White Paper on Universal Credit

Written evidence submitted by Govtech Solutions Limited

Response to Welfare Reform White Paper

In simplifying welfare, Government has two policy objectives:

· To make it easier for people who wish to work to prepare for and take a job, sure in the knowledge that they will be better off (simplification)

· To make it harder for people to unreasonably refuse to take a job (conditionality)

The desired policy outcomes from achieving these objectives are:

· Lower welfare expenditure from having more people in work, and

· An end to workless households.

We believe the Government may achieve its policy objectives and yet fail to achieve the associated policy outcomes, because its delivery strategy is fundamentally flawed.

We support plans for a Universal Credit, to replace a plethora of entitlements. It’s an idea whose time has come. It is difficult to argue that a single payment with a common rate of withdrawal would not be easier for people to understand.

We think proposals to administer the Universal Credit through a single, centralised DWP entity are mistaken and based on IT development and human behavioural assumptions that are wholly simplistic and unrealistic.

As important, the Government’s reforms and strategy fail to resolve two fundamental problems with the existing welfare system. For this reason, reform itself will probably fail.

Firstly, the reforms and the strategy do not resolve the issue of Welfare budget ownership. Welfare is and will remain "a system". Nobody owns the budget. It’s one of the causes of the mess we’re in. The Welfare budget should belong to local communities because welfare makes a difference to communities. Whether recipients are in crisis, ill, disabled, between jobs, long-term unemployed, or have simply gone off the rails, the impact is felt at the community level and welfare helps to shape communities. In some areas, welfare is the largest source of income. Yet communities do not feel that the money is "theirs", or that it is being spent on their behalf. It’s just a system. People who opt out, or get left behind, can blight communities, yet communities are powerless to anything about it. Welfare reform should change this and empower communities to take responsibility for their own.

Secondly, the reforms and the strategy do not resolve the issue of Welfare budget management. This is not a question of administration but of active management. A private company with a budget of £90 billion would set itself a more ambitious objective than accurate payment. It would seek a return on the expenditure. Management effort across agencies which dispense welfare payments is devoted entirely to customer service (paying on time) and audit (paying accurately). This is set to continue under the new system. Government reforms fail to recognise that if ten residents move off welfare into work, it transforms a street and communities are therefore uniquely motivated to obtain returns from Welfare expenditure. Local communities should own and manage the £90Bn Welfare budget.

There are several groups of people at whom reform is targeted, including those who wish to work but for whom there are no jobs locally; those who refuse to work; those who would work but regard the risks as too high. The government’s reforms really only address the last group. They will fail to address the first two groups effectively. To bring an end to workless households, work must be found for people who live in areas where there are no jobs, as well as oblige those who do not wish to work to do so. This is conditionality.

Conditionality cannot be managed from the centre, or by private companies. Private companies are unaccountable to local communities and civil servants working for large centrally-run government departments are neither motivated, nor paid enough, to take on the tough or the devious workshy. If workless households are to become a thing of the past, local support and accountability for conditionality measures is essential.

How might this be achieved?

First, and in accordance with the Government’s Localism agenda, the new, simplified welfare system and the budget to administer it should be handed to Local Authorities to manage on behalf of their communities.

Second, and in return, Local Authorities could be given a new statutory duty to minimise economic inactivity, similar to their responsibility to house the homeless, and instructed to use this power to bring an end to workless households. (Or could this fall under the new General Power of Competence provisions?)

Third, Government should agree the rules that determine Welfare Subsidy payments between itself and councils, including withdrawal rates when a person moves into work.

Fourth, councils should have discretion to vary application of these rules, subject to any additional costs falling outside Subsidy arrangements.

These changes in strategy will engender both ownership of the welfare budget and accountability for effective management of expenditure. Instead of a subsistence payment, welfare can become a £90 billion catalyst for community cohesion and regeneration. A centralised system will not achieve this.

The Welfare budget will belong to local communities who will use it to bring an end to workless households. The consequences of long term unemployment are not the Government’s problem anymore – they’re yours. Locally elected Members will be accountable for how well the welfare budget is spent and for dealing with those who cannot find, or unreasonably refuse to, work. Local Authorities, in partnership with local employers, education providers, private sector placement experts and the third sector, would be able to tie welfare payments, low cost housing, school places and social support to promote employment, mobility, training and work experience, building a skills base to meet local needs and attract inward investment.

Councils will be responsible for enforcing conditionality measures that the local community has agreed to via consultation and answerable to their electorate for this. If jobs are unavailable, or individuals refuse to take them, councils may be obliged by their local communities to engage people in economically active or socially useful activities. For example, these might include helping the elderly to live in their own homes, running an after school sports club, mentoring the young or a single mother, reducing landfill, improving parenting skills, learning to read, write, cook, swim, cleaning up graffiti, planting trees, maintaining parks, marshalling community events; the list is endless but, in an age of austerity, communities are likely to embrace the exploitation of conditionality for community good. Indeed, with ownership of the budget, they may demand it.

Further measures to enforce conditionality, such as eviction, suspension of benefit, provision of vouchers, etc., must also be subject to community consultation if such enforcement is to command local support.

Simplifying welfare is not a policy objective in itself. It is but one component of a means to an end. Clear ownership of, and accountability for, welfare expenditure are both equally important in bringing an end to workless households. Neither is currently part of the Government’s plan.

December 2010