Universal Credit (Wales)

Mark Hoban Excerpts

Tuesday 5th February 2013 Westminster Hall

[The Minister of State, Department for Work and Pensions (Mr Mark Hoban)]

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

[Hywel Williams]

Will the Minister give way?

[Mr Hoban]

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

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

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

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

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

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

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

[Stephen Doughty]

Will the Minister give way?

[Mr Hoban]

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

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

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

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

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

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

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

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

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

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

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

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

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