Speech

Welfare reforms progress update

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

A speech on the progress of welfare reforms by Lord Freud, Parliamentary Under Secretary for Welfare Reform.

Good morning, it’s a pleasure to be here.

When I spoke to you in this same town a year ago, I gave an overview of the changes that were set to come in during 2013 and spoke about the crucial role for local authorities in delivering welfare reform.

It’s been quite a year. The hard work of many of the people here today has been instrumental in enabling the introduction of genuinely significant reforms: Universal Credit, the benefit cap, and Personal Independence Payment to name but a few.

I want to use my time today to remind you why we are bringing these changes in, to update you on their progress, and, wherever I can, to look ahead to the future.

Let me start with the most significant of those changes I mentioned – the introduction of Universal Credit. On 29 April of this year, the first ever claim to Universal Credit was made in Ashton Under Lyne.

Since then thousands of payments have been made, and thousands more will be made as progressive national roll out begins later this month.

To illustrate why Universal Credit is so significant, I want to reflect for a moment on the history of the area we are in now.

This area is, of course, no stranger to great change. Credited with being the home of the industrial revolution, it was at the heart of a transformation that had hugely positive consequences, but that also threw up a host of new social challenges.

Beveridge’s 5 giant evils of disease, ignorance, squalor, idleness and want were in part a product of this new industrial age. And from their identification, of course, came the birth of the modern welfare state.

But just as government was putting the finishing touches to Beveridge’s vision in the mid-20th century, it was already finding itself behind the curve.

Post-war society was already changing – and with gathering speed.

Women began entering the workforce in much greater numbers. Full-time, ‘jobs for life’ became a thing of the past, while part-time, flexible work became the norm for many.

And the result? We found that a welfare system built to deal with 1940s society was no longer able to deliver the support that people needed in a modern, flexible labour market.

For many people, taking work became almost a waste of time because of the way their benefits were withdrawn. That was if they could understand the horrendous complexity of the system in the first place.

Successive governments recognised elements of this challenge, and introduced individual ‘fixes’ to try to deal with it.

But often these fixes created as many problems as they solved.

Tax credits are a good example: a laudable principle – making work pay – failed to really deliver in practice because it was bolted onto the pre-existing system, making things incredibly complex.

Universal Credit is different. It is based on a ‘first principles’ approach to the welfare system, a fundamental overhaul rather than another tweak or fix.

It creates a simple system, one that makes work pay at all hours and – most crucially – one that is flexible and responsive to a modern labour force.

Employers themselves are recognising that universal credit will bring much needed flexibility. Let me read you a quote from a Recruitment Hub Manager at B&Q:

One of our employees, Vicky, who has caring responsibilities, has until now only been able to work 16 hours a week due to how her benefits would have been negatively affected if she had accepted more hours offered by B&Q. With the introduction of Universal Credit she’ll have the opportunity to flex up her hours either on an adhoc or permanent basis and earn more without losing all of her Universal Credit.

And here is Phil Eckersley, Managing Director of ‘Home Instead Senior Care’ in Wigan:

Universal Credit will have a direct positive effect on my business. It will enable jobseekers and employees to work as much as they wish around their family and dependents’ commitments.

Of course such a fundamental change cannot be introduced overnight. We have been really clear about our commitment to introducing Universal Credit in a safe and controlled manner.

That’s why we started with a Pathfinder approach from earlier this year. And that’s why later this month we will begin the progressive national roll-out of Universal Credit as we expand to a further 6 Jobcentres.

We are also making significant progress in rolling out the wider elements which are critical to driving cultural change.

For example the new claimant commitment – which more firmly sets out claimants’ responsibilities – will be rolled out nationally from October, and we are already starting to roll out improved digital services across Jobcentre Plus.

So momentum is building, and this is an exciting time.

But I am also acutely aware that if Universal Credit is to work, it must work for the most vulnerable people.

I am absolutely determined that when more vulnerable claimants come onto Universal Credit we are ready to provide them with the support that they need.

That is why the Local Support Services Framework is so important. It is about how we – working with local authorities – can ensure that we are ready to deal with the additional or growing support needs that come from the introduction of Universal Credit.

To do this, we are putting a really strong emphasis on local partnerships between Jobcentre Plus district managers, local authorities and housing and charity sector providers.

We will be publishing an update to the framework shortly, which will include information on testing and trialling. The testing and trialling will include aspects of the financial model and incentive structure, as well as exploring use of the European Social Fund as a potential funding stream.

We will also be testing the development of Personal Budgeting Support initiatives. This trialling is so important because it allows us to include lessons learned into the next iteration of the framework.

The updated framework will also provide an update on key points of progress and agreement since the publication of the framework in February. We then plan to issue a more comprehensive version of the framework in autumn 2014, to inform local authority budgeting timetables for 2015 to 2016.

As many of you will be aware, the local authority led pilots are already testing elements of this framework, by introducing support services designed specifically to best suit local needs.

For example I’ve heard about how Lewisham Council in south London has developed a structured triage approach to identify vulnerable people who may require additional support with the transition to Universal Credit.

Claimants are contacted over the phone to discuss their skills and experience across the financial, digital, housing and employment spheres.

Scores are then assigned to the claimants answers. If they are considered ‘vulnerable’ a further support appointment will be triggered, where claimants are provided with tailored support plans and referred for specialist help where needed.

But when we talk about vulnerable claimants, I am aware that there are some concerns about the introduction of Direct Payments.

We must not lose sight of why this change is so important though. A driving principle behind Universal Credit is that the transition between being out of work and in work should be straightforward; people should not be scared of taking work.

Monthly housing costs paid directly to claimants are a key step to breaking down that barrier, as they reflect the way that the large majority of people are paid in work.

The Direct Payments Demonstration Projects are showing us what support people will need to make the transition to Direct Payments and what safeguards will need to be in place.

Nonetheless, we are alive to the concerns that some have had. As a result, we have developed a package of safeguards to protect landlords, including alternative payment arrangements for those with the greatest need and an automatic trigger point should claimants accrue arrears of up to 2 months’ rent.

We are also working on an early warning trigger should 1 month’s worth of rent accrue through persistent underpayment.

This gives us the optimum balance between empowering claimants to take control of their finances and minimising unnecessary risk for landlords.

It is still early days, of course, but initial results from the Demonstration Projects are encouraging. Figures from May 2013 show that the average rent collection rate is 94%.

I am keen that, as we move forward with this, we will continue to work with landlords in particular on preparing people for these changes. As part of this I hope that we will see some people moving on to Direct Payments before they move on to Universal Credit, so that they take that additional step towards work readiness early on.

Another of the big changes we have seen in the last year is the introduction of the benefit cap – which has now been rolled-out across the UK.

The introduction of the benefit cap has been a great example of how government and local authorities can work together to deliver reform. For this, I would like to offer a candid and genuine thank you to local authority staff.

The implementation of the cap highlights the positives of a progressive roll-out. It was introduced in April 2013 in 4 local authorities; then in 2 tranches over the summer and has now been successfully rolled out across the country.

The implementation approach was agreed with the Local Authority Association Steering Group. We agreed that lessons learned from phased rollout should influence the national approach. It did and we therefore agreed to manage delivery over 10 weeks in 2 tranches.

We also gave local authorities low volumes in the first week so they could check all systems and processes worked, and we supported them through best practice events attended by hundreds of local authority staff. It’s been a steady and ultimately successful approach.

And we continue to work together to deliver the changes this policy is intended to create. For example I have been to Croydon where the local authority and DWP work side by side in the same building offering employment, housing and budgeting support.

It is public service at its best; working together to change lives for the better.

It is worth noting that since claimants were notified of the benefit cap in April 2012 over 15,000 claimants identified as living in potentially capped households have moved into work.

Indeed, research findings show that, of those aware that they were affected by the benefit cap, almost half took action in response, with the large majority of them either looking for work or undertaking job-related activities.

Like I said, we mustn’t lose sight of why these reforms are so important and I think these early results show the real significance of this policy.

And to continue the theme of cross government working, let me also update you on the progress of the Single Fraud Investigation Service pilots.

This is another example of smart working across central and local government to fully integrate policies and procedures to deliver a single service that investigates the totality of welfare fraud. Four pilots went live last November, with several more to follow this year.

Several colleagues have commended the working relationships and the sharing of expertise that has enabled the pilots to operate well.

This collaborative working led to the first prosecution of a case dealt with by the SFIS pilot earlier this year. On 18 June a woman from Hillingdon was successfully convicted of fraudulently receiving an overpayment of over £13,000.

However, although the pilots have demonstrated the real positives of partnership working they have also identified some of the limitations of the current approach.

For example there have been clear challenges where people have been working across multiple locations, under different managers and with different terms and conditions.

These findings have informed the next stage of the process, which will explore how best SFIS should move forward as an integrated organisation.

But let me assure you that as we take this work forward we will continue to fully engage with local government representatives, local authorities, HMRC and our key stakeholders at every step of the way.

This is a period of great change for all of our people and we want to work closely with you to minimise the impacts that any transition might have.

As you will all be aware we have also introduced the removal of the spare room subsidy this year. I recognise the hard work that all local authorities are undertaking to deliver this important policy.

As with all our reforms, we are gathering evidence, learning and sharing best practice. We recently responded to concerns from the sector by increasing in-year funding for local authorities by £35 million to help support those affected to navigate the transition to the new arrangements.

That includes a £20 million contingency fund, which will provide extra support to local authorities who can demonstrate they are supporting their tenants to make the long term positive changes we’re all looking for.

I have been heartened by many of the innovative solutions I’ve seen and urge you all to continue this crucial work.

So, it has been a challenging year, but a very significant one.

We have introduced a number of far-reaching social reforms, based firmly on the principles of incrementalism, testing and learning, and partnership working.

And these will continue to be our watchwords in the months and years ahead.

It is my firm belief that it is only through the application of these principles that will we be successful in achieving our ultimate aim – the delivery of a welfare state fit for today’s society.

And I look forward to continuing to work with you on making that a reality.