Examination of Witnesses (Questions 1-19)
MR LEIGH
LEWIS, MR
ADAM SHARPLES
AND MR
PHIL WYNN
OWEN
28 MARCH 2007
Q1 Chairman: Good morning, everybody,
welcome to this evidence session on the Department's Autumn Performance
Report. Sometime just after eleven we will go into private session,
so at that point we will have to ask members of the public to
leave. Would you like to introduce your team?
Mr Lewis: Yes, indeed. I am Leigh
Lewis, the Permanent Secretary at the Department. On my right
is Adam Sharples, the Director General of the Work, Welfare and
Equality Group, and on my left is Phil Wynn Owen, the Director
General of the Pensions and Strategy Group.
Q2 Chairman: The Department has delivered
efficiency savings of around £1 billion and around 20,000
posts have now been deleted from the establishment. You have what
can only be called a challenging CSR for the next three year period;
are you going to be able to cope or are there going to perhaps
be impacts on service delivery?
Mr Lewis: Chairman, I think we
are going to be able to cope. We have done well up to now and
we are very much on track to deliver the efficiency targets, both
in terms of headcount and financial savings that we were set as
part of SRO4. That job is not yet complete, we still have some
further ground to cover, particularly on headcount, by the end
of the SRO4 period, that is by March 2008. Then the SRO7 period
is a testing one in which there is a 5% year on year reduction
in the Department's budget; that is not going to be an easy reduction
to deliver while maintaining the quality of our service, but we
are confident that we can do it and we have an evolving business
strategy for our Department as a whole which my executive team
and I have worked very hard on with our top leadership group.
I will not go into every detail now but, yes, we do have confidence
that it is going to be challenging but that we can do it.
Q3 Chairman: A cynic would say if
you are managing were you overstaffed before?
Mr Lewis: When you look back you
can always look at areas where, with hindsight, you were probably
using more resource than ideally you needed, but I certainly do
not want to give any impression that this was a Department which
before the SRO4 period was living off its fat and not working
very hard. What we have actually done is to have made ourselves
much more efficient, both in harnessing IT to provide more of
our services, organising our services in a more cost-effective
way and, in particular, looking at how we can both improve customer
service and value for money for the taxpayer at the same time.
Q4 Chairman: In the forthcoming three-year
period it is 5% a year; do you see the impact being largely on
staff or programmes or further IT-related efficiencies?
Mr Lewis: It is all of those and
one more, Chairman. Certainly, there will be further staffing
reductions undoubtedly over the SRO7 period and we will of course,
subject very much to the wishes of our ministers, be looking at
programme provision and we will be looking to make further IT
enhancements. The other big area that is important to stress is
about half of our DEL as it is called, our administrative expenditure
of some £8 billion, goes to external providers of services
to the Department, in particular our big providers of telecommunications,
IT, our estate, et cetera, and we are engaged in very intensive
discussions with each of those main providers because they are
also going to have to contribute to the efficiency savings which
we are going to have to make.
Q5 Chairman: The Freud review posited
some interesting questions about particular programmes to be delivered
in the future. Will that be reflected in your thinking in how
you manage that extra year period and do you see the essence of
Freud actually means that that will be translated into action?
Mr Lewis: The formal position
of course is that the Freud report was a report to Government
rather than a report by Government and ministers are clear that
they want to consult on the recommendations in the Freud report
and they are interested in gathering views on it, but it presents
a picture which is certainly a plausible one for the future in
terms of the way we will operate, not only in terms of some of
the policy areas but also in terms of our own directly delivered
provision seeing an absolute core, for example, for our Jobcentre
Plus business, dealing with the mainstream client group which
Freud says it deals with extremely effectively, but using the
private and voluntary sector more for those groups who are hardest
to help. That is certainly the Freud vision and we are going to
consider it very carefully indeed.
Q6 Chairman: But essentially is not
Freud just offering an alternative way of financing programmes
for the long term?
Mr Lewis: In one sense that is
the case, because what David Freud is saying is that the market,
given the right incentive structure, will be prepared to put forward
some of the finance necessary to provide intensive support services
for those people who are hardest to help. That of course is one
of the areas on which the Government is anxious to get the views
of a wide variety of stakeholders in relation to that report.
Q7 Michael Jabez Foster: The Pension
Service and pension credit: the Pension Service is one of the
jewels in the crown of the Department and most people are extremely
happy about the arrangements, but why are the PSA targets so likely
to be missed, given the hands-on approach that the Department
takes there?
Mr Lewis: I will start this one
off if I may and then ask my colleague Phil Wynn Owen to perhaps
go into a little bit more of the detail. In fact, I appeared,
as perhaps you will know, before a sister committee of the House
in December of last year, the Committee of Public Accounts, to
speak about that very issue. It is worth saying that the National
Audit Office report was very complimentary about the efforts of
the Pension Service to secure take-up of pension credit. It talked
about the Pension Service having a very good strategy in place
which should deliver increasing value for money, and so on. As
I said myself to the Committee, and I almost used these words,
what has become clear is that we have begun to plateau around
the figure of 2.7 million households receiving pension credit.
That figure has still been inching up month-by-month, but it has
become clear that we are unlikely to get beyond 3 million. I do
not think this is because a lack of effort or ingenuity on the
part of the Pension Service, and I set out for the Committee of
Public Accounts a whole range of ways in which the Pension Service
has been seeking to secure take-up. Probably what is clear is
that we are at something of a natural level in terms of pension
credit take-up, and there certainly is quite some evidence from
particularly the local service staff engaged by the Pension Service
that there are a group of pensioners who may have an entitlement,
know they have an entitlement but simply choose not to apply for
that entitlement. That is not to say that there are not pensioners
out there who we have not yet reached and we do not need to work
harder in order to reach, but I think it has become clear that
despite enormous efforts by the Pension Service we have begun
to plateau at around the 2.7 million level.
Q8 Michael Jabez Foster: Do you agree
then that most pensioners are aware of the entitlement? There
may be a complication about doing it, but it is not a knowledge
issue, they now know it exists and they just do not do it.
Mr Lewis: I wonder if Phil might
like to take that up.
Mr Wynn Owen: In addition to what
Leigh has said it might be worth saying in terms of the data that
when I appeared here last year I was talking to the 2003-04 Family
Resources Survey data; we have since published 2004-05 and we
are catching up in terms of data. We are planning to publish tomorrow
the 2005-06 stock data and we will be writing to the Committee
Chairman and placing the material in the House of Commons library.
But for the purposes of today you will understand I am bound by
national statistics conventions and will be talking to the 2004-05
data. Broadly, we do not believe the picture is changing over
time; as Leigh said, we are plateauing around the 2.7 million
households mark and having to run quite hard to just maintain
small incremental improvement year-on-year because we have around
260,000 households, largely through death, sadly, leaving the
stock of those receiving pension credit each year. The FRS data
suggests the entitled population, as I told you last year, may
be around the 4 million benefit units number, but with the household
receipt of pension credit around 2.7 million we have had to go
down to the working level in the Pension Service to understand
where the other people are. What we have identified is around
about 600,000 people whom we term "eligible non-recipients"
where all the information we have about them suggests they may
be eligible, we know where they live and we can trace them. The
vast majority of those have been contacted, often more than once.
Over 80% of those 600,000 eligible non-recipients were identified
and targeted specifically through campaign activity last year
and I should say that over three-quarters of those eligible non-recipients
have now been contacted five times or more. So we think we are
actually at saturation level in terms of marketing to those additional
people and households that we think may be entitled. The reasons
they appear not to take up the benefit vary and we have done quite
a lot of social research; on the softer side the reasons they
express as to why they are not claiming might be something to
do with lack of knowledge. For instance, 73% of the eligible non-recipients
are owner-occupiers who may think that owning their own house
disqualifies them from claiming, which it does not actually, as
you may know, whereas 45% of recipients own their own house. Similarly,
they may think that having an occupational pension—some
of them have a small occupational pension—may indeed bar
them: it does not. They may be concerned about interaction with
other benefits that we have sought to safeguard against; they
may find the whole process too intrusive, particularly if they
are only eligible for small amounts. We think almost a 18% of
them are entitled to less than a fiver a week and around a third
to less than a tenner a week, so these may be the largely savings
credit recipients who individually judge that it is not worth
the candle to actually pursue the claim.
Q9 Michael Jabez Foster: The people
we are most concerned about are those that are entitled to guarantee
credit, those who need the minimum income guarantee effectively.
Mr Wynn Owen: The guarantee credit,
we think the Pension Service has done best there; we think they
have done very well across the piece but the guaranteed credit
take-up is running somewhere in a range of between 70 and 81%
of eligible units. That is good; compared to the last six months
of the minimum income guarantee which was running at 64 to 77%,
we think there is probably a 10% increase in take-up of eligible
households, comparing guaranteed credit to MIG some years back,
so we are very close to saturation there. That is not to say we
have reached everyone and we are obviously continuing a marketing
effort, we spent about £25.4 million over the last four years.
Mr Lewis: It is just worth adding
that when I appeared before the PAC with the chief executive of
the Pension Service, Alexis Cleveland, she described that her
postbag now has a not completely insignificant number of letters
saying would you stop ringing me, writing to me, I know about
it, I do not want to claim, if you see what I mean. Again, that
is not to suggest that that is a majority issue, but it is an
issue that, in terms of service delivery, we are beginning to
have to balance. Once you have written to or contacted people
five times, how long do you carry on?
Q10 Michael Jabez Foster: Are you
re-thinking? I see you were planning one million extra visits
and two million extra mail-outs in the current year, is that something
you are going to review if you really do believe you have reached
saturation point?
Mr Lewis: What we are trying to
do—and the NAO was very complimentary, as I say, about what
has already been done—is become cleverer still. We are trying
very much to use data, particularly HMRC data and our own data
to really identify the households which may have a significant
entitlement. We are trying to work very much with other organisations,
voluntary organisations, through what the Pension Service call
joint partnerships, and our local service is undoubtedly a resource-intensive
resource but it is also a very effective resource and it is often
the visit by an individual who can persuade a pensioner that it
is in his or her interest to claim, whereas a letter may simply
go the way of other letters, if you see what I mean.
Q11 Michael Jabez Foster: One more
point, there is empirical evidence that the baby-boomers now retiring
are sort of retiring—it may be a short-term change—with
occupational pensions, thus better off than the people before
them and perhaps better off than those that follow. Is that coming
through yet, or have you any evidence to suggest that that will
happen, that fewer people will actually become eligible because
they are better off?
Mr Wynn Owen: It is possible,
but it is very early days yet. If you take VE Day plus 60 years
plus nine months for gestation, the baby-boomers who are lucky
enough to retire at 60—and not all people do of course—began
to retire last spring, so I do not think that we will actually
see the baby-boom effect kicking through into this data in a material
way for three or four years hence, until they start hitting 65,
but you are absolutely right, there will be an appreciable increase
in the stock of people who are retiring from now on in and it
may be that that generation, or the lucky ones in that generation
who have had access to an occupational pension scheme, are richer
than previous generations. We are doing everything we can through
appropriate data-matching with safeguards, working with the Inland
Revenue, for instance, to identify who has ISAs, with individuals
to identify their occupational pensions, to pick up that effect
and to actually target our Pension Service marketing on the people
who really need pension credit, particularly the guarantee credit
you mentioned earlier. Just on Leigh's earlier point about local
service, they have done a marvellous job over the past couple
of years in picking up most of the burden of accessing individuals
in their homes. That is of course very expensive and the cost
per acquisition, although it has come down, is still running at
over £420 in 2005-06, for a local service visit whereas direct
mail, for instance, is just over £60. We hope to see and
plan to see the balance change over time with the new Pensions
Transformation Programme coming into the Pension Service's contact
centres. Customers are now able to apply and have their entitlement
decided in a single short phone call—a process which has
traditionally taken weeks. As that is extended into telephony
claims for pension credit happening more and more in that system,
we should be able to pick up the stock of people coming into eligibility
for pension credit including those baby-boomers who are not fortunate
enough to have a substantial occupational pension as they make
that phone call for their basic state pension. It should mean
we see the balance of where we are making pension credit accessible
to people shift from the local service back towards the call centre
basis over coming years. That is what I hope to see and that will
help the customer by making it a swifter transaction and should
drive down our costs.
Q12 Jenny Willott: I want to ask
some questions about fraud and error. The report shows that DWP
was on course to achieve a 50% reduction in income support and
jobseeker's allowance fraud and error rates by March 2006, but
there is a graph in figure 33 which shows that fraud has dropped
but both official error and customer error have remained pretty
constant over the period. Why has more progress not been made
in that particular area?
Mr Lewis: Let me take some of
that. The first is to say we believe we have met the SRO2 target
and we are very pleased, because that was a demanding target to
reduce losses from fraud and error, as you say, in income support
and JSA by 50% by 2006. In the way of statistics and statistical
sampling, the answer which our statisticians have provided is
that the actual fall lies in the range between 45 and 55%, but
you do not have to be the world's greatest genius to work out
that the mid-point is 50%, so we are taking that as our target
having been met. You are absolutely right to say that overall,
going beyond that, our performance in many ways is good and it
is worth saying that the National Audit Office in a benchmarking
study where it looked at other countries and how they tackled
this issue—and they published their report in July 2006—said
that they thought our department was at the forefront, both in
developing estimates of losses and actually in terms of awareness
of fraud and error and activities to combat the problem. What
we have got really is something of a curate's egg; the total of
benefit being overpaid has fallen year-by-year since 2000-01 in
percentage terms, we are now at around 2.2% of total benefits
paid. Within that total, fraud has been falling very substantially
and very fast from over 2% in 2000-01 to 0.6% in the most recent
year. The ones that have been bucking the trend have been customer
error and official error and they have, if anything, been slightly
rising. That is why we are focusing so much on both of those subjects
and, as perhaps the Committee will know, I have established myself
within the Department both an official error taskforce which reports
directly to me and a benefits simplification unit, and I wrote
to the Chairman with an account of their first year's activities.
I will not instantly go into a great deal more detail because
you may have more specific questions, but simply to say without
in any way lessening our focus on fraud and colleagues will perhaps
have seen the "no ifs, no buts" campaign that has been
running over the last few months, but we are giving an absolute
priority to seeking to reduce both official error and customer
error.
Q13 Jenny Willott: Why has it not
reduced so far? Why is there such a difference between the drop
in fraud and the fact that error has stayed constant?
Mr Lewis: It is quite a conundrum
and there is no one simple answer. Quite a lot of this actually
does have to do with the complexity of the benefits system; we
do have a complex benefits system, and there are many, many reasons
for that. It means that at times our staff make mistakes in interpreting
the rules and deciding on entitlements and it means—and
that is the difference of course between customer error and fraud,
fraud is where somebody sets out deliberately to misrepresent
or claim something to which they are not entitled, customer error
is where they make a mistake but it is not a wilful mistake. Customers
make mistakes because they find the system complex as well. We
are trying to tackle those through a whole range of issues; in
terms of our customers we are trying to make our guidance much
simpler, it is vastly better now than it was in terms of the leaflets
we have produced, their readability, their clarity, the support
that we can offer to people. In terms of official error we have
established, for example, a taskforce within Jobcentre Plus, we
have established a case-cleansing exercise within the Pension
Service, but a key strand is to make the system simpler. We have
the Treasury Committee literally along the corridor talking at
this moment in parallel about the Budget, but we were very pleased
indeed as a Department that the Budget did include four major
simplification measures to the benefit system which we have been
working on in the Department for a long time. They will not in
themselves suddenly make a hugely complex system a very simple
system; that would be expecting too much, but nevertheless as
a step on a journey to try and make this system a simpler one
they were important actually.
Q14 Jenny Willott: If we come up
with some bright ideas on this Committee about how to make the
benefit system simpler, that would help would it?
Mr Lewis: It would help enormously.
Here probably I will be struck down by the Chairman, but it is
both sides of the coin because of course for all the right reasons
within a democratic society it can often be parliamentarians who
are part of making it more complex as well because they receive
representations from individuals, groups, where the system is
not quite working for them, and then there is a tendency could
we not just kind of make it a bit more fine-grained yet. It is
the cumulative impact over many years of those kinds of processes.
Q15 Jenny Willott: Moving on to housing
benefit fraud and error figures, both 2002 and 2004 targets show
a slippage, i.e. not meeting them. In fact, fraud and error actually
increased in the 12 months to September 2005, there was a 6% increase,
so it was quite a significant rise. How are you going to tackle
that? One of the things that struck me looking at the figures
in a further breakdown from Parliamentary Questions was that customer
error had nearly doubled, so there is clearly a problem there.
Can you give us an idea of how you are actually going to tackle
that? I know you have a new strategy but what is it that is actually
going to make a difference?
Mr Lewis: Yes, I certainly can.
It is the case that we have not met, so that is definitive, our
2002 target and the most recent figures—we are soon to know
of course about our 2004 target—are going in the wrong direction,
so there is no hiding away from that. Again, it is interesting,
we have the same basic position going on which is that fraud is
continuing to fall on housing benefit but both customer error
and, to a lesser extent, official error, are rising. Customer
error as you say is rising more sharply than official error and
that has been accompanied by a fall—it is not a fall that
we necessarily entirely understand—in the number of customers
who report changes to their local authority et cetera and, obviously,
if they do not report changes then their claim is likely to go
into error at that point. What are we doing? As you say, we did
launch an action plan; our Minister James Plaskitt launched an
action plan in February and it is based on four main strands.
I will not go into great detail on every one but the four strands
are making better use of information and data, in particular using
our customer information system which we are now linked to with
local authorities, they have access to it, and it has for the
first time a single version of the truth in terms of an individual's
entitlement, and I think it is a huge advance that local authorities
have access to it. Just picking up the point I was making, encouraging
customers to report changes, for example where over 100 local
authorities are now using targeted mailshots, letters which we
have actually helped design, and improving the transfer, particularly
between ourselves, HMRC and local authorities, because there is
quite a complex web here of housing benefit entitlement, tax credits
and our own benefits. On the local authority front we are introducing
a new performance regime for local authorities from this very
April, which will have individual targets for every authority.
Q16 Jenny Willott: Will the figures
for the year to September 2006 show any improvement or are they
going to show a worsening situation as well?
Mr Lewis: The honest answer is
I just do not know, the figures for that year October 2005 to
September 2006 will be available in July, but they are just not
available now, so we just do not know.
Q17 Jenny Willott: Do you have any
early indications? How confident are you that it will improve
over that period?
Mr Lewis: In preparing for today's
hearing that was a question that I asked of my statisticians,
but the answer came back that there is no in-year data at the
moment, for the current year.
Q18 Jenny Willott: You have already
answered a couple of questions about the efficiency savings programme;
as staff numbers continue to reduce is that having an impact on
the number of anti-fraud officers? Have they reduced or increased
in number since the introduction of the efficiency savings programme?
Mr Lewis: I have not actually
got that figure in my head and I do not want to risk misleading
the Committee, so what I will do if I may is write to you. My
understanding is that we have not significantly reduced our fraud
effort but, as I say, I will write to you. It is the same answer
though as in almost every part of the Department; if you are reducing
your overall staffing—and we are—yet seeking to maintain
or improve your levels of service and what you are delivering,
then in a sense you just have to become better and smarter at
doing it. We have some very, very effective anti-fraud staff and
anti-fraud operations in the Department but we have to go on getting
better at doing it. Certainly, it remains a very, very high priority
in the Department.
Jenny Willott: Thank you very much.
Q19 Chairman: Can I ask you a technical
question. If somebody receives an adverse benefit decision, appeals
and is successful on appeal, is that counted as official error?
Mr Lewis: Gosh. I do not absolutely
know that for certain. Adam, can you help me at all?
Mr Sharples: The measurement is
done by taking a sample of cases and then looking at those cases
and asking whether, at the time the case is reviewed, there is
an overpayment or not, so it would depend on precisely the point
that the case has got to. Clearly, if benefit had been refused
but was still being paid, that would count as an overpayment,
but if the appeal was subsequently won then obviously benefits
should be in payment, but the fact of there being an appeal against
a decision does not prove that that decision was wrong.
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