‘Wales needs Welfare Reform’

This speech was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Stephen Crabb MP delivers a speech on UK Government welfare reforms to the Policy Forum for Wales

Good morning and thank you for inviting me to speak here today.

This morning, more people in Wales have gone out to work than at any other time in our nation’s history.
Economic inactivity in Wales today is at its lowest since records began, and both the overall rate of employment and the actual numbers of people in jobs are at a record high.

But, ladies and gentlemen, the tragedy is this:

..that at the same time as a record number of people are out working today, there remain around 200,000 people here in Wales who have never worked a day in their lives.

That’s a tragedy for each one of those individuals and it’s a tragedy for our nation.

A small country like Wales needs to maximise every bit of skill and talent and potential that we have.

And that’s why I am so passionate about welfare reform.

Welfare reform is about saying that this waste of opportunity and potential is just not acceptable any longer;

..it’s about recognising and bridging the gulf that has been allowed to open up between those whose lives are dependent on benefits and those who are economically active;

..and it’s fundamentally about returning the welfare system to its true values and purpose: as both a tool of social protection and an enabler for those in poverty, where they can, to regain their economic independence.

Our welfare reforms are about expanding opportunity and making a positive difference to real lives.

And so there is nothing compassionate or progressive about ducking the challenge of welfare reform.

The assault on welfare reform in Wales

Yet, over the last three years, that is exactly what our critics in Wales have urged that we should do.

There has been a ferocious assault against welfare reform within Wales, led by the Welsh Labour Party which has turned its face against welfare reform – a cause which Labour itself championed twenty years ago when so many of the problems of dependency and the decline of work incentives were first being highlighted.

Instead Welsh Labour has led the calls for welfare reform to be resisted, abolished, watered down or delayed.

And in the Welsh media there has been a voracious appetite for any story which casts welfare reform in a negative light. Since 2010 there have been more column inches devoted to criticising different aspects, any aspect, of welfare reform than almost any other political subject;

..and an escalating rhetoric of criticism which reached its peak a year ago when a Welsh Government Minister attacked the reforms as a “social atrocity” and accused UK Government of “stepping away from their responsibility to the most vulnerable in society”.

Language like creates headlines in Wales and turns poverty into a political football, but it does nothing – nothing at all – to further the interests of the forgotten 200,000 people in our nation who have yet to work a day in their lives,

..and for the 92,000 children who are growing up in households where no-one works,

..and for those communities here in Wales where more than one third of the residents are claiming out-of-work benefits.

The responsible position is not to urge less welfare reform in Wales,

..but to recognise that Wales needs welfare reform as much as anywhere else in the UK and to work to ensure that it bears the right fruit for Wales.

Wales should be using this once-in-a-generation opportunity to break the cycle of dependency and revitalise those communities blighted by worklessness.

Wales needs welfare reform.

Welfare reform here to stay

Regardless of the precise contours of the current devolution settlement, the truth is that Welsh Government has a shared interest in seeing the economic health of our nation improve, and that means a shared interest in seeing the cycles of poverty and dependency broken in Wales, and therefore they do have a shared responsibility to be a positive partner in welfare reform.

Welfare reform must not be a blind-spot for Welsh Government.

Because, make no mistake, welfare reform is here to stay.

And just as the UK and Welsh Governments now work together far more effectively than ever before on strategic infrastructure investment, so I believe that the two governments will need to find ways of working together to see welfare reform achieve its ambitious aims here in Wales.

I therefore very much welcome the new established working group that will meet for the first time today that brings together the Wales Office, Welsh Government and the Department for Work & Pensions to seek to resolve the difficulties around access to ESF-funded skills training in Wales which currently prevents unemployed people on the Work Programme in Wales getting the full range of support and training they need to improve their employability.

As the Commons Welsh Affairs Select Committee said recently:

The last thing we need.. is bureaucracy getting in the way of people simply being able to do what is most effective. The fact that different programmes are funded differently or run by different organisations should not.. create barriers at the point of delivery. The point is to get people in to work, for all the benefits that brings both to them and to the public purse.

Local Government a key partner in welfare reform

And local government, too, in so many ways the unsung hero of social policy in Britain, has a central role to play as welfare reform is rolled out.

I have recently met with authorities from across Wales to discuss, in particular, the localised impacts of the changes to housing benefit, but also to hear the approaches being taken to wider welfare reform matters in Wales.

Later today I will be visiting Caerphilly where the Borough Council has participated in one of the Universal Credit local pilot schemes, working alongside the Department of Work & Pensions, to explore how local expertise can support residents to claim Universal Credit, making sure they are aware of benefit changes and within full reach of assistance when they require it – practical assistance such as advice on debt and household finance.

And no-one is blind to the challenges that lie ahead, but I have been impressed with the dedication and focus with which local authorities are approaching welfare reform.

They understand the importance and significance of this agenda to Wales.

I believe whichever Party – or parties – are in power in Westminster after 2015, there will be no turning back the clock or any return to the kind of welfare system which does not encourage hard work and which does not foster social mobility.

Already as the first fruits of our changes are starting to appear – seen in the falling numbers of long-term unemployed and increasing numbers coming back into the labour market – I believe there is the opportunity to move away from the screeching rhetoric and to achieve consensus here in Wales on the broad direction of welfare reform.

In the last three years we have only just begun to tackle the monumental challenge in front of us.

Welfare reform will need to shape the strategies and business plans of every tier of Government – Local Government, Welsh Government and UK Government – for years to come.

And if we get this right, with each layer of government working together effectively and with a shared ambition for welfare reform in Wales, then the impacts it will have on the economic and social landscape of our nation will be transformational.

The principles which guide welfare reform

And so I would like to set out this morning some of the key principles which are guiding our welfare reforms and which I think can provide the basis for that consensus in Wales:

  • Moral duty to provide both a safety net and a pathway out of poverty

Firstly, the starting point is a fundamental recognition that the state has a moral duty to provide a safety net for those facing poverty and hardship.

We must not and will not walk away from the most vulnerable in society.

Both compassion and self-interest point us towards providing real help to those in poverty. And there will always be a role for a strong safety net to protect those who face hardship from slipping further into poverty.

And so Universal Credit will refocus that safety net to provide more support to those on the lowest incomes – 75% of those who gain from Universal Credit will be in the bottom 40% of income distribution.

The introduction of Universal Credit will also significantly improve the take-up of unclaimed entitlements.

And so around 200,000 households in Wales will actually have higher entitlements under Universal Credit – of £163 per month on average.

Our responsibility to the poor also means providing support to those affected as we reshape the welfare system.

We know that many households in Wales are affected by the current reforms, and this can be unsettling and disruptive for some, but we are committed to providing the necessary support to help those affected through the transition.

This is why we have increased the amount of money available to local authorities in Wales to use for Discretionary Housing Payments for those tenants in social housing affected by the changes to housing benefit: £7.9 million in 2014/15.

No-one is walking away from a duty towards the poor.

But if this duty translates into rights on behalf of some to receive welfare payments then with those rights must surely come responsibilities.

The great failing of the modern welfare state was the stripping away of these responsibilities which helped to foster inactivity and long-term dependency.

Benefit payments alone do not provide a pathway out of poverty. That is why our welfare system should provide the full range of support, guidance and incentives that gives people the opportunity to improve their circumstances and return to the freedom of an independent life.

  • Restoring the value of work, and increasing the incentive to work

Secondly, the key to encouraging people to leave benefit dependency and return to the job market is to restore the value of work in society and that means changing the equation so that there is always a financial incentive to work compared to the alternative of benefits.

That is why, as a Government, we have introduced a cap on benefits so that no household can receive more in welfare payments than the average working family earns through employment.

In Britain, we are already seeing thousands of those whose benefits have been capped returning to the labour market and taking up jobs.

Furthermore, the introduction of Universal Credit will improve work incentives as financial support will be reduced at a steady rate, taking actual earnings into account at the time they are received. If a claimant is working part time, they may continue to receive some payment. If their hours then increase, their Universal Credit payment will reduce, but they will keep more of their earnings and will always be financially better off in work.

The intention is that any work pays, in particular, low-hours work.

Reducing the complexity of the current system and removing the distinction between in-work and out-of-work support, will make clear the potential gains to work and reduce the risks associated with moves into employment.

At the same time we are helping to put money back into the pockets of working people by raising the Income Tax Personal Allowance to £10,000.

This will benefit 1.2 million workers in Wales and take 130,000 out of income tax altogether – many of whom are on the lowest wages.

Taken together with a strong minimum wage, which we want to see increased significantly, these measures represent a very powerful set of tools to draw people back into the workforce by changing the financial incentives to work.

I happen to believe that there are very, very few people who do not to work.

As people we are hard-wired to be productive and make an economic and social contribution.

But the previous welfare system far too often allowed those instincts to become blunted, and the drive to provide for oneself became weakened in a society where work didn’t always pay.

Work shapes us as people, it provides security for our families and it inspires our children to follow in our footsteps – and it is right that work should be at the heart of our efforts to tackle poverty.

  • A benefits system which reflects the realities of modern labour market

Thirdly, it is imperative that our benefits system is reshaped to reflect the realities of the modern labour market.

We need a system that can respond to the modern and flexible labour market where an increasing number of people are, by choice or necessity, working part-time or in multiple low-hours jobs.

The previous welfare system shut out those who wanted to return to work by presenting a seemingly binary choice between full-time work and unemployment.

For many of the longest term unemployed, facing difficult barriers to work, returning straight back to full-time employment will present a huge and in some cases impossible challenge.

We need a welfare system that encourages and supports them in taking their first steps back into work and building up their hours as they acquire confidence and skills.

That is why Universal Credit is a dynamic system which is designed to be flexible to cope with the transition back into full-time work. It gives job-seekers the flexibility to take on part-time, short-term or alternative work patterns, depending on what is appropriate for their individual needs.

Moving the welfare system to reflect more the realities of the modern labour market also means changing the nature of the interaction between the claimant and the advisers who will support that person as they receive benefits. Claimants now receive a more targeted and individualised service than ever before.

I have seen firsthand some of the remarkable changes that have taken place in the design and approach within JobCentre Plus in Wales to reflect this. Walking into JobCentre Plus in Newport city centre, for example, you will see a busy open-plan dynamic working environment where not only the staff are busy at work but claimants too, working on job searches, skills workshops, CV writing; and that’s exactly as it should be. Claimants working hard to find work.

And thanks to these changes and the digital revolution that we are bringing to the benefits system, claimants will no longer be the passive recipients of handouts, but will be firmly in the driving seat, taking control of their own prospects.

  • Welfare reform is about bridging the gulf that has allowed to emerge between those dependent on benefits and those in work

The previous system fostered and allowed a gulf to open up between those who are dependent on benefits and those who are in work - where people who have become dependent on benefits no longer have to live with the same range of practical life choices that people in work do. For those who have been dependent on benefits the longest, that gulf is a very wide one indeed.

And so the fourth principle I would highlight is the need to ensure there is no gap between the choices that those in work have to make and those that made by people receiving benefits – and in so doing we are restoring fairness back to the benefits system.

Practical choices, for example, over what type and size of property they will find affordable:

The changes to housing benefit for social tenants, bringing it into line with Labour’s changes to housing benefit for tenants of private landlords, means that all tenants on benefits will now have to make the same types of decisions as people in work have to about what size property is right for them at this point in their lives.

Other basic practical life issues involve managing money on a daily, weekly and monthly basis – including the timely payment of rent.

People in work have to do this. How on earth did we arrive at a system of housing benefit that removes much of that basis financial housekeeping from people on benefits and so deskill them further?

And so, in the face of all the criticism we have seen from housing associations in Wales and others, I absolutely defend the principle of Universal Credit being paid to the recipient and not direct to landlords.

Yes, we need to build in safeguards – and we are – and yes we need to ensure that those with specific and challenging circumstances and conditions still have the option of having their housing related benefit paid straight to their landlord.

But the starting point must be an expectation that the majority of people on benefits can, and should be expected to, manage their own household finances.

Wales a beacon of social mobility

I am incredibly fortunate as a Wales Office Minister that I am able to get and about meeting many of the people at the cutting edge of welfare reform in Wales –

the superb teams of advisers in JobCentre Plus in places like Newport and Aberdare;

the innovative teams delivering the Work Programme in places like the old Burberry factory in Treorchy,

and inspirational an historic organisations like the Merthyr Tydfil Institute for the Blind which is delivering the Workstep programme to people with a whole range of disabilities.

And people here will tell you there are no magic wands or silver bullets when it comes to tackling worklessness in some of our most deprived communities.

And no-one is pretending there are.

But you will also hear very few people running to the barricades to defend a welfare system which too often locked in that worklessness and created dependency.

My own approach to welfare reform is also shaped by the experience of seeing a single mother raise three boys in council housing in West Wales thirty years ago:

absolutely dependent on the welfare system, and the kindness and generosity of others, to keep her family’s heads above water; having to make all those horrible decisions about what food and clothing was affordable;

thankful for good quality free school meals and a good local bus service for days out on the Pembrokeshire coast.

But those circumstances were not fixed; and, initially, taking advantage of the rule that allowed her to work a few hours each week without the benefits being withdrawn, she got a small job filing at a local office. Gradually she increased her hours even to the point eventually when her benefit was being withdrawn pound per pound, but her skills and self-confidence were improving all the time.

Eventually, when her sons were in their teens, she was able to get a full-time job, and move off benefits completely. Shortly after, she was able to afford driving lessons and buy her first car which expanded her work options even more.

Things were still very tight, but how far she had come on that journey from personal crisis and breakdown to economic independence!

And it should be a central feature of our welfare state that this type of journey – that my own mother made – should be encouraged and incentivised as far as possible.

And that is exactly what our welfare reforms seek to achieve.

One of the great strengths of Welsh society in the past was the belief – written deep in the hearts of so many men and women – that hard work and education was the route out of poverty.

And so Wales became a beacon of social mobility.

The welfare system we are reforming has too often acted as a brake on that social mobility, not providing a pathway out of poverty.

Our shared vision, whether as politicians or practitioners, must surely be for Wales to become once again that beacon of social mobility:

a place where it does not matter what street you grew up in, whether in social housing or private;

where it does not matter what school you went to;

or who your father or mother were, or what jobs they may or may not have done;

a place where hard work, education and a strong community provide pathways of opportunity so that everyone can achieve their potential to the best of their ability.

And this is why welfare reform is much, much bigger than just a financial or economic issue.

It’s actually about what kind of society we want to live in; and our children after us.

And it’s why I am determined that our nation of Wales should see the full benefits of welfare reform in the months and years ahead.

Wales needs welfare reform.