---

Welfare Reform

My Lords, I thank the noble Lord, Lord McKenzie, for his gracious speech. I welcome his overview that this transformation is going in the right strategic direction and that he and his party are prepared to make sure that we get the very best out of it. There is much consensus around this issue and, as anyone who has looked at my career over the past few years will recognise, it may be that I almost personalise some elements of that consensus. I do acknowledge, as the Secretary of State has acknowledged, that we are building on elements, but we are making them truly transformational by ensuring that people will be able to understand that it is always worth working in a way that, because of the complexity of the current system, it has been impossible for them to do. The noble Lord put a series of questions to me and I shall do my best to answer all or virtually all of them. He queried the obligation, as he put it, in the contract to grow employment at the same time. I want to make it clear that two separate things are happening here. In the 16 or 17 years to 2008 we had the longest boom in growth that this country, in common with the rest of the western world, has seen. However, we still ended up with a lot of people trapped on out-of-work benefits. What is key here is to untrap them because during the boom we were sucking in labour from abroad which proved to be much more flexible. Before we worry about anything else, we must unlock the people who are living here so that they can play their part in the workplace. That is what these reforms are about. On the noble Lord’s question about lone parent conditionality, we will of course maintain the good cause provisions that are agreed. We are very sensitive to the school hours measures and so forth, and they will be taken through. Hardship payments will be available, and the exact levels will have to be determined. He made the point that people need self-confidence and good self-esteem to be able to get back into work. The whole point of the work programme is to put in place a structure where providers are incentivised to get people back into the workplace whatever it takes. My own expectation, for what it is worth, is that one of the things that work providers will spend a lot of time on is rebuilding the self-confidence that people need to get back into work. So I expect that to be happening. We have talked about mandatory placements. They are not a punishment, but are to be used for those for whom working for four weeks will be transformational in how they interrelate with work and in getting used to the basic disciplines of work. The placements will be designed for those people for whom we think they will be of the most value. Clearly there is a secondary issue, which is that making people do something for four weeks when they actually have another job anyway is a useful winnowing tool. The noble Lord queried the costs and mentioned stories about an extra £2 billion in the next Parliament or at the next spending review. Frankly, we are talking about a very complicated series of movements, and any figures at this stage would be simplistic. The point is that by the next Parliament, the new system will be locked in, so that in the next spending review we will have to take account of what that system is, along with its costs. I am not sure whether we will be running ahead with the ““better off in work”” credit because there is so much to do in bringing forward the universal credit. We need to concentrate on the big picture rather than amelioration of bits and pieces of the existing system. The plan is to bring in the universal credit from October 2013 and then start to move as soon as we possibly can the people for whom those incentive effects will work the best. They will be the earliest people to move across. I can assure the noble Lord that the disability living allowance is out of the universal credit because we accept the reason for the allowance, which is to provide for all people with disabilities who need help with the costs involved in their support, whether they are in work or out of work. Those costs do not change in line with levels of wealth. They represent a basic strapline of expenditure according to an individual’s disability, so we have decided to leave DLA out. On council tax benefit or rebate, depending on what we call it, we are looking to devolve this so that local authorities can start to shape where it goes. We are also determined to make sure that it works with the incentive structure of our taper on the universal credit. This will ensure that we do not have something working against that set of incentives. I turn to housing benefit, which is effectively one element of the universal credit. We have some work to do on exactly how it will go in and at what rate, but in practice the universal credit is a basic credit with disability add-ons, child add-ons, housing add-ons and so forth. We aim to see the portfolio of an individual’s universal credit build up depending on who they are. On the question of direct payments to RSLs, we will make sure that the risks to RSLs in terms of getting payments are not increased. Their anxiety is that their ability to finance will be undermined, but we are determined to ensure that, whatever we do with this, it does not undermine that ability. We are looking at quite a few options where we can achieve our aim without necessarily having direct payments. Is child benefit included? No, it is not. As to the noble Lord’s concern about wallet and purse, which would apply also to the universal credit—he did not ask the question but I am happy to answer a question he did not ask but should have—we want to ensure that the credit gets paid to one member of the household, although we will explore ways of dividing it. One hundred per cent may well go to the purse or to the wallet, but we need to consider the middle and whether we should make special arrangements for those people who would like it there. The noble Lord asked me to take more time. This is a big project and we are doing it at the speed we can. Nevertheless, it will take a long time. We will have the system ready to roll in October 2013 and people will migrate steadily on to it; we will not throw everyone in at the same time. Up to half of the people involved—particularly those who are most incentivised by being in the system—will be in the system by April/May 2015, and the remainder in the next two years. It is a longish process. I welcome the noble Lord’s closing words—that this will go beyond a second Parliament—but one never knows what will happen in an election. I welcome the fact that the party opposite has indicated that it will be supportive and co-operative because you never know who will be in charge in 2016.