DWP Annual Forum

Speech by Lord David Freud.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
The Rt Hon Lord Freud

Last year’s DWP annual forum was one of my first events as a new Minister.

I’m pleased to be able to join you again this year.

Last year I set out the Government’s plans for reforming the welfare system, reforming employment support, reforming Housing Benefit, and reforming support for disabled people.

It was an ambitious set of reforms.

Now those ambitions are starting to come to fruition.

So today, I’d like to give you an update on how far we’ve come over the past year.

But also, go back to first principles, and remind all of us why we need these reforms, what we are aiming for, and what the final package should look like.

The issue is this - there are nearly five million people on out of work benefits.

The independent Office of Budget Responsibility is forecasting increasing employment over the next few years as the economy recovers.

And therein lies our biggest challenge.

We cannot stand by and allow, these people to be bypassed by growth.

It is bad for the economy, it is bad for the country and it is bad for the individuals themselves.

Of course there will always be people who will need state support, and we will always provide support for those who need it.

But for the vast majority who can work, being in employment is the best possible option for escaping poverty and being able to play a full role in society.

Our welfare reforms are designed to deliver clarity, consistency, and fairness for all, throughout every part of the benefits system.

Let me take each of our major reforms in turn:

With the introduction of Universal Credit we plan to simplify and restructure the benefits system to deliver a single household payment.

We are developing a real time tax and benefit system, to provide immediacy for people.

Benefit support that comes when it’s needed. Earnings from work that boost income straightaway.

This will mean we can make the system more responsive, so people are able to work more hours and keep more of their pay without losing all of their benefits at once.

Universal Credit will deliver clarity by simplifying the benefits system, making it easier for people to understand what they are entitled to and crucially how much better off they will be in work.

It will deliver consistency by creating a single income-replacement benefit for working age adults and establishing a clear, steady tapering off of benefit payments the more people earn from work. 

And it will deliver fairness for benefit claimants by removing some of the barriers people currently face and delivering a more efficient more active benefit system that is also fair to the taxpayer.

The piece of legislation that will make these reforms a reality - the Welfare Reform Bill has already passed through the Commons and is likely to have its second reading in the House of Lords in just a couple of weeks. This puts us right on schedule to deliver Universal Credit for new customers in October 2013.

One of the interesting things about Universal Credit is the Government is taking an entirely new approach to delivery.

We are currently working on the design and build of the new system.

We are developing it in stages and testing each element with claimants.

The aim is to deliver a benefit system structured around the claimant’s end to end experience - not just through the benefits system but their full journey right through the benefits system and into work.

We are making good progress and have already completed the first stage of detailed design. Delivery of Universal Credit is on schedule and on budget.

The same principles of clarity, consistency and fairness are at the heart of our reforms to Housing Benefit.

Over the last 10 years Housing Benefit has roughly doubled in cash terms from £11 billion to nearly £22 billion from 2000-01 to 2010-11. Without reform it is forecast to reach nearly £25 billion by 2014-15.

In some cases the State had supported people to live in homes with such high rents that they had no realistic chance of earning enough to pay the rent without state help.

This approach encourages benefit dependency. 

Housing Benefit reforms restore clarity to the system by introducing a clear limit to affordability.

The maximum we will pay is now £400 per week - still no small sum - more than £20,000 per year in total.

We are also taking steps to tackle under-occupancy in the social rental sector.

In England alone, there are around five million people on the social housing waiting list and over a quarter of a million tenants in overcrowded conditions.

Yet at the same time we are paying for something approaching one million extra bedrooms with Housing Benefit. 

This is a luxury we cannot afford.  

It is not fair to the taxpayer and not fair to those in housing need. If people continue to live in a property larger than they need then we will expect them to make a reasonable contribution to its cost through a reduction in Housing Benefit.

Housing Benefit reform will deliver consistency by encouraging families on benefits to make the same choices about where they live as families on low incomes 

And it will deliver fairness, for families on benefits as they have a real chance of escaping benefit dependency for good and for those on low incomes and other taxpayers who will no longer foot the bill for rents they could not afford themselves.

We are also pressing ahead with reassessing Incapacity Benefit claimants for Employment and Support Allowance.

This is because, even for claimants who are unlikely to see an improvement in their health and who are unlikely to sufficiently adapt to their condition, it is important that we do not write them off completely.

We have now started the national roll out of this reassessment and are currently contacting 11,000 people per week.

The Government does not believe that it is acceptable to write people off to a lifetime on benefits because they have a health condition or disability.

Many people with health conditions are able to sustain and progress in employment.

We now know that work is good for you.

There is strong evidence that being in work can be beneficial to health.

Far from protecting people from work we need to recognise that it can be part of recovery from illness and part of a full life for disabled people.

Employment is entirely the right route for those people who can work.

We are entirely committed to ensuring we get the reassessment process right.

That’s why we have accepted the full recommendations of Professor Harrington’s review of the Work Capability Assessment and remain committed to annually reviewing the process so we can continue to refine the assessment and support people back into work.

This move to unconditional support for those people who cannot work and help for those will provide clarity, consistency and fairness for disabled people and people with health conditions.

Clarity so people know where they stand and get the support they need.

Fairness for people who had previously been sidelined by an inactive benefits system.

And consistency of approach, everyone who can work will receive support to help them make the most of employment opportunities.

We are taking this one step further, looking at the whole system of sickness absence.

In January the Government appointed independent reviewers David Frost of the British Chambers of Commerce and Dame Carol Black, the National Director for Health and Work to investigate the current situation and develop some recommendations for improvements.

Early insights from the review suggests the picture may be far more complicated than we had realised.

For example, people do not always follow a linear journey from 28 weeks on Statutory Sick Pay to eventually claiming sickness-related benefits. In many cases, people who flow onto benefits come more or less directly from work thus entering the State’s auspices rather earlier.

As part of the review the team will be exploring exactly what is happening and where the financial and other incentives are in the system for both employers and employees.

We know that many firms offer excellent support to return to work after a period of illness and this can have a really significant impact on bringing down the number of days lost to sickness absence and the well being of workers.

Alongside reforming welfare we are reforming employment support for those at risk of becoming long term unemployed

Last month, we launched the new Work Programme.

It’s a significant achievement and one which we could not have reached if it was not for the hard work of the welfare to work industry.

The Work Programme is not like previous Government back to work schemes.

It has a unique payment structure which recognises that some people will require more help to find and stay in work than others. Maximum payments for supporting people into sustained employment will range from around £4,000 for typical jobseekers to almost £14,000 for the hardest to help, reflecting the differing levels of support required.

For the first three years there will be a small and declining up front payment made per claimant referred to the Work Programme. Thereafter it’s 100% payment by results.

The contracts are long, up to seven years and include financial incentives for maintaining, as well as securing, employment.

We have worked hard to find the right balance. This has to be a good deal for both taxpayers and providers financially, as well as getting the right support for those who have fallen out of work.

We are happy for providers to make a profit, but only if they do well at getting people into work. We don’t want them to be able to make money inappropriately from the taxpayer if they don’t succeed.

The Work Programme started last month, and I believe it will transform the lives of many of our most vulnerable people.

But what we have created with the Work Programme is not just a system of back to work support, but a blueprint for the provision of Government services.

We have built something that can go much further than tackling unemployment, and we are now looking at developing a sophisticated system of social interventions based around the payment by results model, with the Work Programme at its core.

We’ve already used the DWP Framework to issue an invitation to tender for working with whole families financed by the European Social Fund, to tackle intergenerational worklessness. This approach will focus on England’s most troubled families, those already in touch with social services, the police, probation services, those families who are really struggling. These contracts will take the same non-prescriptive, payment by results approach as the Work Programme but encourage providers to work with whole families with the ultimate aim of getting them into work in part by tackling their other issues.

The Work Programme delivers clarity for claimants as those at risk of long term unemployment will receive personalised support from welfare providers rather than the old confusing array of one-size fits all provision.

It delivers fairness by giving people a real chance to change their lives and leave benefit dependency for good.

And it delivers consistency because whilst the methods may vary the focus on sustainable employment remains the same.

I know many of the organisations in this room have been working very hard to deliver different elements of our reforms.

As the Bill makes its way through the parliamentary system and different aspects of reform take shape we are grateful for your ongoing input.

I know there are a number of areas where we still have work to do; childcare in Universal Credit for example, reforming support for disabled people following the Sayce Review and the introduction of Personal Independence Payments.

As we work through the detailed policy discussions in these areas and in to the delivery of these further reforms I hope you will continue to work with us to deliver clarity, consistency and fairness for all.

Published 6 July 2011