosen.

--- Later in debate ---

[Baroness Lister of Burtersett]

I am sorry to intervene again. Before the Minister moves on, my understanding was that although the noble Lord, Lord Kirkwood, mentioned the delay because of the survey data, he was asking about what the actual measures are, and that is separate from the survey data. There was a big consultation about a set of measures that I personally did not think were measures of poverty. That is also what most people said in response so, fortunately, that time the Government did take note of the consultation and withdrew it. However, as the commission says, they are still distancing themselves from the measures that they have without coming forward with a more acceptable set of measures to complement them. The question is: what has happened to them? Have they got lost? There have been rumours about the Treasury having had something to do with it. What has happened to those complementary measures?

[Lord Freud]

In the long term, the Government think that we need a revised set of child poverty measures which would better reflect the evidence about poverty’s underlying causes and where we need to target action most—the kind of thing that my noble friend Lord Farmer, in particular, was talking about, but we are not currently in a position to put those new measures forward. As our consultation, which the noble Baroness mentioned, showed, this is a complex area and there are a variety of views. I am afraid that that is all I am in a position to say at this stage.

On the noble Lord’s point about how these measures are made up; clearly, both relative and persistent poverty levels depend in part on how both median income changes and how those with low incomes improve relative to the median. That is just how the Act was made. We spent an awfully long time debating during the passage of the Bill a general level of discomfort with just this mechanistic approach to this kind of measure. That is just how it is, and that is what the Act shows, but the fundamentals are that we need to maintain our focus on helping those on lower incomes, which means helping people into work—or more work, which is what universal credit will do—and in help with living costs.

[Lord Kirkwood of Kirkhope]

The Minister is being very helpful, and I do not want to detain the Committee. Presumably Section 6(3) of the Child Poverty Act 2010, as I understand it, requires the Government to set a figure, which has been set at 7%. However, that is all it does. Presumably, the Government, on cause shown if the evidence changed, could in subsequent years change that target. Am I right about that?

--- Later in debate ---

[Lord Freud]

I actually said something rather careful—that we will keep the evidence under review. We will get some up-to-date evidence next year about the persistent poverty target in relation to the relative poverty targets. Clearly, we will be able to monitor that and see how it moves, but we will have set the targets here in these regulations.

[Lord Kirkwood of Kirkhope]

The question I am asking is: are we stuck with the 7% target until 31 March 2021?

[Lord Freud]

The targets are in secondary legislation, and it would be up to a future Government, for which at this stage I cannot talk, to change secondary legislation. In practice, yes; it is a changeable target.

As I said in my opening remarks, we are committed to tackling child poverty, and we have a strong record. Relative child poverty is at its lowest level for 30 years—a fact that will perhaps surprise the noble Lord, Lord McAvoy. There are 300,000 fewer children in relative poverty since the election, and now 390,000 fewer children are growing up in workless families. We are especially committed to tackling persistent poverty and to breaking the cycle which sees poor children grow up to become poor adults. That is why I am proud to present these regulations before the Committee today, which set an ambitious persistent poverty target of less than 7% of all children in the UK, meeting our obligations under the Child Poverty Act 2010.

[Lord McAvoy]

The noble Lord did not respond to many of my points because, as I understand it, he dismissed them as being wrong. Can I respectfully ask him if he could help me by writing to me, outlining what parts of my speech were factually wrong and what the answers were to them? I am sure that he would not want to be thought to be making a cheap accusation—a cheap note—and I am sure that he will recognise his responsibility by writing to me, giving the details of what he said.

[Lord Freud]

I will, with great pleasure, note down and send to the noble Lord the figures, which I think I have used in the past, about how the income of the richest 20% has moved relative to the poorest 20% under this Government. I will provide him with those precise figures. I commend the regulations to the Committee.

Motion agreed.

Universal Credit

Lord Freud Excerpts

Monday 24th November 2014 Lords Chamber

[Lord McKenzie of Luton]

To ask Her Majesty’s Government how many households are in receipt of the housing element of Universal Credit.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)]

The information requested is not currently available. The department published its strategy for releasing official statistics on universal credit in September 2013; officials are currently quality-assuring data for universal credit. It is not yet possible to give a date for when these statistics will become available.

[Lord McKenzie of Luton (Lab)]

I thank the Minister for his reply as far as it goes, but I am surprised that the department does not have better systems for identifying these statistics. We know that its approach to the introduction of universal credit, which is meant to be a flagship policy, is painstakingly slow. We also know that the Secretary of State has declared that it is unlikely that the target date of 2017 will now be met. The Minister is aware that universal credit can bring great hardship to vulnerable clients, which is why alternative payment arrangements have been put in place. Is the Minister able, at least, to say anything about the extent to which direct payments to landlords now operate in respect of people on the housing element of universal credit, and the extent to which those individuals can be identified early, before they build up debt arrears?

[Lord Freud]

We have put out some statistics on the level of housing arrears, which show that, right at the start, 16% of people were in arrears. That compares with 7% for JSA equivalents. In the second wave of research, that 16% figure had come down to 12%. We have put in a lot of measures to ensure that we get that figure right down and give people the support that they need to manage their finances.

[Lord German (LD)]

My Lords, universal credit is paid monthly and usually includes rent, which is quite a substantial slab of money. Can my noble friend tell us what progress he has made with the banks and credit unions to ensure that transactional bank accounts are available to people, so that they may take advantage of direct debits and standing orders?

[Lord Freud]

We have a very active programme working with the banks to ensure that they provide services for the clients who are on universal credit. An exercise is currently going through to expand the ability of credit unions to provide these kinds of facilities by giving them a common banking platform.

[Baroness Hollis of Heigham (Lab)]

My Lords, I declare an interest as chair of a housing association. More than half of tenants affected by the bedroom tax are in arrears. We now learn that the Government propose to claw back those arrears by deducting a further 20% from those tenants’ benefits. For couples, this means a full £20 to £40 deduction a week from their benefit for living in homes that we allocated to them and from which they cannot move. The Government have created the debt and now seek to solve it by sending those tenants even deeper into debt. It is shocking, and many will never recover. Do the Government not understand that we are wrecking people’s lives?

[Lord Freud]

We conducted a painstaking process of testing how people respond to paying their housing rent directly. We found that there was a three-month adjustment process until people got familiar with it. We are now ensuring that we have the right systems to help people make that adjustment into the monthly payment situation.

[Lord Farmer (Con)]

My Lords, the principles of universal credit are sound, but timings and cost to the public purse are vital considerations. Can the Minister tell us when all claimants will be on universal credit and how much it will cost to reach this point?

[Lord Freud]

In the last strategic outline business case the costs of the programme to 2023-24 were £1.8 billion. That is down from the £2.4 billion figure that we had in 2011. Under that case, we anticipate that the bulk of the exercise to transfer people on to universal credit will be completed by 2019.

[Baroness Lister of Burtersett (Lab)]

My Lords, recent research by the Joseph Rowntree Foundation, and the Social Mobility and Child Poverty Commission’s recent State of the Nation report, underline the extent to which high housing costs drive poverty among working people, their children and young people. What are the Government doing about these high housing costs?

[Lord Freud]

The poverty figures show that we are making really good progress in tackling poverty, with 600,000 fewer people in poverty through this Government. We are ensuring that housing costs are covered within universal credit and that people can take control of their lives in that way.

[The Lord Bishop of St Albans]

My Lords, the House will be aware that the Chancellor has announced that the working allowances for universal credit will be frozen until April 2018. There is a real danger, if there is no lift in those allowances—at least in line with inflation—that that will significantly reduce the real net incomes of low earners. Could the Minister tell your Lordships’ House what assessment Her Majesty’s Government have made of the impact of these measures on the level of poverty among those who are already in work, especially for those families who are earning too little to benefit from further rises in the personal tax allowances?

[Lord Freud]

The working allowances in universal credit are much greater than under the legacy system, so there is a freeze that will have a small effect. Nevertheless, the poverty impacts are to take 300,000 children out of poverty.

[Baroness Sherlock (Lab)]

My Lords, I would like to return to the question of arrears raised by my noble friend Lady Hollis. Not only are people paid universal credit once a month in arrears but that is compounded by the debts they are getting into by having to pay back some of their council tax and crucially by the bedroom tax. Has the Minister read the report of the fact that Iain Duncan Smith went to court to defend his department’s right to levy the bedroom tax on a council home whose spare room was in fact a panic room which a charity had paid to secure to protect a woman who had suffered rape, assault, stalking and death threats from her violent ex-partner? As the newspapers reported clearly, she could lose £11.65 a week or move to a home with no secure space. How can the Minister justify this?

[Lord Freud]

We have a system with the spare room subsidy where there is support at a local level through discretionary housing payment, and this is exactly the kind of case where you would expect to see that payment made.

[Lord Flight (Con)]

Can the Minister tell the House how many more people are in employment as a result of the incentives offered by universal credit?

[Lord Freud]

We have some financial incentives within universal credit to encourage people to go into work compared with the legacy system. The best and most recent data we have show that over a six-month period, 69% of people would have had some work in universal credit compared with 65% in the comparable JSA cohort.

[Lord Haskel (Lab)]

My Lords, if business improved productivity by just 1% and divided that between employer and employee, how many millions would be saved on housing benefit, much of which goes to landlords?

[Lord Freud]

The number of people claiming housing benefit has come down by more than 2% in the last year, which makes the point that for the first time in a decade housing benefit has fallen.

[Lord Forsyth of Drumlean (Con)]

My Lords, can my noble friend help me? Why does he think that the official Opposition are ignoring the considerable funds—the hundreds of millions of pounds—that have been made available to local authorities to deal with difficult bedroom tax cases? What possible motive can they have?

--- Later in debate ---

[Lord Freud]

It is very important that local areas look after the more vulnerable people, and one of the most important elements that we are introducing alongside universal credit and supplementing it is universal support delivered locally. That produces a partnership where we can get all the resources that people need to become independent and take responsibility for their own lives and get them into a place where that can be done. We have 11 formal trials of universal support going on now.

[Lord Campbell-Savours (Lab)]

My Lords, the Minister was asked by my noble friend Lady Lister about what the Government were going to do about housing costs. Does he believe that housing rents in the United Kingdom are now too high?

[Lord Freud]

Excuse me, I just missed that. The housing what were too high?

[Lord Campbell-Savours]

Rents.

[Lord Freud]

Thank you. We have borne down on rents in the local housing allowance rates and have seen rents come down—I do not know if that was as a direct result, but they have come down at the same time. I have some statistics that I will send to the noble Lord.

Social Security (Jobseeker’s Allowance and Employment and Support Allowance) (Waiting Days) Amendment Regulations 2014

Lord Freud Excerpts

Wednesday 19th November 2014 Grand Committee

[Lord McAvoy (Lab)]

My Lords, I, too, thank and congratulate the noble Lord, Lord Kirkwood of Kirkhope, on moving this Motion which allows us to elaborate further on this pernicious policy. Like many others, I am still waiting for the rationale behind what the noble Lord described as a mean policy. I do not get the stated—or, rather, not yet stated—rationale behind it.

I would like to repeat some of the comments made by the Secondary Legislation Scrutiny Committee. It stated:

“DWP estimates that this change will generate savings of approximately £50 million in 2015-16, although these will decrease in subsequent years as Universal Credit is rolled out”.

Can the Minister say whether there has been any change in that estimate? If that is the case, I would like to hear what it is. The Secondary Legislation Scrutiny Committee also says:

“DWP states that these savings will be invested in new measures to support people into work”.

Therefore, work must have been done on allocating money to these new measures to support people into work. I would like the Minister to indicate what new measures are planned and their estimated benefits.

The Social Security Advisory Committee has issued a report on this measure, which, again, has been referred to. The Secondary Legislation Scrutiny Committee states:

“An Impact Assessment is now attached to the instrument which indicates that approximately 70% of JSA claimants and 40% of ESA claimants will serve waiting days ... reducing the value of their first benefit payment by an average of £40 for JSA claimants and £50 for ESA claimants”.

I fully understand why the noble Lord, Lord Kirkwood, described this measure as mean. There is no doubt that the country faces a difficult situation caused by the downturn initiated in America in 2008 to 2010 and that difficult decisions would have to be made by whoever was in authority. The noble Baroness, Lady Thomas of Winchester, mentioned the Labour Party. We have repeatedly expressed concern about how the administration of universal credit will impact on those on low incomes. The reform represents a significant change in the rhythm of social security payments for a group for whom this is a main source of income and whose well-being will be profoundly affected by any delays or problems experienced in receiving it.

My noble friend Lady Lister of Burtersett and the noble Baroness, Lady Thomas of Winchester, both referred to the role played by food banks and charities. Like many people, I am outraged that food banks have had to be established to deal with the society that we live in. This measure has not taken into account the dire straits that some people will find themselves in when trying to deal with it. The Labour Party convened a universal credit liaison committee which reported in June 2014 and made several recommendations on the payment of universal credit which we believe the Social Security Advisory Committee should have considered, including one on the scope of the regulations.

I ask the Minister whether consideration was given to making the first payment of universal credit earlier. If that was the case, it should be widely publicised. The cost of allowing claimants that choice of payment date, as with direct debit payments, should also be looked at. Has that happened or was any consideration given to it? Did the Government ever seriously consider implementing it?

In order to mitigate any hardship that may arise from the recommended move to a seven-day waiting period, we asked that sufficient attention should be drawn to the recourse available to claimants through short-term benefit advances. Noble colleagues have mentioned this aspect. In fact, the Social Security Advisory Committee itself recommended that the DWP should:

“Strengthen the existing process for highlighting the availability of STBAs and ensure that they are proactively and consistently signposted. In particular, it will be important to ensure that staff (through training and appropriately worded scripts) are encouraged to identify potential hardship and, where it has been identified, explain the process to the claimant. It is also important that the Department ensures that all supporting information channels, such as GOV.UK, highlight the existence of STBAs”.

Will the Minister give the Government’s response to that view and say whether they have given any consideration to implementing it?

The claimant should be made fully aware of budgeting advances and more discretion should be shown in order to mitigate any hardship that may arise from the recommended move. Attention should be drawn to the existence of budgeting advances and, in certain circumstances, we hope that discretion is given to advisers to waive the eligibility criteria whereby claimants need to have been in receipt of benefits for a period of six months in order to apply for an advance. I ask the Minister to respond and indicate what consideration was given to the measures that I have outlined or other measures from a variety of sources. The Minister has an overriding duty to explain the rationale behind the measure and go into detail about its implementation.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)]

I thank noble Lords for their many helpful contributions to the debate. It is clear that this measure has generated a great deal of interest, not just within this House but outside among voluntary and public organisations, which have also presented their views to the Government. The principle behind this extension from three to seven waiting days is that benefits are not intended to provide financial support for very brief periods, for instance when someone is between jobs or during a short period of illness. This measure will generate savings of £125 million over five years. It is money that, as noble Lords have touched on, will be reinvested to help those most at risk of long-term welfare dependency. As noble Lords know, the measures will fund schemes including additional support for lone parents and improving literacy and numeracy skills.

To pick up the question from my noble friend Lady Thomas about any change in those estimates, they were based on departmental forecasts which themselves were based on OBR economic assumptions at the Autumn Statement 2013 and in Budget 2014 and there have not been any updates to this analysis since then, although we are, of course, awaiting another financial event quite shortly.

On the related question from my noble friend Lord Kirkwood and the noble Baroness, Lady Lister, about what and where these investments are, we are expanding on measures that are already in place. They will introduce more rigorous scrutiny on the hardest-to-help claimants. The English language provision is new and will ensure that claimants have the language skills for the workplace. Those methods should enable the claimants to enter the workplace sooner than they otherwise would, which means that they will be earning sooner and not receiving benefits.

[Baroness Lister of Burtersett]

Perhaps I may ask the noble Lord the question raised by SSAC. Is it likely that the people who are going to be adversely affected by this change will be the people who will be helped by these measures?

[Lord Freud]

Yes; I thought that I had made that clear—that the intention is to focus on the people with longer-term difficulties. So, yes, the intention is that it will be those people.

This measure means that many people who make a new claim for jobseeker’s allowance and ESA will see a reduction in their first benefit payment. However, we have measures in place through exemptions and the offer of advances and signposting advice to ensure that claimants who are most in need will continue to be protected.

I hope that I can pick up all the points that have been raised. On the point raised by my noble friends Lord Kirkwood and Lady Thomas on the exemption of ESA claimants, if there had been a differentiation between the two types of claimant there would have been a perverse incentive for people to self-certify sickness for a week and claim ESA rather than JSA in order to get an additional four days’ benefit. There is no evidence that ESA claimants are at greater risk of financial hardship than JSA claimants. Furthermore, to exempt ESA claimants to make that differentiation would be inconsistent with future proposals for universal credit, where our intention is that all ESA-type claimants will be placed in the all work-related requirements group and therefore subject to waiting days. Clearly, waiting days themselves have been a feature of ESA since its introduction in 2008. This measure has simply extended that existing provision for those who do not qualify for an exemption.

The point that my noble friend made about exempting vulnerable groups is clearly one into which we put a lot of consideration, particularly around care leavers, sufferers of domestic violence and ex-prisoners. Bluntly, they were exempted on grounds of practicability. It would have introduced an unworkable, three-tier system and these groups are already required to serve three waiting days, so the only other option would be a full exemption which would go beyond the scope of this change. Despite what my noble friend said about the UC provisions in this line, we are able to make an exemption for these groups in the UC-equivalent provisions. Perhaps that will leave my noble friend somewhat more relaxed about those.

--- Later in debate ---

[Baroness Lister of Burtersett]

I am sorry to intervene on the Minister. I was not asking about savings, because that is in the public sphere. My question was whether there was any information about people who come out of work in debt or arrears?

[Lord Freud]

I was coming on to that. The noble Baroness asked a series of questions. We do not currently have the information on the proportion of people coming on to benefit who are likely to be in arrears or debt. I am not aware of any published analysis that would allow us to estimate this quickly. All noble Lords who spoke raised the question of short-term advances. SSAC recommended that communications about them should be strengthened.

--- Later in debate ---

[Lord Freud]

A number of noble Lords raised the communications issue around short-term benefit advances. We have taken the recommendation of the committee and issued communications to all staff to improve staff awareness of benefit advances and to remind them of the circumstances in which an advance can be considered.

On the point made by the noble Baroness, Lady Lister, on the report on food banks, I was not at today’s press conference but no one takes the decision to use a food bank lightly. The factors driving food-bank use are many and complex, as today’s report recognises. The report said:

“The immediate income crisis that predominantly led to food bank use was often one incident in a complex life story, in which several other factors had combined to leave people vulnerable and less able to cope with dramatic changes”.

[Baroness Lister of Burtersett]

I agree that we are talking about very difficult lives here, but it is very clear from this research, which is not a huge study but it is from a number of different places using a number of different methodologies, that benefit delays were a very important factor. Given that, does the noble Lord not accept that this measure could well make it worse?

[Lord Freud]

My Lords, I would be the last person to say that the current benefits system was easy to navigate. One of the things that has been driving the reform that we are introducing, universal credit, is the production of an in-work and out-of-work benefit that is easy to navigate. I started researching this area in some depth in 2006 and the irony is that benefit delays under the existing, rather complicated system have actually been improving. That is why I revert to the point that this is a complicated matter, as is acknowledged in today’s report and in other reports. That is the only point I want to make.

There was a series of questions on universal credit and the noble Baroness raised the point about TUC concerns about the length of time claimants have to wait for payments under universal credit. Clearly we have an advances process built in, but probably more important is the system that is now developing of universal support delivered locally, which is designed to work in the local community, both with councils and with voluntary organisations, to bring the support that is specifically required by vulnerable people. The estimated saving from increasing the waiting days in universal credit is £200 million per annum once it is fully rolled out, but this figure will be reviewed and updated with the Autumn Statement. I have talked about exemptions within universal credit.

The noble Lord, Lord McAvoy, asked about our consideration of whether we add waiting days to the assessment period in universal credit or whether we have partial periods of universal credit. We spent a great deal of time considering that issue. Universal credit is an in-work and out-of-work benefit, paid on a monthly basis. That monthly basis is designed to help households to budget on a monthly income and eases the transition from and back into paid work. The one-month assessment period is therefore central to universal credit, and the waiting days in universal credit are days of non-entitlement. I need to remind noble Lords that because universal credit is an in-work and out-of-work benefit, one might not experience waiting days anything like the same number of times as, especially if one is moving from low-paid work to being out of work, one is likely to be consistently on universal credit. That is one of the safety features of universal credit in this regard.

With that I think I have dealt with all the questions raised today and thank my noble friend—

[Lord McAvoy]

I may have missed it, but I do not think I did. Does the Minister have any response to the point made by the Social Security Advisory Committee about short-term benefit advances?

[Lord Freud]

Yes, we have accepted the communications issue there and have already, on the basis of that recommendation, issued communications to our staff to improve awareness of the availability of short-term advances and remind them of the circumstances in which those advances can be considered.

As I say, I think I have dealt with everything. I thank my noble friend for the opportunity to discuss this important topic and to address all the concerns and matters that have been raised.

Motion agreed.