Welfare Reform: Meeting The Needs Of Northern Ireland - 09th October 2012
I beg to move that the second stage of the Welfare Reform Bill be agreed.
As the Minister for Social Development I have the duty to introduce one of the most substantial pieces of legislation this Assembly has been asked to implement to date. It is the culmination of the wide ranging debate that is taking place, both here and in the wider community about the future of our social welfare system. That debate is about issues that will have a major influence on how we address poverty and disadvantage and how we grow our economy; and the two are very much linked. Economic growth is a necessary prerequisite to tackling poverty. Getting people into work is the only way we will ever succeed in lifting our people out of poverty.
It is not reasonable to argue that the welfare reform programme and the focus on getting people into work must await a time when jobs become available. Implementation of welfare reform needs to take account of our current economic difficulties; by preparing those who are not working, in terms of skills and attitudes to work, to make them ready for work for when it becomes available. We need a Welfare System that not only works in the good times, but more importantly we need a system that is capable of effectively supporting people during periods of recession.
As we discuss this Bill and the regulations that will follow, let us not underestimate the challenges we face. As a region we have the highest levels of economic inactivity in the United Kingdom; over 120,000 households in Northern Ireland in which there is no-one working and over 60,000 children live in households where there is no adult working. There is clear evidence which shows that the income of families where there is no adult working are heavily skewed towards the bottom of the income distribution with over six out ten families in the bottom quintile and 93% of families in the bottom two quintiles. If, through the changes included in this Bill, we are successful in getting more people into work, we will have made a start on tackling a root cause of poverty, and we can make a contribution to addressing issues such as low educational attainment, and high levels of ill health, often in areas of multiple deprivation. There are people in our society who have never worked, who will have no concept of what work means or requires of them. So we have to change systems, behaviours and attitudes and we have to change fast without leaving the most vulnerable behind.
As Minister for Social Development I am committed to tackling disadvantage and building strong and vibrant communities across Northern Ireland and so I give a high priority to measures which will mitigate the negative impacts on individuals, their families, households and communities. Welfare Reform is not the only reform which I will be bringing forward to reduce disadvantage and shield communities, I will shortly be bringing to this House, proposals for the reform of the Housing Executive together with a new Housing Strategy. I am also working to develop a range of complementary changes that will benefit poorer people and disadvantaged communities.
The substantial costs of benefits are paid under parity arrangements directly from the Westminster budget and I have no doubt that our approach to those parity arrangements will be at the centre of this debate. I would say to this House that we have a clear choice. If there are substantial costs involved in changes we want to make to this Bill, we will have to pay for them. Breaking parity is a choice we can make – but it will have huge costs. And those costs will be met through less money for schools, less money for hospitals, less money for the police or we will have to find the additional resources from introducing local charges to meet the costs.
As Minister for Social Development I would argue in the strongest possible terms that such an approach would be dangerous to our economic position, hugely damaging to public services and indefensible in terms of the possible consequences for those people who are struggling to work and support their families with little or no support from the public purse.
That does not mean however, that we blindly implement all the changes that were introduced at Westminster under the GB Welfare Reform Act. Together we must identify, and implement changes that take account of our particular needs here in Northern Ireland but changes that are consistent within the constraints of parity. Through the Assembly, the Executive and its sub committee on Welfare Reform we can decide on the type of changes which are within our remit to make and I will make comment on some of these later in my speech. And of course, there are still changes that I am working hard to achieve through ongoing discussions with DWP Ministers
I present this Bill to you because I believe that if we are to be successful in tackling poverty, making people’s lives better, supporting families, and growing a more sustainable economy, the core principle behind Universal Credit is right - that of always being better off by working than not working. I believe that Universal Credit can help to tackle poverty, make people's lives better, support families and grow a more sustainable economy. Through Universal Credit, there is a real opportunity to develop sustainable support, through engaging more people in work and economic activity. Grasping the opportunities that the reforms bring, together with the further development of our economic strategy can contribute to a growing and vibrant Northern Ireland economy that is able to provide better support to households and children. Failure to do so will lead to continued and possibly increasing poverty, increased stress on those same families and children, giving them no possible escape from the poverty trap.
I would also suggest that most of us are supportive of the principles underpinning Universal Credit. We all want to see a welfare system that provides financial support not only for those unable to work due to illness or disability but also for those that can work but are unable to find work at a point in time. We also want to see a system that enables and supports, in a practical way, a return to work but at the same time challenges those who refuse to work.
So there are aspects of Welfare Reform that I support and there are aspects that I am trying to change; but let me say that there are other aspects that I personally do not like, but I know I cannot change them because of the financial consequences.
Translating the core principles into an efficient, fair and responsive system poses challenges for all of us here as we strive to achieve the cultural and behavioural changes which these reforms will require.
My party has consistently opposed damaging and ill considered cuts to the welfare budget. We do however accept that there are major problems associated with welfare that must be addressed.
There are four key principles central to the policy intent behind this legislation:
First: we need a welfare system that protects the vulnerable;
Second: a welfare system designed in such a way that it provides the maximum support and encouragement to get people involved in economic activity;
Third: a system that is fair; and
Fourth: a welfare system that promotes personal and social responsibility.
And in the context of this change we must ensure that we gain the maximum advantage for Northern Ireland, through negotiating areas of operational flexibility and through the delivery of those benefits that are under the direct control of the Executive and this Assembly.
1.A WELFARE SYSTEM THAT PROTECTS THE VULNERABLE
I am committed to implementing change that provides more support to those who are the most vulnerable. Let me be very clear; people who are unable to find work or who require support because they are too ill to work will be supported.
And part of that support must come about through better targeting of resources; it must include better assessment of the support claimants need to return to work. In some cases that will not be possible and we must ensure that people who are genuinely unable to work are supported and protected. Nevertheless the ‘default position’ needs to change from ‘why claimants can’t work’ to ‘how can we support claimants into work’.
Whilst lone parents will be able to claim jobseeker’s allowance without having to undergo a work regime, until their youngest child reaches the age of five, there will of course continue to be safeguards to allow parents to fit their job-search requirements with their caring responsibilities and child care availability.
Improved childcare provision is an important element of the welfare reform programme as it will help remove artificial barriers to work and we want to ensure as many people as possible get the help they need to engage with the labour market. We already know that about 65% of all lone parents are working or would like to work.
I now want to briefly outline one area of change under Welfare Reform that worries me. The Bill will introduce changes in the support offered to those who claim Employment Support Allowance (ESA) where the claimant is assessed as requiring support but capable of some form of work. ESA will be available for one year, paid on the basis of national insurance contributions.
I do have some concerns that the policy intention here is not solely all about getting people back to work – which I support – rather it is more about cutting the costs of welfare - which I do not support, given the potential vulnerability of those involved.
The Bill also allows for the abolition of DLA for working age claimants and its replacement with the Personal Independence Payment, which like DLA will be available to disabled people both in and out of work and will be non-taxable and non-contributory. This is also subject to new assessment procedures.
There is no question that in recent years there has been a significant increase in DLA uptake, which has attracted comment both on the reasons for the increase and the robustness of the system for deciding eligibility. Northern Ireland has a very high level of such claims and in the last ten years the annual cost of DLA has risen from just under £500 million to over £800 million per year. DLA is over 20 years old; our understanding of many disabilities has changed and there is a changing environment in terms of an increasing commitment to enabling disabled people into the work place. This means that we need new mechanisms for assessing and supporting disabled people into work, consistent with those changes.
The key changes will be an end to automatic entitlements based on having a certain health condition or impairment, a more objective assessment, and the introduction of more regular reviews of your entitlement to the benefit. Whilst these reforms are designed to ensure support for those who face the greatest challenges to take part in everyday life, I am focussed on ensuring that its introduction in Northern Ireland is on delivering the best possible service to disabled people. My department is actively working with a large number of voluntary and community groups in mapping out how disabled people will claim the Personal Independence Payment and how best to support them through that process.
I have been working since coming into office to ensure that the Personal Independence Payment assessments are carried out in a way that will properly assess the support that people in Northern Ireland need. I have been consulting on the draft assessment criteria and have tasked my officials with ensuring that Northern Ireland cases are fully reflected in the assessment process. I will continue to work to ensure that the new arrangements provide support to those who have a disability, and who face the greatest challenges in leading independent lives and I am committed to ensuring that we make every effort to ensure that disabled people have equal access to taking up employment thereby making a full contribution to Northern Ireland society.
Over the years many of the most vulnerable in our society have relied on the Social Fund for financial support at times of crisis. Whilst this system had many strengths it had drawbacks in that it was largely restricted to people on benefits, and it led to some people using the system as another form of loans. The abolition of the discretionary elements of Social Fund provides this Assembly with the opportunity to create a system of discretionary support for Northern Ireland which retains the key principles of Social Fund but addresses its weaknesses including making provision for families on low incomes having access to the fund in order to meet emergency needs.
This Bill proposes two changes to Housing Benefit by (a) changing the way Housing Benefit is up-rated, from the Retail Price Index (RPI) to the Consumer Price index (CPI) and (b) introducing size criteria for the social rented sector and existing working-age Housing Benefit claimants living in the social rented sector. The size criteria will replicate that which applies to claimants in the private rented sector. This will ensure equal treatment in the application of Housing Benefit whether a claimant is renting from the Northern Ireland Housing Executive, a registered Housing Association or from a private landlord. Housing Benefit expenditure has increased from £312m in 2003/04 to £455m in 2009/10 and whilst these measures are intended to control the increasing costs, I have been actively taking practical steps to minimise the most negative impacts of the proposed changes and am seeking to put in place long term solutions to the structural problems which are confronting the social housing sector in Northern Ireland. I am keen to hear constructive ideas from all parties on practical steps which we can take to alleviate the most negative impacts of the housing benefit changes and I will also be bringing forward ideas in my forthcoming Housing Strategy.
Since coming to office I have doubled the Discretionary Housing Budget over the SR 10 period to help address short term housing costs which individuals and families have to meet as a consequence of housing benefit reform. I am also reviewing the Social Housing Development Programme and am engaged in discussions on additional funding to help secure changes in the types of houses we are building in Northern Ireland to ensure it meets real needs.
2.GETTING PEOPLE BACK TO WORK
We have created a highly complex benefits system which discourages some claimants from seeking work, and effectively penalises those who have the lowest earnings potential, when they do find work. At present there are in excess of thirty benefits and tax credits available to those on low incomes which often makes the whole process of claiming benefits difficult and unpredictable.
Our increasingly complex welfare system is failing to meet people’s needs.
The system as it currently stands, can often force people into making an impossible choice between working or doing the best for their family. Families can often be better off on benefits rather than working; that cannot be right. I do not want to stigmatise or stereotype those who have to make that choice rather I want to put in place a welfare system that supports people in making lifestyle choices.
But as the system stands, people who want to work often find they are better off on benefits. People who want to work often do not get the specialist support they need from the current system. So I am working with Minster Farry in developing effective solutions to meet the needs of the long term unemployed.
People who want to work are actually hindered from doing so by the current rules, whilst the poorest and most vulnerable suffer because the available resources for support are badly targeted.
But let me be clear. In the changes that are proposed, work will pay.
As we increase support to make work pay, it is right to ensure that claimants do everything they reasonably can to find or prepare for work. We will therefore tailor conditionality to individual circumstances, and require all claimants to accept what will be called a claimant commitment. From the outset they will be asked to sign up to the idea that they will be provided with the necessary support and access to universal credit, but will also be expected to recognise that the sanctions regime is applicable.
The toughest sanctions will apply to those who are expected to be seeking work but fail to meet important conditions. They should understand that if they keep on crossing a series of lines, they will invoke the sanctions regime. The problem at present is that the regime is often confusing. The problem is that when claimants reach the point where they are about to hit sanctions, it comes as a big surprise to many of them that sanctions will be imposed and that the situation is real and serious.
By letting claimants know much earlier and by introducing a regime that is easy to understand, with a simple tripwire process, they will know from the word go. That should disincentivise people from taking the wrong turns.
At the heart of the changes this Bill will introduce is Universal Credit. This will be a single income replacement benefit for working-age adults. It will be easier to understand and access and crucially, it will bring together in and out of work support, simplifying the current system of benefit payments and tax credits into a single payment for those out of work or on low pay. It will provide a more consistent system of support. For example, Universal Credit will allow people to see how they will be better off in work because they keep more of the money they earn from their employment as well as being topped up with many of the benefits they receive when they are unemployed. This is making real the promise that ‘work will pay’ under Universal Credit. Similarly under Universal Credit, people remain registered with the system for two years after their claim has ended. So, someone can get a full-time job and leave universal credit completely, but if they lose their job or perhaps cannot work for a period because of a health condition, they will be able to start payments again almost instantly, ensuring that they do not have to wait for vital support.
Whilst the current complex and burdensome system is administered well, it can be slow in delivery; leaving already vulnerable people more vulnerable. At a recent visit to a food bank run by a church in Newtownards it was pointed out to me by the organisers that one of the reasons some people had to use the service was delays in social security payments. I believe that Universal Credit, once fully implemented will provide families with the support when they need it.
Universal Credit will also provide support that is flexible enough to meet the needs of different claimant’s circumstances. It will deliver a more responsive system based on actual earnings, making the transition between benefits and work much easier. It will remove one of the main barriers preventing people returning to work by providing the security of a minimum income while retaining and for many, restoring the financial incentive to work with universal credit payments being gradually reduced as earnings increase. Even for those at the bottom end of the pay scale looking to take on extra hours or a modestly paid job, there will be real financial gain with the lowest earners retaining 35pence of each additional pound earned. This is in contrast with our current system that traps people in benefit dependency, effectively denying them the opportunity of becoming economically active through work that pays.
When fully implemented my department has estimated through modelling exercises that Universal Credit will lift 10,000 children out of poverty and put an additional £110 million back into the Northern Ireland economy.
Importantly child care costs will also be met by an additional element paid as part of the Universal Credit award. We will invest at least the same amount of money in child care as in the current Tax Credit system; with additional support provided to help those making their first moves into work, by removing the restriction of child care costs only being payable to those working more than 16 hours.
So Universal Credit will allow claimants to adjust their hours of work to suit their child care responsibilities. It will allow people to set their hours of work more in line with their caring responsibilities and more importantly it will be available regardless of the number of hours that people are planning to work.
Members will be aware that the Executive is developing a childcare strategy for Northern Ireland. The changes to be implemented through Universal Credit will provide additional resources to complement the wider childcare strategy and, crucially, remove a significant barrier for many families who want to work but are trapped in benefit dependency.
Whilst growing unemployment is a worrying factor, growth in the economy will only begin to address unemployment but not economic inactivity. During the last period of economic growth in Northern Ireland there was a substantial decrease in those unemployed but there was actually an increase in the economically inactive through long term incapacity.
The introduction of Universal Credit will help remove some of the barriers which undoubtedly led to some people remaining economically inactive when there were jobs available. Giving people clear information on the financial benefits they will receive in work as against the monies they are receiving on benefit will help families make real choices about going to work in the medium to long term. Universal Credit will have an important role in helping to address poverty and creating strong role models and stronger communities. But all of this will require a change in the way we think about work and benefits.
Whilst Universal Credit will ensure work always pays, rewarding those who seek to work and increase their hours, there is a leadership challenge for all of us in promoting a work ethic culture which will not only promote the well being of the individual but also make a positive contribution to their families and their communities.
3.A SYSTEM THAT IS FAIR
This Welfare Reform Bill is not just about those who are claiming benefits; it is also about those who are paying into the system. As our economic difficulties have deepened, perhaps unsurprisingly opinion polls show an increasing dissatisfaction amongst the wider population in a benefit system that encourages dependency and is not sufficiently robust in getting people back to work. This dissatisfaction is particularly prevalent in those who are in work but on lower incomes. We know that taxpayers want a benefits system that is fair. They want a system that does not abandon those at the bottom and a system that they can turn to if they need it. However, taxpayers also want a system that is not wasteful; a system that does not pay benefits to those who can work but choose not to; a system that is not open to abuse; and a system that is affordable and effective.
The changes this Bill will introduce will deliver such a system. We anticipate that more people will take up benefits once the system is simplified; so the combined effects of welfare reform will be supporting more people and reducing the number of workless households. Taken together, these changes will reduce benefit dependency encouraging more people into work. The introduction of universal credit will help create a simpler benefits system, and will be focused on those in the greatest need; in short it will restore fairness for both taxpayer and claimant. A more transparent system will be more accountable to the public. A more effective system will deliver more for those who need it most.
I have already mentioned the concerns of those who are working but on low incomes. We need a benefit system that is seen to encourage and motivate those on low incomes to continue working and to strive to better themselves. This Bill therefore introduces a benefit cap on those in receipt of certain social security benefits. The principle is that people who are unemployed and on benefits should not be receiving more than average earnings. This is a matter of fairness; those who are working hard, supporting their families and paying their taxes must be supported to do so. We must not have a benefit system that encourages people not to work and discourages those who are at work.
In terms of the level of the cap, even though incomes are generally lower in Northern Ireland, the cap will be at the same level as in Great Britain. This is to our claimants’ advantage. Members should also be aware that there are significant exemptions in the provisions in particular for those people who are also receiving Disability Living Allowance; Attendance Allowance; Employment and Support Allowance(if paid with the support component) , Working Tax Credits, War Widow's or War Widower's Pension or Industrial Injuries Benefit.
I recognise that there must be transitional arrangements. We will work intensively with the families affected once the cap comes in. We will help them move into work, to change their circumstances so that they are not affected. We will make sure that families who need transitional support will receive it. But the principle in this Bill that we must make work pay must be upheld.
4.A SYSTEM THAT ENCOURAGES PERSONAL AND SOCIAL RESPONSIBILITY
The foundations of this Welfare Reform Bill are social responsibility, establishing a fair contract between taxpayers and claimants, supporting the vulnerable; and people accepting personal responsibility; requiring claimants to be fully committed to working for their financial independence through work. The introduction of Universal Credit will help people back to work, shift the over reliance on benefits and encourage the assumption of greater personal responsibility for individuals and for families.
At the end of the day Universal Credit will bring £110m additional money into Northern Ireland. We have to make that work; and we have to get people back to work. I began my introduction to this Bill by saying the only way we can address poverty is through economic growth; and the only way we can get public expenditure under control through welfare reform is making it work, supporting personal responsibility and independence; making work pay.
There are other aspects of this Bill where it is argued by its architects in London that reform of how benefits are paid will increase the level of personal responsibility which individuals take for their lives. Plans to end direct payments to landlords, to limit opportunities for split household payments and to introduce monthly instead of fortnightly benefit payments are key characteristics of the new Universal Credit systems.
These architects argue that these changes are necessary to make the experience of claiming benefits more like that of people who are in work thereby making easier the transition from benefits to work.
In a perfect world this rationale might work but none of us live in that perfect world. I am not aware of any significant support for these changes and I believe they could have damaging consequences; for landlords not receiving rents and eventually tenants being subject to eviction; for children who are not properly fed because their main carer – usually the mother – does not have control over their benefits and for families who run out of money before the end of the month.
I am in intensive discussions with DWP Minsters about the changes we require. However the are real difficulties for us. All of this is dependent on a DWP IT system which requires flexibilities to meet the needs of Northern Ireland. For the Executive to run its own IT system would cost hundreds of millions of pounds whilst handling these matters manually would also be punishingly expensive. I am arguing with DWP that they must provide us with an IT system that provides the flexibility that we require. I have made it clear to DWP Ministers that it is not possible to deliver an effective welfare system for Northern Ireland without the flexibility we require. I also believe that the need for changes is not specific to Northern Ireland, rather they should form part of the core system for the whole of the UK. We must continue to argue for changes here that will meet our needs. There is a real danger that these changes, if implemented, would make life so difficult for households and families that rather than encourage personal responsibility we would destroy all confidence in a reformed welfare system before it has even begun.
5.ACHIEVING FLEXIBILITIES; PROVIDING ADDITIONAL SUPPORT THOUGHT THE EXECUTIVE
Earlier I made reference to the opportunities and responsibilities that we, as a devolved administration, have to address our own challenges around persistent and growing levels of poverty. Social security provision, significant as it is in this regard, is complemented by a wide range of non social security welfare provision which is funded from the Northern Ireland Block and is contained within Departmental budgets. These range across many important areas aimed at promoting and maintaining health and well being, supporting education and learning, ensuring access to justice and promoting accessibility and independence.
The funds associated with current non social security welfare provision amount to approximately £400 million per year. With the exception of the Social Protection Fund, which is centrally administered, the costs of all other non social security benefits are met and managed within respective departmental budgets.
As part of the welfare reform changes the Executive will assume new responsibilities for the provision of discretionary support and domestic rates relief. While some additional resources will accompany these changes, there is likely to be a funding shortfall. In terms of rates relief this could amount to a deficit of £13m in the first year 2013/14 which may easily escalate due to inflationary pressures and increased demand in the future years giving rise to an ongoing reduced baseline going into the next spending review. No longer will the Treasury cover developing pressures and the risk will fall to the Executive.
Through the Executive Sub –Committee on Welfare Reform we have begun discussions about what the Executive’s approach may be to these benefits, to maximise the impact on those in need and to complement changes that are a result of welfare reform. As our scrutiny of the Bill continues I would suggest it is important that the delivery of these benefits is considered in the context of the increased pressure on budgets, targeting resources on those most in need and the outcomes of Welfare Reform.
As I have reflected to you, I believe there are four principles underpinning this legislation:
- to protect the vulnerable;
- to get people back to work;
- to develop a system which is fair; and
- to encourage personal and social responsibility.
These four principles must be considered together; it is on that basis that I support the Bill.
So this Bill is far from perfect, and I am not saying that what will emerge from our scrutiny will be perfect. However I do hope that as part of the scrutiny process we will identify changes that will not have significant costs but can address some of the shortcomings of the Bill, and will deliver a better welfare system for the people of Northern Ireland.
If we do not deliver on this Bill, Northern Ireland and those dependent on welfare support will suffer serious losses. Changes to Housing Benefit and incapacity benefits are already reducing social security income paid to Northern Ireland. The measures to deliver these reductions are already largely in place; they are already happening. When Universal Credit begins, there will be an opportunity to increase the levels of benefit paid into Northern Ireland that will provide the additional income I have identified. The consequence of not delivering on this Bill is that we will get the negative aspects of Welfare Reform, but not the benefits; those dependent on welfare will experience real cuts without the potential for increasing their income, through progression into work supported through the various measures in the Bill. And of course that means that our focus must be on ensuring that the reforms introduced through this Bill complement the work the Executive is taking forward through the Economic Strategy.
Undoubtedly we are facing very hard decisions. But ultimately nobody, least of all our poorest households and communities will thank us if, by our failure to make those decisions, we do not realise the opportunities available to us. Failure to make progress quickly will either result in cuts to the incomes of our poorest families and substantial costs to the Executive; as I have already said that would leave significantly less resources for schools; less resources for hospitals less resources for the police, and less resources to build the necessary roads infrastructure to help us become more economically efficient.
I would encourage members of this House to help me to progress this matter so that the Social Development Committee can set about finding ways to improve the bill and I am grateful for the agreement of the Social Development Committee to put in many extra meetings to progress their scrutiny it.
So let us focus on the areas we can change; let us ensure that we protect the most vulnerable; let us not waste time on arguing about those matters we cannot change. Let us work as a collective to mitigate the worst aspects of the planned changes and deliver the best possible welfare services for the Northern Ireland people.