Examination of Witnesses (Questions 260
- 279)
MONDAY 6 MARCH 2006
RT HON
JOHN HUTTON
MP
Q260 Jenny Willott: It has been pointed
out to us in some of the evidence sessions that under the current
plans somebody could be on Statutory Sick Pay at £68 a week,
then go down to the holding allowance of £56 a week, and
after 12 weeks possibly go up again. That is quite a dramatic
drop in somebody's income. Why did you decide to fix the holding
benefit level at Jobseeker's Allowance rather than at the Statutory
Sick Pay level?
Mr Hutton: Entitlement to Statutory
Sick Pay is a matter of statute. At the end of a period of a person's
statutory entitlement to Statutory Sick Pay they are not entitled
to Statutory Sick Pay. I think in relation to the benefit, the
decision that we make, we felt it was appropriate really not to
make a judgment at a point where somebody is applying for Employment
and Support Allowance about what their level of disability was
or is or might be. That is why we made a decision to have, as
it were, a neutral holding rate, and the obvious rate to fix that
at was Jobseeker's Allowance. So that is broadly the thinking,
the rationale behind that. It is true, clearly, that therefore
somebody on Statutory Sick Pay will come down to the new holding
rate for Employment and Support Allowance but then has the prospect,
assuming they come through the PCA process, of getting the long-term
rate for Incapacity Benefit as it currently is paid up to 12 weeks
and not wait 52 weeks to get it, which is what they would have
to currently do under the existing system. With all of these things
I am sure there will be people around this table who have a different
view and would have done things slightly differently, and people,
I am sure, will propose that in the consultation and we will look
carefully at what people say, but I think there is a rationality
about having the whole thing set at that neutral rate which does
not predetermine any outcome from the assessment process, and
I think the JSA rate is the obvious rate to fix it at.
Q261 Jenny Willott: If it appears
that it is causing significant hardship, given that everyone going
on to that holding rate prior to going on to the Employment and
Support Allowance presumably will have previously been on Statutory
Sick Pay, or a lot of them will, would you reconsider the holding
benefit rate?
Mr Hutton: We will look at that,
but I think the point to bear in mind about the holding rate is
that there will be some people who will qualify, nonetheless,
for the Enhanced Disability Premium or the Severe Disability Premium
ahead of their outcome of the Personal Capability Assessment process,
and the Green Paper makes that clear too. So that is not being
affected because entitlement to those Income Support-related benefits
is down to, for example, whether one meets the eligibility rules
for medium or high rate of a care component to DLA, and that is
a completely separate process. A person may well qualify for those
benefits as and when they apply, but I think for everyone else
it is important that the initial holding group which will last
for 12 weeks is set at a neutral rate which does not pre-empt
or assume anything about their condition or entitlement for the
higher rate until there has been a proper medical assessment of
that situation. That is absolutely essential to manage this whole
benefit system fairly and reasonably.
Q262 Jenny Willott: Has there been
any assessment done on the number of claimants who may opt to
stick on the holding benefit and continue to claim benefit at
the Jobseeker's Allowance level rather than go on to the Employment
and Support Allowance?
Mr Hutton: I do not think they
can. I do not think you can elect, choose to stay on the holding
benefit rate and not undergo a PCA process. That is not possible.
Q263 Jenny Willott: That was flagged
up by some of our witnesses.
Mr Hutton: I do not think that
is possible but obviously I need to check that with my officials
and come back to you on that but no, it will not be possible to
do that because you are applying for the Employment and Support
Allowance benefit and there is not another option in between just
applying for the holding rate and just staying on that, and not
being subject to the Jobseeker's Allowance conditionality requirements.
Absolutely not.
Q264 Jenny Willott: Another concern
that was raised in evidence that we have taken was about the fact
that the contributory based element of the Employment and Support
Allowance might evolve into means tested benefits over time. Can
you confirm that that is not going to happen?
Mr Hutton: Yes.
Q265 Jenny Willott: Good! I like
one-word answers!
Mr Hutton: Maybe I should just
add the proviso "under this Government" because I cannot
commit anyone else.
Q266 Jenny Willott: Do you think
there is a risk that the proposed benefit structure builds an
incentive for people to try to get on to the higher rate of Employment
and Support Allowance similar to the growth of numbers of people
in exempt categories we have currently seen over time on incapacity
benefits. Do you think that is likely to be happening?
Mr Hutton: It is possible, yes,
of course, because we know that is what happens now and I think
we have a fundamental judgment to make here. The question we asked
ourselves was, in relation to people who have no prospect of returning
to work because of the extent of their sickness or disability,
should we, that is all of us, take the view that if you are in
that position, then you need some more help, and in this case
more financial help, to get by, because we know how difficult
it may well be for you in that condition, and we came to the view
that it would be right to provide people who are so seriously
disabled and are in that position with more financial help. Now,
if that is the decision that you come to, and that is the decision
we came to, then you have to have a way of making that happen
inside the new benefit system that we want to bring in, and it
does create a problem because it may well be the case that there
is now an argument about where the lines should be drawn. So I
think really it just comes back to this fundamental question that
we all need to ask: is it right for people who are seriously disabled
to get more than others who are not? I think the answer is yes,
and that is generally reflected right the way across the way we
have approached disabilities using the benefit system for a long
time. So the challenge is for us to find a context in which the
PCA process can properly distinguish between these two broad categories
of benefit claimants. I am confident we will be able to do that
and we should do it without doing what we currently do, which
is to designate people simply because of the condition they might
have, so blind or deaf people automatically assumed to be currently
incapable of work and treated accordingly. I think that is absolutely
appalling. David Blunkett came into that category, quite obviously
so, and he was the former Secretary of State for Work and Pensions.
So I think the welfare system, in addition to making sure that
we do treat people who are seriously disabled more fairly and
generously, also the Department says: "We are not in doing
so going to simply label you as being incapable of ever working."
Clearly in all these things there is a balance to be struck but
I do believe very strongly—that is why it is in the Green
Paper—that it is worth having a go at this because of the
over-arching principle that we want to apply, which is that we
want to provide more generous financial help for people with more
serious disabilities. If you take a different view about that
basic premise, then fine, you are not going to have an argument
and everybody is going to be in the same category and get exactly
the same benefit, but I do not think that is how people should
be treated. I think there is a way of making the system more refined
and more discerning and discriminating but yes, it does create
a problem and create potential for an argument around where the
line should be drawn. We will have to try and get that right as
far as we possibly can, and I suspect this is something that we
will have to reflect on very carefully in the Green Paper consultation,
and obviously, I am sure it will be a concern of the Select Committee
as well.
Q267 Jenny Willott: Is it going to
be possible for people with fluctuating conditions to move between
two different levels of the Employment and Support Allowance depending
on the state of their condition?
Mr Hutton: Yes.
Q268 Jenny Willott: Has there been
an assessment made of the amount of resources it is going to take
to police the boundary between the two different categories?
Mr Hutton: Probably in some dark
corner of the Department there are some numbers but I have not
seen anything specific. I am very happy to share all of our own
thinking with the Committee about this. Clearly these are the
reforms we want to see happening. We have to make it sensible
operationally and we have to budget accordingly to make sure we
do that, and we will. I do not have any numbers to give to the
Committee right now but I am very happy to keep the Committee
informed of how this bit of the policy develops over the next
few months and to share that with you.
Q269 Jenny Willott: Finally, if somebody
is on the lower rate of Employment and Support Allowance because
their disability is not considered serious or severe enough to
be on the higher rate, however, they carry out all the aspects
of their work activity plan and they still fail to get a job because
of factors outside of their control, such as discrimination or
a dodgy labour market, is it going to be possible for them to
be classed as unable to work and therefore move up to the higher
level, or is it only going to be based on their medical condition?
Mr Hutton: I think it is primarily
a medical assessment, yes.
Q270 Jenny Willott: One of the things
that has been raised as a concern with us is the fact that there
are always other factors other than medical conditions that alter
and the fact whether somebody is going to be able to get a job
or not. If somebody, just because they have a more severe medical
condition, is able to get a higher level of benefit than somebody
else who is trying very hard to work but is unable to work because
of factors outside of their control, they will be on a lesser
level of benefit. You do not foresee a change in that in any way?
Mr Hutton: People can make the
argument, I can see, but the way we have thought about it and
the way we have presented these reforms in the Green Paper is
very much trying to provide extra financial help for people because
of the specific care needs arising out of their disability, and
that is the basis.
Q271 Jenny Willott: Is that not what
DLA is for?
Mr Hutton: Yes, but the Incapacity
Benefit currently tries to reflect this now and we have decided
that we should do this as well with the new Employment and Support
Allowance, so I think it is perfectly sensible. We did look, incidentally,
at whether we should do this all through DLA, but we took the
view—and again, I am sure there is a corner of my brain
that remembers the argument—that we should do it through
an enhanced payment through Employment and Support Allowance.
Again, we have not fixed the detail of what this additional payment
is going to be yet, there are still discussions under way about
that, but generally, and I want to come back to what I said a
few minutes ago: you have two ways of dealing with this problem.
You either say everybody is going to get exactly the same flat
rate benefit, irrespective of their care needs. That is one perfectly
sensible approach, so there is no boundary to police between those
who get the higher rate and those who get the standard rate. That
is a perfectly logical position; it is not the one we decided
because we wanted to provide more generous financial help for
people with more serious disabilities. The only way you basically
remove this dilemma is you either pay everyone exactly the same
or you have some way of discerning and discriminating between
two categories of benefit claimants. I think you should do that
primarily on medical and other grounds, and that is the argument.
I am sure we will see whether that works out through the consultation
on the Green Paper.
Q272 Natascha Engel: I want to ask
you about the simplifying of benefits in the Green Paper and the
proposals. In the Green Paper it states: "We consider there
may be advantages in moving towards a single system for benefits
for all people of working age". There have been lots of organisations
that have come and spoken to us about their concerns that the
proposed reforms will actually create a two-tier benefit system
which will be even more complex to administer, so you have the
two-tier benefit, the holding benefit and the existing arrangements
at the same time. Is there not a danger that the proposals will
cost more to administrate and will in the end be far less effective?
Mr Hutton: That depends what comes
out of this longer term study of how we can make the benefit system
simpler. That is essentially what we are trying to do in Chapter
8 of the Green Paper. There are many committees of this House
who have criticised, probably rightly, the complexity of the benefit
system, so people have been saying to us and to previous Secretaries
of State and other governments: "Make the system more simple,
more streamlined", and we were trying to set out a programme
of work that might deliver those objectives. But, look, we are
not talking about there simply being one working age benefit.
Some people have looked at this part of the Green Paper and have
assumed that there will only be one working age benefit; that
is not what I think is likely to come out of this. We are talking
about a more streamlined, more coherent system, and I think everybody
will probably sign up to that. The argument will be about what
that means in relation to specific benefits, to how disability
is treated, how low pay is treated and so on, but it is very much
at the beginning of that exercise. It would be terribly depressing
if people had really leaped into the two-tier argument straight
away, because it is the only vocabulary people have to describe
any reform in my experience. It is either privatisation or two-tier,
and I think we should be a little bit more grown up about it.
It is a complex issue but it is not about a two-tier system or
anything like that. Managing change from the current system, where
there are lots of working age benefits, for example, to a more
streamlined system clearly presents major transitional problems.
Any benefit reform does that. Previous governments found this
and so have we. Invalidity Benefit, for example, is still being
paid even though it was scrapped years and years ago. It is a
complicated exercise to manage this sort of change but all I am
saying is that I think it is utterly premature for people to leap
in now, a week, two, three weeks after publication of the Green
Paper and say, "Oh, we know what the outcome is going to
be. Two-tier". That is preposterous. We are right at the
beginning of this exercise. There is going to be plenty of opportunity
for further work, further consultation—there will have to
be consultation in relation to any substantial benefit change,
as you know. We are not proposing any detailed changes at this
point, and this is a piece of work that is going to take years
not months to reach fruition; of that I am quite sure.
Q273 Natascha Engel: You were just
talking about managing change. As you are aware, the DWP is under
enormous pressure to deliver efficiency savings at the same time
as piloting through these welfare reforms. What makes you sure
that your Department can cope with the introduction of a new benefit
and not just buckle under the strain?
Mr Hutton: We will see about all
of that. I think the Department is right to make these efficiency
changes. We are a huge department: we spend £120 billion
a year; we employ well over 100,000 civil servants and we have
to be able to run the organisation more cost-efficiently and cost
effectively, and that is essentially what underpins the Comprehensive
Spending Review Settlement of 2004 and the variety of changes
that are under way across the Department, whether it is reduction
of head counts, more intelligent use of IT, moving to benefit
processing, use of call centre technology and so on. These are
sensible and rational things we have to do and we have to do them
right. Managing this new benefit is going to be a major operational
challenge for the Department, for sure. You just need to mention
the dreaded words, "information technology". We will
need to develop a new IT system around this, and I just want to
crawl into the foetal position whenever I am presented with these
submissions and people say "Minister, we need a new IT system",
but we do. It is going to be difficult; we do not have a brilliant
track record, we have to get it right on this occasion, and I
think we have, in Jobcentre Plus in particular, and its new Chief
Executive, an exceptionally able public servant who I think, with
her organisation, are getting themselves tooled up for this major
job, and it is the job of myself and my ministers to make sure
that this exercise goes via the numbers. Right now, at the beginning,
it is premature to say how it is all going to end up, of course,
but we are going to try to apply our professional skills in government
to this challenge, and I know civil servants in the DWP will be
aiming to do that themselves.
Q274 John Penrose: Following on from
the earlier questions about why not use DLA as opposed to two-level
Employment and Support Allowance, given your desire for simplicity
and robustness, and given the fact that DLA is comparatively stable
as a payment system, I know you said you have it at the back of
your brain as to why you decided not to go through using DLA as
the vehicle for this, but could you send a written explanation
to the Committee at some point?
Mr Hutton: I am happy to. If my
memory is right, the decision revolved around an analysis of the
eligibility rules, Employment and Support Allowance and DLA. We
wanted everyone in the Employment and Support Allowance to get
this extra payment, and there was some concern about whether that
would have been the case if it was all done through the DLA. But
I will follow that up and come back to you.
Q275 Natascha Engel: I genuinely
do not want you to collapse into the foetal position but I want
to press you on the IT systems. Given that there has been a history
of disasters with IT systems and delivery, how are you going to
make sure that introducing a new benefit with the IT system will
not be a disaster? How will you make sure that is delivered properly?
Mr Hutton: How long have we got?
Look, it is not true to say that every IT system, certainly every
IT system in the DWP, has been a disaster; that is absolutely
not true. I think the Committee has been to see the work the Pension
Service is doing. It is a superb service, delivering a tremendous
service for the public. You can apply for your basic state pension
over the phone line and get the whole thing done over the phone
without needing to sign any form at all. We have made significant
progress in relation to the Pension Service in relation to benefit
payments. The modernisation and transformation programme has been
a huge success story, and because it has been largely a success,
no-one writes about it, but it has been a success. So the DWP
is perfectly capable of implementing successful IT projects and,
again, we have some exceptional civil servants who run this part
of the DWP's activities. We have started this exercise now about
planning for the new benefit and, again, I am very happy to try
and keep the Committee informed, Chairman, of the work that is
being done on this, because it is absolutely critical that we
get it right.
Q276 Natascha Engel: Finally, the
Green Paper is quite clear about being the Government's vision
for welfare and welfare reform, and about being a single gateway
to financial and back-to-work support for all claimants. The proposals
in the Green Paper, though, do not actually go so far as to create
a single gateway, so is this kind of an interim measure, the Green
Paper, or is there a reason why we cannot go all the way now?
Mr Hutton: I think it pretty well
is a single gateway. Why do you say it is not?
Q277 Natascha Engel: There are no
specific proposals in the Green Paper that create a single gateway,
which outlines that that is what our vision is.
Mr Hutton: The Employment and
Support Allowance will be the gateway into the whole suite of
services and additional help and support that we want to provide
through, for example, the roll-out of the Pathways to Work schemes
across the country. It is very much designed as a single gateway
into this portfolio of improved help and support services for
disabled people. If we have missed something in the design of
that gateway, then hopefully it will come through in the consultation
of the Green Paper, but it is very much an attempt to try and
bring things together in the new benefit regime, to take away
from it the things we know are not right about the current incapacity
benefits, the lack of help and support, some of the perverse incentives
that are in the system which mean more people are staying on benefit
rather than taking active steps to get back into the labour market.
We have done that, I think, without trying to punish people. This
is a radical set of proposals; it is not being punitive, and in
the context of the clients, the customers, that DWP are trying
to deal with, that is entirely the right approach we should take,
and it is partly why I believe the broad thrust of these proposals
has been generally very warmly welcomed, particularly by the disability
organisations themselves. Of course, there are important issues
of detail to get right, and that is why it is a Green Paper rather
than a White Paper, and I think we can get the details of much
of the concerns that people have raised resolved during the course
of the consultation period and then when we put forward our proposals.
Q278 Justine Greening: Just a brief
follow-up to the question Natasha raised. Obviously, a single
gateway is, a little bit, build-up language in some respects,
so there may be an issue about what is meant by a gateway, but
going back to the earlier discussion about a two-tier system,
I just want some clarification from you on exactly what the chronology
of changes will be. At the moment we have, obviously, existing
claimants who I think will stay on the existing benefit levels.
From 2008 new claimants will be on the Employment and Support
Allowance, so at that stage there will be two groups of people
on different benefits. Are you saying that the Government's long-term
vision is then to somehow merge those two groups on to a single
benefit structure and, if you are saying that, will it be in the
form of the Employment and Support Allowance? Will it be like
the existing benefits or will it be somewhere in between that
is as yet undefined?
Mr Hutton: It is marvellous to
be able to say this but I do not know, is the short answer, because
that assumes where we end up with from this wider piece of work
in the Green Paper, which talks about a more simplified streamlined
benefit system, and I do not know the outcome of that exercise
so, with the greatest of respect, it is not possible for me to
say today whether the various alternatives we sketch out will
be the ones that emerge. I do not think, however, it is true to
say that, because we have incapacity benefits continuing and a
new Employment and Support Allowance coming in from 2008, that
in itself represents a two-tier system. It certainly represents
two different benefits being paid out but what I hope will join
the whole system together, the whole way of supporting people
who are either sick or disabled from 2008 onwards, will be the
more extensive help and support packages available to people either
on incapacity benefits or Employment and Support Allowance to
help that person get back into the labour market. I think it is
that approach that underpins the way that we think systems should
be fundamentally reformed. It is about reforming the help and
support, not about blaming individuals for the way they are.
Q279 Justine Greening: I think everybody
understands, if you like, the broader thrust of what is trying
to be achieved from this. I think what I am trying to get some
clarification from you on is the steps undertaken to get from
where we are today to the long-term vision, as you have called
it, of where we want to get to. I appreciate you may not know
what the end destination may look like exactly, and that work
will be done to understand what that will look like, but can you
confirm that the Employment and Support Allowance could potentially
just be an interim stepping stone to a unified benefit system
for people out of work as a result of being incapable of work?
Mr Hutton: We are not constructing
Employment and Support Allowance from the beginning as an interim
stepping stone. That has not been part of my thinking; it has
not been part of the advice I have received, and is not set out
in those terms in the Green Paper, clearly. The Employment and
Support Allowance is a long-term reform of incapacity benefits
and provides a much more straightforward, streamlined, simpler
form of supporting people on incapacity benefits, and is in itself
an example of the sort of wider reforms that I would like to see
right across the benefit system in the direction of the change
that many people have argued for for some time, particularly the
Public Accounts Committee, the NAO, and others. So Employment
and Support Allowance itself I would cite as an example of the
longer term direction of change and not something that is likely
to be cast out five, six, 10 years down the track. However, it
all comes with a caveat, does it not, because I do not know how
long I am going to be the Secretary of State for Work and Pensions
and I do not know what view other people have of these matters
either, what other governments in the future might have? But Employment
and Support Allowance is not a temporary interim halfway house.
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