Examination of Witnesses (Questions 1
- 19)
WEDNESDAY 30 OCTOBER 2002
RT HON
ANDREW SMITH
MP AND MR
NEIL COULING
Chairman
1. Ladies and gentlemen, can I declare the formal
session of our evidence open and welcome Andrew Smith, the Secretary
of State for Work and Pensions. Thank you very much for coming.
We were grateful that you responded to our suggestion that, rather
than stick with the original slot we had earlier in the summer,
which was literally moments after you had been transported to
this new dizzy height of political appointment, it would make
more sense for us both if we took a little time for you to get
your feet under the table at the Department. I think that will
make this morning's session a more meaningful for both of us.
For the record, we welcome too Neil Couling, who is Private Secretary
to the Secretary of State. This is a huge Departmental Report
that we are to cover this morning so we would not expect you necessarily
to have every detail at the front of your mind, and if Neil cannot
come up with some of the detail then we will get it later by way
of notes. We are perfectly happy to operate on that basis. I should
say this, and I say this every year, but I mean it every year,
that we get enormous help and assistance from, in particular,
the liaison team of the Department but also from the rest of the
departmental staff right across the whole Department. When we
go on visits we are always treated extremely well and we get assistance
which we appreciate. If you can find some way of reflecting that
back down to the level of the front desk we would appreciate that
because it is genuinely felt and meant. We get very good service
from the Department in all of our work and that helps us enormously,
and you should know that and it is said absolutely from the heart.
That is the easy bit over. Now we can perhaps turn to the Department.
There has been a huge change since your predecessor was here.
We have got a new Secretary of State, we have got a new department,
we have got a whole welter of change in terms of policy. Employment
is at record levels and that is a significant factor for the new
work aspect of the Department. We have had an industrial dispute,
which was not easy, which we have seen in the last 12 months.
There have been major reforms to the CSA. We have got some new
ideas floating around about benefit sanctions that we have been
hearing about over the summer, and of course there is a lot of
controversy in the national press about pensions. There is a huge
agenda. I noticed that you described yourself as feeling thrilled
when you were appointed. Are you still thrilled and, if so, why?
(Mr Smith) Thank you very much. I thank
the Select Committee for arranging the meeting. I found it useful
to have an informal session which we had in the summer and obviously
it made sense to arrange things this way. I thank you very much
for your very kind remarks about the support you get on your visits
and the good working relationship and I will certainly be very
pleased to pass those generous remarks on to all the staff concerned.
I do on the whole prefer them to be nice and co-operative with
the Committee. Can I also say that, especially given the scale
of change which you have referred to, the dimensions of many of
the issues that we are dealing with in these crucially important
policy areas, a constructive working relationship with the Select
Committee is especially valuable because you have got a very important
role yourselves in informing the wider public debate which is
the essential backdrop to everything that we do. I am very grateful
for that good working relationship and I just want you to know
that I value it. In terms of being thrilled, yes, I am still thrilled.
It is an enormous privilege to be leading the Department through
such an exciting period of change. It is especially rewarding
given the key principles and goals that we are working to in terms
of trying to ensure there is full employment in every region,
in enabling all disabled people to make the most of their potential
and enjoy full civil rights, tackling child poverty, ensuring
pensioners have dignity and security in retirement. These are
very important goals, very close to my heart, and so it is an
exciting responsibility and I am privileged, as I say, to be able
to be doing the job. As you have mentioned, one of the biggest
challenges of course is that we are carrying forward new policies,
new measures and reform whilst simultaneously attempting one of
the biggest change programmes in Europe, completing the restructuring
of the Department and our agencies, modernising our antiquated
IT, taking with us the many thousands of staff who are working
for a different agency than they worked for previously (and they
are our greatest resource in all of this). Ensuring that that
goes as smoothly as possible is a very big managerial task, so
both on the policy front in terms of the social issues we are
dealing with and in terms of management it is a very big job but
I am greatly enjoying it and I do believe that building on the
foundations that we have put in place we can and will deliver
on our policies of work for those who can and security for those
who cannot, that we will get more people into jobs, more children
and pensioners out of poverty, reform benefits and transform the
rights of disabled people in our community. A lot done, a lot
to do.
2. Before I ask colleagues to respond to that
opening statement, a very brief question from me which is a predictable
one. The Departmental Report does refer to it in some detail at
the end. It is the question of the qualification of the accounts.
This is obviously something that the Department has inherited.
I see you have been talking to the NAO about trying to do something
about that. It is a significant worry, is it not, that a big spending
Department like your own cannot get the Comptroller and Auditor
General to sign off the accounts? Is this one of your priorities
in your stewardship of the Department that over a period of time,
hopefully a short period of time, we will get cleared accounts?
(Mr Smith) I very much hope so. You are absolutely
right. It is very important. I understand and share the concerns
about this. I would see the modernisation which we are undertaking
as being an absolutely key factor in ensuring that we can get
accounts which do not have to be qualified and, as you say, we
are working very closely with the NAO on this[1].
3. So it is a priority for you?
(Mr Smith) Yes.
Mr Mitchell
4. Secretary of State, can I open up the discussion
and move on to what must be one of your biggest concerns at the
moment, and I am sure will be touched on in many of the other
things you mentioned in your opening remarks, and that is pensions?
As the news, I am sure, has reached you, this Committee is going
to produce a report. One of the biggest studies we are doing this
year is in the field of pensions. We read every day in the press
about the tremendous difficulties there are in this area. It will
be enormously helpful for the Committee to find out how you think
things are today and what plans you have for the future. I am
conscious of two points about the world of pensions. The first
is that by tradition the House has always tried to move where
it is possible on a joint all-party approach to pensions because
it is so long term. I was the Government Whip on the 1995 Pensions
Act and I remember the extent to which the Committee work on that
Bill was much more collegiate than adversarial. One of the things
is that in so far as it is possible it does tend to get done on
as all-party a basis as possible. Secondly, of course, in the
area of pensions nothing tends to happen in a hurry but things
build up over a period of time and there is no doubt that there
is a huge crisis for people as they look towards whether they
are going to have adequate funds and be able to retire. Can I
ask you what is to be done, what your considered view is, having
been in this difficult job now for some months? Have you ruled
out setting up a Royal Commission, for example, to look into the
future of pensions? It seems to me that amongst a number of grave
difficulties facing the Government this one must be right at the
top of the list and of course it lands on your desk.
(Mr Smith) Indeed it does. Your reference to the all-party
dimension to this is one that I share. As you say, pensions policy
is by definition something for the long term and it is obviously
in everybody's interests if there can be as much of a shared agenda
as possible. That does not mean of course that where there are
difficult policy choices to be made, as there are in this area,
we are going to be able to agree about everything. Neither does
it mean that the lowest common denominator approach would get
you the best policy. It does mean that we need a well informed
and wide-ranging public debate. That public debate is already
under way but it needs to continue around the options for the
future and it needs to be one that can establish as much agreement
across and beyond party lines as possible. All these of course
are issues for the Green Paper which we will be publishing later
this year and you will understand if I cannot anticipate this
morning what is going to be in the Green Paper.
5. Can you say when?
(Mr Smith) Later this year is as precise as I can
be at this moment. As I have said previously though, it is quite
clear that you need a partnership approach here, one in which
of course Government has a very important responsibility to put
the right framework in place but where there are also responsibilities
for employers, employees, financial services, industry as well,
and we need to get everybody working together on this. In terms
of what is to be done in the challenge as I have stated it before,
it is one that you will all be aware of, the remorseless arithmetic
that people are living longer (which is a very good thing) and
with us all wanting a good quality standard of living in retirement
it does mean that between us we have to save more, work longer
or some combination of both. That is why in the Green Paper we
will be analysing and setting out the options for precisely the
sort of framework which I have described. It needs to be one moreover
which simplifies the pensions landscape, and the fact that so
much of this is an impenetrable maze for people is another reason
why they do not think about it today and put it off until tomorrow
and too often put it off until it is too late. There is an important
agenda of simplification and minimising the regulatory burdens
and making it easier for employers to make good schemes available
and make it easier for people to raise their level of saving to
the levels that they need and want. An important guiding principle
here is one of informed choice and for informed choice people
need clearly to be able to understand the options which are open
to them; they need a simple range of products. I think they need—and
this is what we are developing with pension forecasting and combined
pension forecasts—as accurate an idea as possible of what
income they can anticipate. All of these things and more will
be in the Green Paper, building on what we have already done,
of course, improving the basic state pension, introducing the
pension credit, the new income guarantee and tackling the priority
problem of poverty affecting today's pensioners, which was obviously
something which we had to address as soon as we could after coming
into office.
Mr Dismore
6. I just want to raise with you the merger
of the two Departments and how you felt that was going because
the particular concern I have in my own patch is that we are still
operating from separate buildings. It is still operating as separate
organisations. I can illustrate that by a case which I would not
expect you to know the details of, but it is a Miss Townsend in
my constituency, a lone parent who, after eight years on income
support, was able to get a job. She feels extremely disgruntled
because she was effectively dealing with what was to her the DHSS
who told her nothing about lone parent advisers, gave no advice
on WFTC on which she lost out, and gave her no advice on the clothing
allowance of £150 that she could have got. She only found
out about these after the event when it was too late to claim
them. They are trying to unscramble it but she feels very let
down by the Department because, having heard all about the merger
and so forth, effectively the DSS half of the operation still
did not know even of the existence of lone parent advisers. When
she went back to complain about it she was told, "Oh, this
is done randomly", which is clearly not satisfactory, so
what is going on in terms of trying to merge the two halves of
the Department where they are still effectively operating from
separate buildings and unless and until that proper merger can
be achieved it is, certainly in my patch, a long way off yet?
(Mr Smith) First of all on the specific details of
the case that you raise, if you would like to let me have those
details I will look into this.
7. I use that as an example.
(Mr Smith) I do appreciate the point that you are
using it to illustrate the general challenge of such a big structural
reorganisation. The straight answer is of course that it takes
time to implement a merger of that scale. We have rolled out the
first 56 Jobcentre Plus offices. We have a programme of rolling
out 200 a year over the next few years. There is a very big job
of work, as I said in my introductory remarks, in the reorganisation
of staff and, of course, as well as premises and IT, there is
the question of training and the definition of roles and connecting
up much more effectively than we have in the past the benefit
side of the operation if you like with the job-seeking side. I
know you have made visits and have seen this for yourself but
where the integration has happened there is a transformation in
the quality of service and the help which is available to people
so, whilst I can understand your impatience that we are not able
to do it more quickly, I can assure you we are doing it as quickly
as any sensible advice would say it could be accomplished.
Mr Goodman
8. Following the publication of the Green Paper
on pensions are you committed to legislating in this Parliament?
(Mr Smith) That is something that I will have to set
out in the Green Paper and I am not going to give commitments
of that nature this morning, except to say that of course we will
want to move as expeditiously as we can. We do want to get on
with this. That has just reminded me that I did not answer the
previous question about a Royal Commission. I am not this morning
ruling anything in or anything out. Neither do I want to set hares
running. My views on a Royal Commission, or other bodies that
might be deployed in order to help build the broader consensus,
are that it is one thing if you have discussion on the basis of
the Green Paper and if there are specific emerging proposals where
it makes sense to have a Royal Commission then I would not rule
that out, but, as I say, neither am I setting hares running. I
am not sure how impressed the public would be if we simply took
this challenge now and said, "Actually, we are handing it
over to a Royal Commission". I am not sure that they would
feel that we were engaging with sufficient priority ourselves
in addressing the very real policy challenges there are in this
area.
9. They certainly would not if you just handed
them the problem but they might on the back of some government
proposals for wider consultation and for some action to be taken.
(Mr Smith) As I say, I am not ruling things in or
out this morning. A commission or similar body can work best if
there is a defined issue that they are dealing with within particular
terms of reference. That points to there being a stronger argument
in relation to the "how" than perhaps the "what".
Chairman
10. I want to go on now to areas of child poverty
but can I ask you a brief supplementary about Andrew Dismore's
important question? There was a press comment that 20,000 members
of staff were going to be taken out of the system over the next
two or three years. Is staff morale high at the sharp end of the
delivery?
(Mr Smith) I think people are excited by the changes
that we are bringing about and, as they see the benefits of the
investment, both in the more proactive approaches which are at
the heart of our policy and in the investments in better premises
and working conditions, I believe people can see that there is
something in the deal for them here. Yes, it is a world of change.
We are all in a rapidly changing environment. Yes, there are challenges.
Of course, people have apprehensions when there is change but
I believe they can understand the value of the reforms that we
are bringing about and I believe they can see how we are able
to give a better, more responsive service to the public in that
way, so there are benefits for them. It is true that as a consequence
of the way in which the business we are operating in is changing,
not least as the benefits of the IT investment come on stream,
the balance of the nature of work will shift more from routine
processing tasks towards the front line engagement with members
of the public, but there are rewarding and important jobs there.
I think anybody who has spoken to personal advisers and heard
about the remarkable experience of what they have contributed
through the New Deal can see that there is an intrinsically important
and rewarding job of work there. Yes, it will involve a net reduction
in the staff, we think of some 19,000 across the next four years.
We wrote to all members of staff about this. They heard it first
from us directly and, yes, of course we are engaged with the trade
unions and will want to carry it forward in a consultative way
that carries people with us. It is worth underlining that our
staff turnover is something like 9,000 a year anyway, so that
shows how even what is a big change could be managed within the
turnover.
Andrew Selous
11. Can we move on to child poverty? Your Department
had a consultation over the summer in trying to measure child
poverty through a series of indicators. Can you tell us when you
are going to be able to bring concrete proposals forward in this
area and if you believe that we will be able to have a robust
and credible measure of child poverty?
(Mr Smith) By next spring I would expect us to have
published our response to the consultation. The consultation has
gone well and there has been a lot of interest. Not only have
we had written submissions but we have been able to draw on face-to-face
sessions that have been held with poorer people and with younger
people to get their perspective on the issue. Obviously, some
of the submissions we have had are highly technical. This is a
technical area as well as a very important and human area, and
of course it is crucially important that if we do adopt further
measures we get this right.
12. You said that there is a technical area
as well as a human area. I think it is probably pretty widely
accepted that the relationship between child poverty and family
breakdown is a very close one. This country either tops the league
or is in second place in terms of divorce and relationship breakdown,
lone parenting, with a quarter of children in single parent households
as opposed to only one in ten in the Netherlands, and, for example,
on things like infant mortality and teenage pregnancies we are
either top or second in the whole of Europe. What do you see is
the Department's role, liaising with other departments, in actually
trying to do something preventative about this, rather than just
picking up the pieces? There are estimates from reports like The
Cost of Family Breakdown Report, from the Lords, the Commons
and the Child Protection Group, that your Department picks up
around £15 billion a year from these sorts of issues. How
do you see your Department working with David Blunkett, who I
believe takes the lead in this in trying to turn that tide, and
perhaps getting us down to a situation more similar to the Netherlands?
(Mr Smith) First of all, as you acknowledge in your
question, factors such as low income, unemployment, housing problems,
health problems, are all additional pressures which obviously
can aggravate relationship difficulties and family breakdown.
Obviously these are crucially important and are priorities for
us.
13. There are other countries in Europe who
are perhaps less well off than us who seem to be doing better
than we are in some of these other measures.
(Mr Smith) As I say, it is none the less important
to be delivering and making progress on all of those things. This
is a challenge which confronts us across government and it does
mean that cross-agency collaboration, what we are able to do in
partnership with local authorities, is very important as well.
I could point to the Sure Start initiative, for example. You ask
what can we do that is preventative. That is very preventative.
It is getting in right at the beginning, it is working—
14. Do you intend to roll that out across the
UK? There are many areas in a constituency like mine which has
significant pockets of deprivation where Sure Start is not there.
(Mr Smith) There is a substantial further roll-out
that is provided for in the spending review and of course we are
learning from the experience and the benefits all the time and
that programme has a great deal to commend it. There are other
areas as well. What we can do in asserting and upholding standards
as far as anti-social behaviour is concerned is a very important
dimension to this wider challenge as well.
Ms Buck
15. I think we would all be impressed with the
progress that has been made towards reaching a target in lone
parent employment but there are some aspects of this where we
do need to do a considerable amount of future work. One of the
things I would like to ask about is, are you content, particularly
with the extent to which the childcare component of the working
families tax credit has helped lone parents and parents generally
with the cost of childcare, because I believe (and I will be corrected
if I am wrong) that the latest figure is around 160,000 families
receiving help, which is actually a tiny proportion of the total
lone parents and all families in need. The average award is less
than £40 a week which is about a third of the cost of the
average nursing place. What can we do to use the childcare component
of the new tax credit to reach a larger proportion of people in
need?
(Mr Smith) Of course promoting its availability is
very important and the advisory support that is given to lone
parents through programmes such as the New Deal for Lone Parents
is very important in that respect. I agree with you that there
is a big remaining challenge here but we should not understate
the progress that has already been made, the fact that we have
for the first time more than 50 per cent of lone parents in jobs,
the fact that childcare provision has been expanding very fast.
Of course, we need it to expand still further and it is one of
the reasons why the new unit, the Early Years, Sure Start and
Childcare Unit, has been set up jointly under the DfES and the
DWP. That does give more of a focus to the relationship between
childcare and supply and take-up, and people moving into jobs
which I very much welcome.
16. I know there is always a balance to be struck
with being positive about progress that has been achieved and
I certainly do not want to underplay that at all, but do you not
think it is a worry that after three years of the working families
tax credit such a small proportion of parents are entitled to
assistance through the childcare tax credit? What can we positively
do to make sure that lone parents in particular, as we move into
the new tax credit, actually do get more assistance towards their
childcare costs?
(Mr Smith) Of course the level of the credits, like
everything else, is kept under review, obviously bearing in mind
the evidence that you are pointing to in this area. I come back
to what I said previously though. Certainly with the promotion
of its availability and the right sort of advisory support the
New Deal for Lone Parents is making good progress as a programme.
We do not relax. We are not complacent. The other thing which
is very important here though is the supply of childcare as well
and how much confidence people have in its suitability for their
children. That is something which the new unit is doing intensive
work on. We are getting a better take on the numbers of places
for childcare of different sorts which are becoming available,
trying to analyse the reasons for and variations in that supply
and what can be done to ensure that that supply is accelerated
in a way that people have the confidence to take it up and use
it.
17. I would like to ask you a couple more questions
on that but before I do, and sticking to the issue of the tax
credits, not specifically for lone parents but for all parents
in poverty, I asked this question to Nick Brown when he came and
did not get an answer and I really would like to know whether
there is some concern and some commitment to doing something about
the extraordinary degree of regional variation in the claims for
the tax credits. If you take, for example, the constituency of
Tottenham, it ranks ninth in the entire country for unemployment.
We also know from statistics that there is extensive low pay and
yet it ranks at 237 for the number of people who are taking up
the working families tax credit. Clearly in some parts of the
country there is an extraordinary mismatch. Birmingham, Ladywood
and Sparkbrook, which have the highest unemployment, also have
the highest number of people taking up working families tax credit.
Clearly something is not quite working but where there is unemployment
and where there is poverty it is not necessarily the case that
people will then be using working families tax credit as a step
up.
(Mr Smith) You raise a very important question as
to whether there might be a distinctively London dimension to
this. There is a study which I have just seen—draft reports
by William O'Connor and Richard Boreham—that is looking
specifically at lone parents in relation to the labour market
and how far there are special factors at work in London. It is
very interesting. It points out, for example, that the variation
in employment is greater, comparing London with the rest of the
country, for whites than it is for ethnic minorities, for example,
and obviously I will be pleased to share this report with the
Committee as soon as we can. They also say that analysing this—and
research reports quite often say this—is proving a lot more
complex than even they might have anticipated.
Chairman
18. It needs more research.
(Mr Smith) They are recommending that we need more
research but, having had a quick look at it, they may well be
right. I share your concerns. We need to do more to get to the
bottom of this. One can point to other factors in London as well.
Housing costs are a factor and a perception amongst people against
working might not be so great. More apprehension about their being
able to get their housing benefit back if it has been changed
when they have gone into work, the availability and suitability
of childcare and issues about getting children to it might particularly
be an issue. There may well be other factors as well. It will
be very interesting to see the contribution which our proposed
piloting of the standard housing allowance is making. I am not
saying it is going to solve all of this but certainly, coupled
with the rapid reclaim facility, it should at least, if promoted
and explained to people properly, lessen their anxiety about the
risk of losing housing benefit.
Ms Buck
19. That is very helpful. There is clearly an
element to which the issue of information and advice and support
contributes to this. I do not think that is the main reason but
there is an element there. The work that lone parent advisers
do in supporting people is absolutely critical but could I ask
you whether you will guide the Department and make sure the Department
is making better contacts, particularly with organisations like
the Early Years Development Partnerships responsible for planning
and overseeing childcare and creating new childcare places, because
there is at the moment a very patchy record indeed about how the
two areas of service relate, and there are not any integration
targets so, for example, the Early Years Partnerships are charged
with setting up targets for delivery of childcare but the Department
for Work and Pensions lone parent targets do not relate to that
at all and there is very little dialogue going on? A local example,
which I am certainly not asking you to comment on, is that the
Department for Work and Pensions commissioned some outreach projects,
did the contracting process and hired some outreach projects,
and the Early Years Development Partnerships had never even heard
of them, did not know what these projects were. You have statutory
organisations responsible for liaison with parents, responsible
for planning childcare and delivering childcare, the perfect organisations
to be part of an outreach process and yet an outreach process
is planned completely independent of them. That has happened,
there is nothing we can do about it. Can you assure me that you
will try and get to grips with this and make sure it does not
happen again?
(Mr Smith) You ask me will I reinforce the importance
of co-ordination in this area. The answer almost certainly is
yes, and it is not only something I am saying we are going to
do in the future. I believe the steps we have already taken, the
joint responsibility which we now have with DfES and with the
new unit which clearly is going to be our principal avenue of
liaison and co-ordination with the Early Years Development Partnerships,
but not only that but the decision we have also taken to have
a childcare partnership manager in every Jobcentre Plus, are of
crucial importance. The definition and operation of that role
is going to be very important at the local level in more effectively
bringing together the supply of the right sort of childcare with
the labour market opportunities which are open to people.
1 Please refer to the supplementary memorandum from
the Secretary of State to the Chairman of the Committee, paras
14 and 15, Ev 19. Back
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