UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 703 -i

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

WORK AND PENSIONS Committee

DEPARTMENT FOR WORK AND PENSIONS

ANNUAL REPORT AND ACCOUNTS 2011-12

MONDAY 29 OCTOBER 2012

ROBERT DEVEREUX and MIKE DRIVER

Evidence heard in Public Questions 1 - 141

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Oral Evidence

Taken before the Work and Pensions Committee

on Monday 29 October 2012

Members present:

Dame Anne Begg (Chair)

Debbie Abrahams

Sheila Gilmore

Stephen Lloyd

Teresa Pearce

________________

Examination of Witnesses

Witnesses: Robert Devereux, Permanent Secretary, and Mike Driver, Finance Director, Department for Work and Pensions, gave evidence.

Q1 Chair: Thank you very much for coming before us this afternoon, permanent secretary; it is nice to see you again. I am sorry our numbers are so cut, but by Wednesday we should be back up to our full strength. The names of the new members are on the order paper today, but unfortunately they cannot attend until the House does its proper business.

We have rather a lot of questions for you this afternoon, if you don’t mind. I begin by asking you more general questions about expenditure on staffing. Last year the Public Accounts Committee was sceptical about your Department’s ability to make cuts of £2.7 billion by 2015, particularly as half of those savings were to be made in 2011-12. Have you achieved the target for 2011-12?

Robert Devereux: The settlement that we reached with the Treasury in SR10 had two components to it. The critical bit, in terms of what the NAO were referring to, was what they called our baseline spending, which is the recurrent cost of running the Department. We were invited during 2011-12 to reduce that baseline spend by 8% compared with 2010-11, and in practice we reduced it by 12%. For 2012-13, the current year, cumulatively, we were asked to reduce spending by 13%. Our current estimate is that we will indeed reduce it by 13%, so we are exactly on target. If anything, we spent slightly less in 2011-12 than in 2012-13. The inquiry in front of the PAC was quite early on. We have got more detailed plans since then, but the evidence at the moment suggests we are absolutely on target.

Q2 Chair: In terms of your staff’s understanding about how these cuts are being achieved, how well do you think you are doing?

Robert Devereux: We are still doing an awful lot of business. One of the things referred to in the report here is the work we have been doing on increasing productivity. The National Audit Office regards this Department as one of the few that has an accredited methodology for measuring productivity in terms of its outputs. During the course of last year we increased productivity by 12%, so essentially what is going on here is that money is going down, productivity is going up and outputs are staying up.

Q3 Chair: There are huge challenges ahead for your Department in terms of what you are asking. I will come to staffing in just a minute, but you are asking your staff to do far more than they are currently doing. You talked about productivity going up, but you are expecting fewer staff to do more work with a larger number of clients.

Robert Devereux: I am expecting fewer staff to do more work, because that is pretty much what the taxpayer would expect of almost any organisation funded by the public service; it is what most private businesses do, too. Remember, staffing levels in this Department and its predecessors went down from about 140,000 only five, six or seven years ago. Relentlessly, frontline staff have been doing things better and more efficiently, and they will continue to do that. That is a definite challenge. It would be much easier to stand still, but no organisation stands still and I do not expect my staff to either. I travel out pretty much every week on Thursday night/Friday to meet frontline staff. Nineteen questions out of 20 that they ask me are about how to make things better; to deliver the work better; and to do better things for claimants. They are on that case as much as I am.

Q4 Chair: You referred to the reduction in staff. In 2011-12 you made 1,578 people redundant, but you recruited 1,200 new external staff during a recruitment phase. That does not look like a particularly large net reduction in staff.

Robert Devereux: As to the overall figures for the core Department, we have gone from having just under 98,000 full-time equivalent staff at the end of March 2011 to 89,000 at the end of March 2012, so we have reduced total staffing by about 10,000 over the course of the year. In the course of that year, two important things were going on: first, there was turnover, because we were working on a recruitment freeze for most of that; and, secondly, within the corporate centre, we reduced the number of posts in that period by about 2,500 to 3,000. Most of those were redeployed back into the operational business. In practice, we have managed to make good the natural turnover in a world of recruitment freezes by supplementing staff from a smaller corporate centre. That is what happened in 2011-12.

The figures in respect of the 4,000 and the recruitment were all forward-looking statements about what was going to happen to make the youth contract work properly. Most of that was scored after 1 April. Again, what was happening there largely was that we converted about 2,700 fixed-term appointments in the operational business into permanent staff, so that gave me some, and a further 1,200 recruits have been brought in.

Q5 Chair: You are about to deal with universal credit. Are you expecting to have to recruit more staff when that fairly major reform comes on stream?

Robert Devereux: I described earlier that the Department’s budget comes in two pieces. The model of the baseline budget, which is the cost of doing today’s business, is scheduled to reduce by 26% in real terms over the course of the Parliament. I have explained we are absolutely on target for that. The second part of the budget is the additional money we have been given to do welfare reform. Some of that additional money in this Parliament is to add staff to do some of the transitional work required in universal credit, for example. There are two things going on here. We will end up with fewer staff doing today’s business and more staff doing tomorrow’s business. What we are trying to work through at the moment is exactly how that will pan out over the next two financial years.

Q6 Chair: Is the baseline cost you have just talked about broken down into the different sections of the DWP like Jobcentre Plus, or is it across the whole Department?

Robert Devereux: From the Treasury’s perspective, it is a single number right across the whole Department.

Q7 Chair: From your position in trying to operate the Department?

Robert Devereux: Yes. We take a budget, which in 2012-13 is currently £5.9 billion, and allocate that to all the different entities, so that will be the jobcentres, benefit centres and contact centres all the way down.

Q8 Chair: You took Jobcentre Plus back in-house; you have the disability and carers part; and you have the pensions part. Can you separate out the costs in each of those different areas?

Robert Devereux: We do. I do not know whether my colleague can tell you exactly what the numbers are. Are you asking for what the budgetary elements are within that £5.9 billion?

Q9 Chair: You said there is extra money for the new things, such as universal credit. I am trying to get a sense of what the baseline or core is and how that is reducing, as opposed to all the extra work that you are going to have to do. It is not just in that particular element; it is in other aspects of the Department.

Robert Devereux: We have gone from having a core budget of £6.8 billion in 2010 to £5.9 billion in 2012-13. That is the reduction in the cost of the core Department. At the same time, in 2012-13 the total amount of money we have to spend on welfare reform is of the order of £2 billion.

Q10 Chair: There was some argument as to what the correct figure was.

Robert Devereux: I have £2.063 billion here.

Q11 Chair: The set-up costs, running costs and transitional protection costs are all in that £2 billion?

Robert Devereux: Remember that a very large number of things are going on in this, so maybe it is worth just running through some of them. In here we have, for example, the cost of the youth contract and the investment we are making in fraud and error.

Q12 Stephen Lloyd: So the youth contract of £1 billion, £1.2 billion, or whatever, is coming out of that £2 billion?

Robert Devereux: The numbers for 2012-13 now include the announcement we made about the youth contract.

Q13 Stephen Lloyd: That is in the £2 billion, or is that additional?

Chair: That is, the £2 billion for universal credit.

Robert Devereux: No.

Mike Driver: The £2 billion is additional to the baseline in the current financial year.

Robert Devereux: I am afraid there are an awful lot of £2 billions. The £2 billion I was offering you was the spending in 2012-13 that we are proposing to do across the whole range of welfare reform. That includes the cost in that year of universal credit, which itself is a lot smaller than that because it is £2 billion for the whole Parliament.

Q14 Stephen Lloyd: On the transitional costs, we had the Minister in fairly recently. We struggled when trying to find out exactly how much of the £2 billion is estimated to be allocated for the transitional cost of universal credit. Do you have a feel for what percentage of that £2 billion will be transitional cost?

Robert Devereux: Transitional cost in what sense?

Q15 Stephen Lloyd: To give an example, there is a recognition that it will be too difficult for some people not to receive payments for a month. The Secretary of State or Lord Freud-I cannot remember which-said that there would be transitional money available so they would get interest-free loans or what have you, rather than go straight to credit sharks, or whatever, but we could not really get an idea of it.

Robert Devereux: My memory is that they were quite careful in their answers by pointing out that we are doing a lot of piloting work now to try to understand exactly what the size of the problem is, and the commitment you got from them was that we would have in place appropriate mechanisms for all those cases, but deciding exactly how much that is depends a little on the work we are doing. For example, you know that we are doing some pilots on directly paying social tenants and making sure exactly how that would work. Some of the early work has found that, for example, rather more social tenants have bank accounts than we previously imagined. We are trying to work through exactly how that will work in practice, so it is quite difficult to know, on a programme that will take through to 2017 to complete, exactly how all that will fall out. However, we are doing quite a lot of work in the next six to nine months to try to get our heads round exactly what that will be. The commitment that I thought I heard the Ministers make to you was about making sure that appropriate steps are put in place, but I do not think there is an individual cost for it because we are still trying to explore exactly what that will be.

Q16 Chair: But the Secretary of State, and the Prime Minister in last week’s PMQs, said there would be no cash losers with the introduction of universal credit. When the Secretary of State was before us he was not able to say how much that cash protection would cost in terms of rolling out universal credit. Can you?

Robert Devereux: The amount that transitional protection will eventually cost us depends on a number of variables, not all of which we know at the moment, in particular where policy has got to, for example, on tax credits and what has happened to things to do with inflation and economic growth. We make estimates. The Office for Budget Responsibility has been all over our numbers with a very fine-toothed comb, but the precise number at the end of it will depend on some external factors, too. Obviously, transitional protection lasts until the transition is over, and that will be different depending on what the economic circumstances are.

Q17 Chair: We had understood it would last until the individual’s circumstances changed.

Robert Devereux: Yes, but the rate at which those circumstances might change is itself not wholly in the gift of the individual.

Q18 Sheila Gilmore: Clearly, that is the case. Do you not have a working view of how much of the extra money that we have been told is going into universal credit is envisaged to be for administrative costs, and how much for things such as the transitional payments? We do not know how often people’s circumstances will change, though we suspect it may be more often than might have been originally envisaged.

Robert Devereux: We do have estimates of precisely that, because you would expect the Office for Budget Responsibility to go through that. The business case we have constructed has got, on the basis of a set of assumptions, what these numbers will be. I have not brought them with me, so if you want a more detailed account of the business case you can have it. Remember, there are two different things going on here in terms of the time frame. We have announced what the SR10 budget in this Parliament for universal credit will be, which takes us up to 2014-15. The total cost of transitional protection as we start to roll this out-we will still be rolling it out in 2017-obviously goes beyond the period for which this Parliament’s budget has been set.

Q19 Chair: In terms of staffing, how many extra staff will you need to introduce universal credit?

Robert Devereux: I am sorry to say, "It depends", but it does rather. At the moment the Department is already absorbing within its budget the fact that levels of unemployment are higher than they were at the time the SR10 settlement was fixed. The number of extra staff I need will depend on where the economy is in 2013-14, 2014-15, 2015-16 and 2016-17, because, in the event that the economy is in a good place, I will have quite a lot of spare staff whom I will be able to redeploy to universal credit, and vice versa.

Q20 Chair: But universal credit is not just about unemployment levels; it is about the number of staff you will need to support claimants who are not able to make digital online applications. The Secretary of State said there would be computers in Jobcentre Plus to help people who do not have access to computers anywhere else, but he was not clear whether there would be staff to help them. In figures we were given for the number of computers, it looked as though there might be only three in each Jobcentre Plus. Even so, you will need to employ staff who will be able to help claimants through the process in a way they do not at the moment.

Robert Devereux: I understand the question. To do this by scale, I have got 80,000 operational staff spread across an awful lot of benefits. At the rate of productivity improvement we are making, which is around 7%, quite a lot of them will be spare. We are not going to find ourselves short of staff to do the work you are talking about.

Q21 Chair: You might find yourself short of staff to give people the time they need to make the transition.

Robert Devereux: No; I am making an allowance for that. Neither of us knows until we have completed the pilot work I have described quite what proportion of people will need what sort of help. What you heard from the Secretary of State is that he will ensure appropriate arrangements are put in place. I have no doubt, given the track record of the Department in being able to be very good at reallocating staff to wherever the current requirements are, that we will be able to accommodate that.

Q22 Chair: The staff survey results were significantly more negative for your Department than for some areas of government. Why do you think that was?

Robert Devereux: If you look at the staff survey results, you will find that, by and large, the larger the Department and more junior the staff, the more negative the results. It is not really a surprise. We have 43,000 people who are paid less than £19,000, so when they are in the second year of a pay freeze and it is announced that their pension contributions are going to go up by more than the 1% they might get in the third year, you might imagine that has a bearing on their propensity to declare themselves happy.

Q23 Chair: But that is across the whole of the Civil Service and the whole of the public sector; it is not just in the DWP.

Robert Devereux: It is, but it is a particularly strong effect in Departments like mine, which have very large numbers of low-paid staff.

Q24 Chair: Happiness is the result of external factors outside your control rather than of anything you can do.

Robert Devereux: No; that was not what I said. I said that, if you compare me with the rest of the public sector and take a bog standard Whitehall Department that has a lot of very senior staff, you would expect it to be in a different place from one where you have a lot of very low-paid staff. That being the case, one thing we are spending a lot of time doing as a top team is getting to grips with how I can have a world that I will describe. Wherever you go-you will have met my staff-they are some of the most committed people on the planet. They are very good at what they do, yet they are recording themselves as unhappy with their lot. One of the things that is quite striking to me is the extent to which the ideas and innovations they would like to make are not typically in the gift of either them or their line manager. If you sit in a benefits centre and have an idea of how to improve things but it requires changes in the jobcentre, that is quite difficult to do at present. More than anything else, we are trying to harness the ideas and energy right across the piece to get to a much better place.

Let me give you an example that I have been using with my colleagues. If you go to Ilford, you will find a couple of hundred staff who are doing benefit integrity checks, which essentially means that they ring people up to check that their details are still as they were on the claim: so many children, so much rent, and so on. One very junior member of staff said to me, "If I can’t get them on the phone, Mr Devereux, I have to write them a letter." The letter says, "We’re trying to check your benefit. Get back to me in a month." That letter is spectacularly not answered. They then write another letter that says, "Get back to me in another month or I will suspend your benefit." Unsurprisingly, that catches people’s attention. This individual, who is frustrated that it is taking two months to catch up with somebody since he is supposed to be paid to check benefits, cannot change that himself because that is required by regulations.

But in the world that we are trying to build, that story got back to our lawyers, who said that it would be perfectly straightforward to change things and, with the benefit of their work, some policy people-again, nowhere near Ilford-and the Minister himself, we changed the law on 1 April. In Ilford, they now write one letter, which says, "Get back to me in a fortnight or I will suspend your benefit." That change is an illustration of a world in which the Department starts to work together and everybody recognises that they might be able to do something to help somebody else get a better outcome. At the moment, you could characterise the Department as having some strong silos that prevent that. I think that is profoundly behind some of the sense of, "I could do better in my job but somehow or other the system is preventing me." I think that is the internal reason that drives engagement scores alongside the external ones I started with.

Q25 Stephen Lloyd: Thank you for that answer, which I thought was very interesting. I am inclined to agree with you, in the sense that the challenge to the DWP is to try to allow flexibility through advisers. We have been talking about that for years and you are now trying to deliver it where it works. It will be good but it is going to be hard. On that score, Jobcentre Plus is clearly a key issue. I have a number of specific detailed questions. Last year, the Department’s annual report and accounts suggested that you were planning to make a 43% saving in the cost of Jobcentre Plus. How are you planning to realise this, and are you on target?

Robert Devereux: Do you want to tell me where it says that?

Q26 Stephen Lloyd: I can find that. It is in last year’s annual accounts.

Robert Devereux: I have got them with me. It is a very long document, and I am not going to guess where it is.

Q27 Stephen Lloyd: I realise that. I am happy to pass that down to you, if you like.

Robert Devereux: The reason I am pausing is that 43% sounds deeply unlikely. I would like to check the reference before I try to answer it. As to the entire budget of the Department, in baseline we are trying to get a 26% real reduction over the course of the Parliament. It is slightly unlikely that a 43% figure for Jobcentre Plus alone is there, so I fear you may have a misquote there.

Mike Driver: The settlement was broken into two parts. The main part of the settlement on our DEL programme was 26% on the baseline, and the maximum efficiency we were asked to look to make was 40% on our administration costs, so 43% is higher than anything we have seen.

Q28 Stephen Lloyd: If we have a typing error, we will have to explore that. Building on that, let’s take the 40% reduction in administrative costs. Essentially, what I am getting at is that, even if this figure is correct-I am not able to confirm it or otherwise-there are very significant savings you have signed up to. The Chair touched on them briefly earlier, but in general terms, are you on target as to the 40% administrative reduction?

Robert Devereux: If you think about the 40% as being essentially the corporate centre of the Department-in old money, the corporate centre of what used to be Jobcentre Plus and PDCS-we are on target because we have gone from having, from memory, about 12,200 staff in December 2010 to 8,300 staff in March 2012. We have made a reduction in the number of posts in the corporate centre of the order of a third in the space of 15 months. That will get us most of the way towards the 40% real saving, and we have done that by making some other changes that you have read about, in particular by taking a root-and-branch look at the way the Department is organised. For example, I no longer have three separate policy groups looking at three different sets of policies but one group, which is now much smaller and working better together. I have managed to get across different sectors much more common ways of operating with finance and HR business partners, so instead of everybody having their own organisations, we are now running them much more centrally and directly. We have managed to remove some of the duplication we had by having an entire set of accounts for Jobcentre Plus and an entire set of accounts for the Department, even though there was only ever one principal accounting officer. Essentially, we have tried to streamline all this.

If you ask me how it feels, it is quite hard, but I am afraid it was a conscious choice on the part of my predecessor that, in settling for an average 26% real reduction over the Parliament, we would seek to protect the front line-we have got a 24% reduction in their area-at the expense of looking hard at the way the corporate centre has been operated. That is partly a conscious choice, picking up the point I made a bit earlier to the Chair that, year after year, we have taken efficiency out of the operational business, and it is a while since we have had a complete spring clean in the corporate centre.

Q29 Stephen Lloyd: You are confident that, with such a substantial reduction, performance and standards have held up and/or improved? I am a private-sector animal, so I understand exactly what the private sector has been going through for the last four or five years. What you say to me is not unique, but it is a very substantial reduction, and obviously performance standards are not only crucial, but the Secretary of State has insisted that they will be improving in all this.

Robert Devereux: To be very clear about the sort of people we are talking about here, those in the corporate centre are the strategy, finance, HR and IT people. The operational staff, who maintain day-to-day standards in terms of answering phone calls and processing benefits, are the ones in the 24% reduction, so the corporate centre is the 40%. Essentially, by taking what used to be the corporate centre itself, which had grown through several iterations over past years when money was less tight, as well as recombining some of the functions that were sitting in the agencies, we have managed to streamline some things.

Let me give you an example. We had some difficulty, when mandatory work assessment was being assessed and Ministers decided they wanted to do this, in trying to work out exactly what that would take. Who would need to know? What would the training look like? How would we do all that? It took the relevant teams-plural-something in the order of 12 weeks to work that through. Twelve weeks is a long time in politics. When it came to the youth contract, because we had simplified things and made it very clear who was doing what, we managed to get a good assessment of that in 12 days. There are some things about simplification and reshaping an organisation where, if anything, you get better outcomes because you can go back to first principles and say, "Let’s be clear. I’ve got one person doing this. You’re accountable for it", instead of having three or four slightly vague accountabilities.

Q30 Chair: One of the reasons you gave for the reduction in staff and, at the same time, the recruiting of staff was to rebalance work flows. Essentially, that is what you said. But the percentage of staff at each grade, according to the annual accounts, was roughly the same in 2011-12 as it was in 2010-11.

Robert Devereux: It was roughly the same, but there are individual percentages when some of the numbers are 20,000 and 30,000. Looking at the sorts of things that go on in the corporate centre, if I take out 4,000 posts, they are lost in the rounding of percentages in 100,000, so it is true that I have moved people from the corporate centre into operations.

Q31 Chair: But the figures were higher.

Robert Devereux: Do you want to tell me where you are looking and I will help you?

Q32 Chair: In 2010-11, higher and senior executive officers comprised 10.5%.

Robert Devereux: Where are you?

Q33 Chair: It is page 27. In 2010-11, higher and senior executive officers were 10.5% of the work force, and by 2012, they were 10.6%. Executive officers were 38.2% and that has gone up to 39.5%.

Robert Devereux: At EO and AO, that is where all the work is done.

Q34 Chair: I do not have the AO one, but presumably that is senior management.

Robert Devereux: They are in the same table. At the end of March 2011 the total number of EOs and AOs amounted to-

Q35 Chair: The AOs have gone down. Those are the ones who should have gone up, and the executive officers have gone up when they should have come down. I appreciate that it is just over 1%.

Mike Driver: The table you are referring to shows that, yes, for administrative assistant and administrative officer, in percentage terms the number came down very slightly, but in some of the job design, we changed the emphasis of some of our roles from AO to EO jobs.

Q36 Chair: Did they get paid more?

Mike Driver: EOs get paid more than AOs, so overall the balance is an increase between those grades. If you look at the more senior grades-grades 7, 6 and the Senior Civil Service-you will see that, in percentage terms, their numbers have come down.

Q37 Stephen Lloyd: By how many?

Mike Driver: By small percentages, but quite significant numbers.

Q38 Stephen Lloyd: You have got 89,000 staff.

Robert Devereux: Yes. From memory, we have reduced the Senior Civil Service by over a quarter. There are two different things in here. If we end up being able to be more productive in what we do, you would expect that effect to show particularly strongly in the most junior grades because those are the ones doing that work. It is equally true that some people of that grade who used to be in the corporate centre have also gone into operations. Two different things are going on: a reduction, because people have become more productive, and I am topping up that number. Therefore, the small percentage changes here are a combination of two different things.

Q39 Stephen Lloyd: I understand that, but where I struggle is with your point that there is a 24% reduction in frontline posts, which is a lot lower than the 40% in strategic posts. I completely buy the argument, because the frontline posts, particularly with UC and the rest, will be absolutely crucial. I struggle over the difference between 40% and 24%, which is big. Looking at the figures we have got here, even with your explanation that staff will be going from strategy and moving to front line in some way, shape or form, it is almost identical to what it was the year before, yet the difference between 40% and 24% is huge. That is where I am struggling a wee bit. Is it apples and pears?

Robert Devereux: It may be. It would be a mistake to think that all the junior staff sit in operations. Most of the staff in operations are more junior than most of the staff in the corporate centre, but we have moved quite a lot of the people because we have got EOs and AOs sitting in the corporate centre. I am struggling to work this out quickly. I do not think the fact that I intend to have a differential path for operational staff and the corporate centre necessarily means you would expect that to show a big difference in the percentage make-up in one year.

Q40 Chair: So you will be back next year with a figure?

Robert Devereux: I would expect you to invite me back. I would be happy to come back and explain that next time.

Mike Driver: It is also worth noting that the 40% is not just about staff reductions; it is about reductions in our other overheads. If you think about another element of our expenditure, our estate, which is an overhead, we have made very significant reductions in the size of our corporate estate. If you take London, for example, we have gone down to one single site, but we had two earlier in the reporting period. We are trying to make best use of the estate, which drives out quite significant costs.

Q41 Sheila Gilmore: Bringing Jobcentre Plus in-house makes a number of changes. Does it mean there is less focus on the work of Jobcentre Plus? Related to that, is there less accountability for the work that Jobcentre Plus does? For example, there used to be a specific Jobcentre Plus report. As an agency, it had its own report. As part of the DWP report, there is far less detail about that work, so are we going to have the same degree of accountability and scrutiny?

Robert Devereux: I think you will get the same degree of accountability. To be clear, you cannot go round requiring of organisations a 30% or 40% reduction in cost and at the same time say that everything they do by way of reporting and scrutiny will stay the same. I am sorry to be slightly hard-hearted about it, but the decisions we had to make here were in part to do with what is the best way to structure the organisation when Ministers have, perfectly properly, decided in this particular climate that we need a very substantial reduction in cost. Everything we are currently doing in being on top of the performance in the different parts of the organisation is every bit as strong as it was previously. As to some of the things we had previously, where you had a chief executive in charge, the question you need to ask yourself is: what decision was that chief executive making independently of the ones being made by more senior staff? It is my view that we were, to a degree, overdoing the extent to which there was a real level of accountability there. I simply cannot afford to run an organisation that is as top heavy.

Q42 Sheila Gilmore: You talk about having a new performance management framework that will have outcome-focused instead of process-driven targets. How does that drive improvements in performance?

Robert Devereux: The reference that you pick up is that, particularly for Jobcentre Plus, we have tried very hard to get colleagues working there to focus on two particular metrics. One is off-flow from benefit; the other is to reduce fraud and error. That is not to say we still do not measure the speed with which things are done, the basic accuracy of claims and so on, but we are trying to make it clear to people that, at the top of the tree, helping people back into work and off benefit and keeping the taxpayer’s pound protected are the two things we want them to focus on. That is the critical sense of it. Ministers have been really clear that, if you want to drive proper behaviour, it is good to be very strong about the relatively few numbers of things you are interested in.

Q43 Sheila Gilmore: Jobcentre Plus’s targets for 2011-12 are not on the Jobcentre Plus website; previously its targets were. Is there any reason for that?

Robert Devereux: I wonder whether we are talking about the same thing here. We have tried to be clear about what we are seeking to achieve by way of off-flows and fraud and error. We are trying not to tie them up in lots and lots of other targets below that, but I am slightly uncertain about whether what you think is missing exists somewhere else. Do you mind if I just check that?

Q44 Sheila Gilmore: It is about accountability. If we are not clear what the targets are, how can we hold people responsible?

Robert Devereux: Maybe I should go back to this document and say that one of the things this Government did, which was a complete departure from their predecessor, was to try to be very clear about which things it was going to report on and which things were important. You have now got in this document all the things to do with inputs, outputs and outcomes that are part of the business plan that we now publish. Part of the philosophy behind this-because I have been through it now with two Secretaries of State in two Departments-is to sharpen up the things we are going to come back and talk about and not have a plethora of other things, any one of which might be interesting but possibly is not quite on point. So the things that we have promised to be accountable for in the business plans are being faithfully reported in the annual report and accounts. We are not seeking to say in one place, "We are always going to talk about all these," and then not report on it. We have deliberately tried to be transparent about the things that, in the Government’s view, are the right ones to worry about. That is what is in this business plan. A lot of work went into trying to get to the right sorts of things.

If your Committee has a view about whether those things are deficient in one way or another, I am sure you will let us know in the scrutiny, but in running the Department, I have not sought to cut stuff away. We have been trying very carefully to stick to a particular business plan, which Ministers have done right across government. It is exactly the same.

Q45 Sheila Gilmore: One big change you will be managing over the next two to three years is the move to online claiming. I understand that already there is encouragement to get more people to claim JSA online. There will be online claiming for universal credit, and I understand that the aspiration is for personal independence payments in due course, but not immediately, to be online. What effect would that have on Jobcentre Plus staffing?

Robert Devereux: Getting people to be more online?

Sheila Gilmore: Yes. If more people apply online, do you anticipate that is going to help you reduce staff?

Robert Devereux: Yes and no. The "yes" is that, self-evidently at the moment, I am running what you might regard as a bit of a Rolls-Royce system. If you want to make a claim for JSA, I will pay a member of staff to talk to you over the phone and fill in all the forms for you. In an online world I would expect you to do that yourself, so necessarily I am going to save some money.

In addition, since for once in our life we are investing properly in modern IT, I would expect most of that to be automatically capable of being processed, so I would not need quite so much hand off and paper-shuffling as happens in the benefits centres at the moment. I hope that, because it is more accurate straight away, I have fewer people chasing down the contact centres just asking questions, so a whole bunch of investment in a modern system ought to save me staff.

That said, one of the critical things that goes into universal credit, which you discussed in part with Ministers when they came, is much more careful use of data right at the front of the system to decide the best way in which to process the claim. What do we know about this individual? We talked a little about the integrated risk and intelligence system we are building, which is absolutely the flip side of the online service. At the moment, a claim comes in and we deal with everybody pretty much in a standard fashion, but the whole point of this data-rich intelligence system is to try to discriminate. Let’s take Mr Driver. Maybe he has been with the same partner in the same house for years and years and we have dealt with him lots of times. Probably we will call him green and process him automatically. That is a fantastic saving. Mr Devereux on the other hand is on his 14th house and goodness knows how many times he has reported different children. Maybe we ought to do something rather more extensive by way of checking the circumstances up front. Some of the things going on in the fraud work, which we may come to in a minute, contemplate much more active engagement, taking staff time in checking that things are right at the start before we even make payments. At the moment we do not do that at all. Part of universal credit is going to be using modern systems and automation to save staff; part of it is optimising clever data analytics to put more staff effort in to make sure things are right, because, like you, I do not want the fraud and error to be at the level it is at the moment.

Q46 Sheila Gilmore: You are suggesting that the system itself will flag up cases that require more investigation. The other area we were talking to the Ministers about was how to identify people who are perceived to be vulnerable and might need, perhaps not the monthly payments, but something. Does the system achieve that? Will staff be redeployed to follow that up?

Robert Devereux: We are slightly going back over an answer I gave earlier, but perhaps I did not make it clear enough. We are trying to establish, in the run-up to the first of the Pathfinders in April next year and then the roll-out next October, what sorts of numbers of people require what sorts of support; how we would know; and what should be put in place. What the Ministers said consistently throughout the previous hearing was that work is happening now, and they are committed to ensuring that people get appropriate support. They are also committed to being absolutely clear that we want to support people to be making online journeys, because nothing locks people out of the employment market more than continuing to regard them as being capable of managing only fortnightly payments and on paper. For some of this change, we are deliberately seeking to manage, help and support people. We do not know the precise quantum of support they will need at the start. That is why we are running the pilots, but you have heard some fairly strong commitments. We will ensure that there is enough resource to handle that problem.

Q47 Sheila Gilmore: Do you anticipate the same level of staff being able to concentrate on the more difficult cases? Is that really what you are saying?

Robert Devereux: I have offered you a reason why I could expect to make savings over and above the sort of efficiency we have made previously. I have identified both tackling incorrectness and supporting vulnerable people, and new challenges in terms of staffing. The precise balance between those two will be worked out as we are informed by the pilots. I had better say, just in case the Treasury is listening, that all that will be done with the numbers they first thought of because that is what they would expect me to do, but I suspect these things are slightly more at the margins than you might imagine, given the very large size of the operation in the first place.

Q48 Sheila Gilmore: One of the very specific things about online claiming that came up previously was how people might get access, for example in a jobcentre, if they want to come along and make their claim, because they do not have any other access. Some Jobcentre Plus offices operate on the basis that, if you do not have an appointment, you do not get in. Will those people have to make an appointment in order to use a computer to make their claim?

Robert Devereux: If we are to make a reality of enabling jobcentres to be places where you can come and get support, the way in which we provide access to those machines and how people are helped is something we would have to spend time thinking about. I cannot just say, to use the Chair’s point, "I’ve got only two computers; you can come in in half-hour chunks." We will have to think quite hard about what level of support we want to be providing in jobcentres, but I come back to the same old refrain. The work we are doing now with local authorities up and down the country to try to identify who is vulnerable and who is best placed to support them will inform what we do. It may well be the answer is that local authorities are closer to some of this action and are better placed to do it than Jobcentre staff. I do not know yet, but the only thing we can do is take real people in real places and take them through this journey and try to understand better what is going on. We all have views about the general areas that will need to be addressed, but neither you nor I has the specifics to enable us to crystallise how many screens we need in a jobcentre and how much support we need there. What you have heard consistently is that there is a commitment on the part of Ministers to make sure it is done properly.

Q49 Sheila Gilmore: Do you have staff who are tasked next year when these pilots are being unfolded to analyse all that and make recommendations?

Robert Devereux: Yes. People in the universal credit programme are working with their colleagues in the direct payment pilots and innovation pilots and with local authorities to understand the answers to the questions you have been asking. They are working now in the universal credit team; and at the same time we are putting a big effort into making sure our frontline staff are themselves comfortable and happy to engage with online things. I found myself in the Evesham Jobcentre only two weeks ago. A member of the public had come in and a member of staff came out and helped them go through the screens and showed what was going on with job matching. Increasingly, that is the world we are going to be in. It is quite a big journey for some of my staff as well as for claimants. As I said previously, calibrating how much of that effort sits where is what the pilots are all about.

Q50 Debbie Abrahams: I apologise to the Committee for being late. I am sorry if any of the questions that I am about to ask have already been covered. I was conscious of what my colleague said, particularly in relation to the introduction of universal credit. My constituency is one of the pilot areas; Oldham is a pilot. Having met council officers, who are due to be responsible for implementing that, there was grave concern on their part at the lateness of much of the information being provided to them. This did not give them any confidence about how they would be able to undertake an effective pilot, in terms of how its results might best be put back into the process so some learning could be gained from it. You came across as being very confident in your answer to my colleague. I am saying that, on the ground, that is just not the situation that is being experienced.

Robert Devereux: I am very confident about my answer because the question I was being asked was how many people I would have doing X, Y and Z. The only answer to that is: let us do some work and see. If your colleagues in Oldham do not feel they have the information they need, they may need to drop me a line. I was speaking to the chief executive at a conference the other day and that did not seem to be the message he was giving me. He was pressing me on another question, which is: if local authorities do good work, how do they get to share the potential benefit savings? That is a perennial question from local authority chief executives and one that is perfectly valid but also very difficult to establish.

Q51 Debbie Abrahams: These are people who have to manage, organise and deliver it on the ground, so not necessarily the chief executive.

Robert Devereux: Because I want these pilots to be successful, if there is anything getting in the way, perhaps you would let me know.

Q52 Debbie Abrahams: And the lateness of information.

Robert Devereux: I do not quite know what it is.

Q53 Debbie Abrahams: I will make sure that comes to you.

Robert Devereux: If it is coming out of Oldham, you do not even have to tell me; I can go back and speak to Oldham and find out.

Q54 Chair: I am sure Debbie will have a letter in the post to you itemising all the things she has picked up.

If you discover that it is not Jobcentre Plus that is best placed to support claimants, particularly those who are digitally excluded, you have suggested that it might be done by local authorities or CABs. Will they get the money to provide that service, because they are all finding that their budgets are being cut to the bone?

Robert Devereux: I read the transcript, too. I think Lord Freud gave you a pretty clear "yes" to that question.

Q55 Chair: He said "yes" to citizens advice bureaux, but we did not get anything about local authorities.

Robert Devereux: From memory, he said, "We will stand behind the principle that if we put new burdens on local authorities, we will fund them," but, as I have been answering, the extent to which it turns out that that is the right answer, and how much that might cost, is to be established. It is not in my interests, nor the interests of local authorities, to fudge this particular one, because I need to get it right.

Q56 Chair: Can you answer this question: what will happen to the housing benefit staff, who are currently sitting in local authorities with a huge amount of expertise, when universal credit comes in? Will your Department be looking actively to recruit them? It would be an absolute tragedy if local authorities made them redundant and you do not get the expertise.

Stephen Lloyd: Because that is a lot of specific skill around housing benefit, which is so complicated.

Robert Devereux: Remember, we have just announced the first set of universal credit centres-I cannot remember how many-that will do some of this processing. They are in a finite number of locations, so, with the best will in the world, given that housing authority staff are a long way away from those locations-because they are in 424 authorities-it is not a practical proposition to imagine that all the existing housing benefit staff will move to the particular locations we have. In any case, it is not as if there is not other work going back the other way as part of the Government’s policies in respect of other benefits and changes. We are sending the social fund back to local authorities; we have asked them to do council tax benefit. There are things moving in two directions. In any recruitment that we do, we are not setting our face against taking in housing authority staff, but we are not setting out to say that, all of a sudden, these people are going to come our way, because, for all the reasons I have just been through in terms of automation, there will be net savings in the total number of people doing welfare in the universal credit space, even though, in local authority space, there will be some work going on that currently we do.

Mike Driver: In case you ask the question again about new burdens, if you take the social fund in particular we are sending money through CLG to local authorities to do that work.

Q57 Chair: But CLG keep top-slicing it, as they have done with council tax benefit.

Mike Driver: We are doing it in such a way that they probably will not be able to do that.

Robert Devereux: We are abiding by the doctrines that we are supposed to adopt. You will have to ask CLG what they choose to do.

Q58 Chair: I thought you were against silos in your own Department, and that that was the problem?

Robert Devereux: I am, but I have not come prepared. I am not well versed in exactly what it is CLG have done with it.

Q59 Sheila Gilmore: When we took evidence on universal credit there were a lot of concerns about the sanctions regime and whether people fully understood what they were being sanctioned for, and what kinds of warnings people would be given prior to a sanction being applied. How do you ensure that your staff deal with this properly?

Robert Devereux: The world that we are trying to put in place with universal credit starts from the proposition that the current system is not very clear to people. If you want to have a decent sanctions system, you need to make sure you have one that is clear about the consequences for action. Quite a lot of the stuff to do with universal credit is trying to say, "Look, we’re going to do this on the basis of first, second and third failures. Each time we will be very clear what we are doing. We won’t have lots of variation and different things in it; it’ll be a straightforward thing, which, by the way, we will then write on to your claimant commitment." At the moment, you cannot find on your jobseekers’ agreement exactly what you have signed up to by way of sanctions because there are so many ifs, buts and maybes. In the universal credit world, the set of sanctions is sufficiently straightforward that you can reference it in the claimant commitment. When signing the claimant commitment, people can know exactly where they stand. There is a very deliberate simplification going on here to make sure people can follow it.

Q60 Sheila Gilmore: Does simplification mean that there are no ifs, buts and maybes? If somebody who comes along has not brought their diary filled in and cannot produce it at the beginning of the interview, is that sanctionable? Are they allowed to give any reason why they might not be able to do that?

Robert Devereux: We are still in the world of social security. People will still be able, when confronted with a sanction, to submit a rationale around what we call good reason to say, "I couldn’t do that because…" To take the example of a lower-level sanction, if they fail to attend a work-focused interview they could put as a good reason, "As it happens, my wife had to go to hospital," or whatever it might be. Those are the sorts of things that happen at the moment; they will continue. In a sense, that part of the regime is not changing. If you want to understand what happens in the event that we do not agree your good reason-you have not turned up and there is no good reason for it-what we are saying is for low-level sanctions, particularly for the sort of things we expect you to do, like prepare a CV, attend a training course or whatever it is, the deal will simply be that we are going to sanction you until you have complied with what we have asked you to do. In addition, we will add seven, 14 or 28 days on top of that by way of a sanction. This is quite new territory; this is what we have been calling "open-ended sanctions". For the lower-level sanctions, which are things where we would like you to do something, we have asked you to do it, and there is no good reason why you should not have done it, the sanction works on the basis that you will complete this and, when you have completed it, the sanction will be removed. At the moment, we do not have that sort of arrangement. We are sanctioning the non-attendance; we are not trying to encourage people back in to do the thing we want. That is what the lower-level sanctions are.

The higher-level sanctions are slightly different because they are in the nature of things that, if you think about it, cannot be remedied. If I do not accept a job that I could reasonably have done, I will be sanctioned for that action, and there is no remedy. If you have turned it down, the job has gone.

The principle of the sanction that I am trying to illustrate is that it is straightforward to comprehend what will happen to you, and I am submitting that is different from and better than what we have at the moment, where there are so many different variations that it is not straightforward to comprehend, but all of it remains subject to good reason.

Q61 Sheila Gilmore: If somebody is sanctioned for a long period, are they able to get any help? Could it not be counter-productive? I give you the example of a constituent who has been sanctioned for six months because he wanted to go to one Work programme provider where he had been successful previously, and not the other. He was told he had to go to the one he had been told to go to, and he has been sanctioned by way of loss of benefit for six months. How is he going to get any help at all in that period?

Robert Devereux: It is important to say that the staff in the jobcentres continue to make all the offers that currently exist, including when you are on sanction. The sanction is there because, in an active labour market with conditions, those conditions have not been met. It does not mean that you cannot then get help. Another important thing we have introduced is that, whatever sanction you have got, if you are six months off benefit, we will wipe the slate clean. If you find yourself in work, or, through the help of jobcentres, get into work because you are on a sanction, you can wipe the slate clean by being off benefit for six months.

Q62 Stephen Lloyd: Is that a new thing?

Robert Devereux: I thought it was new. If it is not, I apologise.

Q63 Stephen Lloyd: It could be. I am not trying to catch you out. I just had not heard of it before.

Robert Devereux: I understood this to be a new departure, again to reinforce the sense that we are trying to be clear about it. We will check that. I do not think anybody knows.

Q64 Sheila Gilmore: Isn’t there a risk that someone in that position is simply going to drift off?

Robert Devereux: What would you like instead? The entire edifice of the jobseeker agreement, which is why our labour market performance in this recession-which is a much deeper one than many-has been much better than it would otherwise be, is that we have a conditional benefit; we make people do things, and constantly being on their case is having measurable improvements in labour market performance. If people are not going to meet those conditions, something has to happen. All that the Government are doing now is saying that ought to be clear, straightforward and appropriate.

Q65 Sheila Gilmore: So you do not think that there are people who are effectively disappearing from the system? You are saying that all these active prods, sanctions and so on are creating good labour market performance, but there is evidence that some people are dropping out of the system. You do not accept that?

Robert Devereux: I did not say that, but I am not sure what you would expect the Department to do.

Q66 Chair: You must take into account the social consequences of some of the policy decisions that are made. If someone finds it too difficult to engage, they might turn to crime; they might be starving on the streets.

Robert Devereux: It is very important to make sure that the things we ask them to engage with are reasonable, and so the "good reason" cause is there to try to make sure that we have not asked a ridiculous thing.

Q67 Chair: But people with mild mental health problems that are not severe enough to get anywhere near ESA will be a large proportion of those you are sanctioning, because that is the fundamental reason. If the consequence of the sanction that they are not able to get out of because they cannot fulfil what you ask of them-although it may seem reasonable to us-whether it is getting up in the morning and organising their time, because of their illness, which is not severe enough, is that they are on the streets, homeless and so on, that must be of concern to you, surely?

Robert Devereux: It is a concern, but we are going to drift between people who are properly on JSA and those who, if they really cannot do active job search because of their condition, will not be in the conditionality world.

Q68 Chair: We have questions on the WCA-they’re coming. The problem is that to get over the threshold of WCA to get on to ESA you have to be very ill, but there are lots of people who are not that ill, are on JSA and are dependent on having an understanding personal adviser. At present, sometimes they have an understanding personal adviser, but if the sanction used is so rigid that those kinds of personal observations of your personal adviser cannot be taken into account, you are storing up huge trouble.

Robert Devereux: What I have described is what happens in the event that a particular claimant commitment has not been met. We might both expect, therefore, that if the individual you describe turns up, the job adviser thinks of things that are within the scope of the individual to manage. There is nothing in it for the adviser to be artificially setting a level of performance that clearly the individual cannot meet.

Q69 Sheila Gilmore: Can I come back to the example I gave? You may say it is going to change suddenly under universal credit, but this particular person had been referred previously to one of the work providers, probably under a previous programme. There were two operating in the area. He found that one of them was empathetic and worked well with him and the other did not. He was told, "You can’t go to provider one, whom you’ve worked well with; you’ve got to go to provider two." He did not go to provider two and was sanctioned; that is to say, he is off benefit until January from about last July. Why was it not possible, if you are really trying to help somebody in this situation, to let him go to provider one rather than say, "We are dogmatically telling you that you have to go to provider two"? This is somebody who probably does have an undiagnosed learning or mental health problem and does not want to self-diagnose it. I am not a doctor, but it seems to me unduly rigid. He was told, "You’ve got to do this, and if you don’t do it, that’s it." That is not helping somebody to get back into work.

Robert Devereux: I understand that. I suspect the reason that lies behind it is that we have gone to some trouble to make sure that there is more than one work provider in every contract package area. We are deliberately assigning people to them randomly so you can measure their performance against each other and see where they are. If it was indeed a case in several thousand that went from provider A to provider B, I can see exactly what the position would be, and I am sympathetic to your point. If, on the other hand, this becomes, "You can go to any provider you like," we will start getting selection biases in the way in which you and I assess whether the providers are performing well. One of the big problems with contractual structures is making sure you continue to have competition in the market, even when you let the contract. The way we have achieved that is to make sure there are multiple providers in every area, with randomly allocated claimants. That lies behind the general philosophy of the Work programme.

Q70 Chair: You have just illustrated the thing that you said was wrong with your Department. You gave us an example where, with a little tweaking, a member of staff, instead of sending a letter one month and then another one the next month, could do it in two weeks. I have a constituent who has got experience of one of the providers and does not want to go to that Work programme provider because of his experience with the same, and he will face sanctions. He has not yet. There are a number of very legitimate reasons, but you are saying, "We can’t do it; we must be rigid because that is what the contract is."

Robert Devereux: With respect, I did not say that. I was trying to explain what was probably lying behind the way the adviser treated it. What I said to your colleague was that, if these are known to be isolated changes at the margins, it would not make any difference to the statistics of the Work programme, and that would be a perfectly legitimate thing to do. I do not mind taking it away as a question. All I am observing is that, if it becomes the case that any person referred to the Work programme can decide they would rather go somewhere else, neither you nor I will be able to measure whether or not provider A and provider B are meeting the minimum standards.

Chair: I do not think we are suggesting that.

Q71 Stephen Lloyd: Like all these things, to a great extent you are both right. I understand that you need some boundaries; otherwise, you will not have a level playing field and the empirical evidence would be hopeless. By the same token, my colleague and the Chair are right, and it backs up to what the DWP say they are trying to do in Jobcentre Plus: have those rules but have some level of occasional flexibility that will not throw the baby out with the bathwater. It is worth thinking about.

Robert Devereux: I am happy to do so. It may well be the case that it is relatively straightforward because the number of people who ask to switch providers is so infinitesimally small that we can give people some carte blanche there. I am very happy to take that away as an example. You are absolutely right. I do think we are both right, and I am happy to look at it.

Q72 Chair: Can I push you a wee bit more on the point Sheila was making: the number of people who are disappearing from the system as a result of the sanctions regime? It might be that is the Government’s intention: if they are not going to do as they say, they will not get any benefit, and, therefore, there is no cost to the taxpayer, but there is cost to the taxpayer because of the social consequences of large numbers of people not having any money. You may say that they are not being responsible, but there will be people who, rather than do this as they are asked, will take the sanction and end up with no money. They end up in the black or grey economy or depending on family and friends, if that is the case. Have you done any work on estimating the numbers of people who will just disappear from the system? I suppose there are also those who will disappear from the ESA system because the contributory ESA comes to an end after a year.

Robert Devereux: I noticed that, in the conversation you had with Ministers about universal credit, there were two slightly competing philosophies going on here. A lot of this stuff to do with sanctions is to make sure that the great majority of people comply with the agreements that they make and sign for when they take conditional benefits. It is important to ensure that works well. With as many people as we have on benefits, you would want to make sure they are fulfilling their conditions. That is a different point from the question: what are the numbers of people for whom that regime is not working effectively?

All I can say is that the work we have referred to many times to try to identify how you would know who these vulnerable people are in claiming universal credit, and how would you then deal with them, is real work going on right now. If it turns out that one of the characteristics of the sanctions regime is somehow or other generating costs further out in the system, we would want to know and pick up on that, but I do not want to entertain the proposition that somehow or other the sanctions regime ought to be a lot softer because there may be some persons who cannot cope with it. This is a difficult balancing act, isn’t it? There are large numbers of people on these benefits who are supposed to be fulfilling conditions. What you are asking us, perfectly reasonably, is that, if there are individuals for whom, somehow or other, that will result in an even worse outcome for the public purse and for them, please be alive to it. I am happy to be alive to it, but some of the conversation makes it sound as if everybody consequent upon this will be in that box. I do not believe that.

Chair: I do not think we are saying that. Let’s move on to fraud and error, because we have quite a few questions.

Q73 Debbie Abrahams: This year the Comptroller and Auditor General again qualified his opinion on DWP accounts due to the level of fraud and error. Last year, you said that the Comptroller and Auditor General was thinking through what the benchmarks should be for an organisation like yours. What progress has been made towards that benchmark?

Robert Devereux: Since the CAG is properly jealous of that which is his opinion, it is for him to decide what benchmarks he is prepared to look at. I know they have been doing some work on this, but it is quite a difficult thing to do. There are surprisingly few people in banks and insurance companies that want to disclose what an acceptable level of loss is.

Q74 Debbie Abrahams: Do you have an idea what sort of level would be acceptable to them?

Robert Devereux: I think that as soon as you start putting the words "acceptable" and "loss" in the same sentence in Parliament, you are looking to a short career. This is taxpayers’ money, and it is perfectly reasonable to say that we ought to be aiming for not losing a lot, but when you start running large systems as we are doing now, then, as in every other walk of life, the question you ask yourself is: how much would it cost to protect the next pound, and is it worth spending that to do so? At the point at which it is not worth spending it, you would not invest.

One of the things you would find, if you want a way of calibrating this, is that lots and lots of banks and insurance companies are spending a lot of money on the sorts of things I described earlier about integrated risk and intelligence. The sort of data analytics and data mining that large companies put in to try to prevent avoidable losses is orders of magnitude more than we do normally. It is a fair push back to us to say we really do need to do more in this space, which is why I described it as being a fair point.

The Comptroller and Auditor General has written in the accounts this time round that he is qualifying them on two grounds. One is: is the loss too big? The second is a reading of the statute that simply says that any penny that is misapplied has both a regularity constraint and a propriety one. He is doing it under both of those at the moment. Even if we had an erudite conversation about the levels of acceptable loss, in my understanding, it would still turn out to be irregular according to the CAG. That is why I think he has put in his opinion that, if we regard that as being the case, we ought to come back and make a legislative pitch to Parliament to change the rules.

One of the things Lord Freud and I are seriously contemplating doing is having a conversation with the PAC to talk through how in a civilised fashion we can reach a judgment about what level of investment we want to put in to protect against fraud and error to get to a more reasonable position. I do not think anybody thinks that 20-odd years’ worth of account qualification is achieving very much, because normally account qualifications are supposed to be a shock or drama and something must happen, and we are past that.

Q75 Debbie Abrahams: One of my colleagues has just passed me the NAO’s comments. I note that fraud and error has remained at a consistently high level since 1988-89.

Robert Devereux: That is not correct.

Debbie Abrahams: That is an actual quote from the report.

Robert Devereux: Where are you?

Debbie Abrahams: This is in paragraph 53 of the summary of the NAO’s work on DWP on page 20.

Stephen Lloyd: It is the summary report.

Robert Devereux: I know the one you mean. We have a copy somewhere. Let’s try a couple of facts, shall we? The level of fraud and error as recently as 2001 was 3.2% of the benefits spend. For the last five or six years it has been of the order of 2%. There has been a material reduction over that period. What I think the Comptroller and Auditor General keeps coming back to is that in 2001, when the level of fraud was 3.2%, the level of benefit spending at the time in cash terms was worth about £3.2 billion. Today, I have a better performance; it is only 2% for mistakes, but I have a much larger sum, so it is still £3.2 billion. It depends on whether you measure this in terms of the cash amount that is found to be incorrect or the rate of incorrectness. My view is that it is not good enough yet, but it has definitely improved. If you want to measure just the cash amount, unsurprisingly-since benefit spend has gone up by about 60% in the last decade-the total amount has not reduced.

Mike Driver: There is an example on the social fund accounts, which are separate from that, where we have a qualification as well. Fraud and error is down to about 1.5%, but our accounts are still qualified for the same reason.

Q76 Debbie Abrahams: Are you able to quantify the reduction in fraud and error as a result of the introduction of universal credit?

Robert Devereux: Yes, but forgive me if I add just one explanatory point. The numbers we have just been talking about are the national statistics, which measure the stock of incorrectness at any one time, so they literally go out and sample cases and decide which ones are incorrect. Our view is that we will be saving the taxpayer something of the order of £2 billion a year as a consequence of introducing universal credit. That is not directly comparable with that stock number because one of the things that will improve is the level of over-payments that are recovered, particularly in tax credits.

I will tell you the sorts of things that make a difference under universal credit. We estimate that by having a regular feed from HMRC about all the earnings data, instead of waiting for people to tell us often late, or sometimes incorrectly, we will probably save something of the order of £500 million a year. Because we will not have to ignore, as it were, some of the changes in income that at the moment are ignored when it comes to tax credits, given the six-monthly way they are claimed, we think we will save the best part of £750 million a year. They are very large sums of money that come from the particular design of universal credit and will save the taxpayer real cash.

Q77 Chair: At the moment, of the £3 billion, £1 billion is about fraud; £1 billion is official error and £1 billion is claimant error. Under universal credit, do you think there will be the same level of fraud or less, and will basic error, which is the biggest bulk of it, be reduced? Will your super-duper computer systems make it easier for your Department to get it right?

Robert Devereux: At the moment error, whether it is customer or official, is running at about twice the level of fraud, so it is roughly a third, a third. We have done the calculations, which say that the target the Government have set us is to get the percentage of fraud and error down to 1.7% by 2014-15-the end of the Parliament. It was 2.1% in 2010-11; it is 2% in 2011-12, so it is going to be 0.1% at a time as we go down. That is the sort of rate we are going at. I am not sure I have seen any internal calculations about whether that is achieved by differentially affecting error or fraud. If you think about some of the answers I have already given you, you would expect it to deal with both, because we will not have some of the processing errors that arise from having to copy and transcribe between multiple systems. Some of the facility to see what data we are holding through your online account, as opposed to wondering what it is and therefore not necessarily reporting it, will also be improved. That is the customer error part of it. Lastly, the fraud bit will be significantly improved because by bringing together the verification and thought process about what sort of person I am dealing with right to the front of the queue, you would expect to be in a better position on fraud. I expect all three of them to get better. I do not think I have seen the overall data for the Department broken down into exactly which ones that will be. It may be quite difficult to project that.

Q78 Debbie Abrahams: I want to pick up on what my colleagues said earlier about what other costs might be incurred by other parts of the welfare system, not necessarily DWP. In terms of your fraud and error strategy, can I ask about the reduction in over-payments? You have the figure of £1.4 billion by 2014. Do you think you are on track to deliver that?

Robert Devereux: Those are the numbers I have just quoted. The £1.4 billion is a monetary value of the 1.7% I have just described.

Q79 Debbie Abrahams: I understand it costs the fraud investigation service 46 pence for every pound it identifies as recoverable over-payments due to fraud. Why is it so expensive to investigate fraud?

Robert Devereux: I do not immediately recognise the number, but if it is an estimate of how much it costs to do a fraud investigation it would not surprise me if it is relatively expensive, because quite a lot of work has to be done to produce evidence to a standard that stands up in court.

Q80 Chair: The figure came from a parliamentary question to Gareth Johnson on 15 October 2012.

Robert Devereux: It may well be right. One of the reasons you do fraud prosecutions is for the deterrent effect. We are not just hoping to save in the particular case that we take to court; we are also hoping that, by dint of giving that very good publicity, people realise they cannot get away with benefit fraud. I am pleased that it is still the right side of less than a pound for a pound saved, but it would not surprise me. This is quite expensive stuff. We have to get the evidence together, pay barristers and all the rest of it. This is not a trivial task, but we do not do it simply to save the money in that case. We are trying to demonstrate to people that you cannot get away with it.

Q81 Chair: But that is not going to get any cheaper under universal credit.

Robert Devereux: It won’t.

Q82 Chair: It might even be more expensive under universal credit because the people who are fiddling the system will have to be a bit more inventive, but your checks are there.

Robert Devereux: I am not sure I am following the logic of that. We have arranged, for example, to put the prosecution of our cases in with the CPS now. We used to have our own prosecution service. We have made sure that has gone in. We have tried to make some savings in that space. In general, prosecution is an expensive business, but I continue to do it for its deterrent effect, as long as it saves me money case by case, which it does.

Q83 Debbie Abrahams: The most recent fraud and error strategy was published this year and involved sharing information across Government. I was wondering what plans you have in place to ensure that personal data are being protected.

Robert Devereux: There are a couple of things. We have different legislative provisions to share with different parts of Government. The best one we have at the moment, courtesy of the Welfare Reform Act, is a very substantial tidying up of the multiple powers we have to share data with HMRC. Section 127 of the Welfare Reform Act consolidated all that, so HMRC is in a good place. With some of the other Departments, we have powers for specific things. For example, we can share information on passports and immigration with the Home Office. All those powers give us a statutory background for what we do. It is an entirely different question to ask me: is it being done securely? That takes you into the methodology by which my analysts get hold of electronic data to do data sharing. The answer to that is that, for every single piece of routine data sharing we do, all the data are brought to us electronically and in an encrypted form. There are no disks going round anywhere. The only time we ever move physical disks, which are then encrypted, is when we are doing very small volumes for pilots. We are trying to do some piloting now on the European health card and whether there is any information you can get from the NHS that way. That will be 1,000 cases and it is not efficient to set it up as a big electronic transfer, but every single routine thing we do is being wired to us in an encrypted fashion, and that is as good as it is going to get.

Q84 Debbie Abrahams: In the NHS there is somebody called the Caldicott guardian who is responsible for making sure that personal information is shared in an appropriate way. He has an independent role on NHS boards in that process. Do you have somebody like that who can act as a conscience, say?

Mike Driver: We have information asset owners across the Department.

Robert Devereux: I do not think that is quite the same. The answer is that I do not know. I will go and ask. The individuals we have doing this are quite good at it. To give an example, the Government announced that they wanted to give an automatic £130 rebate to pensioner credit households in respect of heating. In order to do that without troubling pensioner credit households we went to the energy companies. I think there are 28 million records sitting in the energy companies, because every one of us will be in there somewhere. Instead of asking for 28 million records to match against our pensioner credit households, they thought quite laterally and said, "We know the postcodes of all our pensioner credit people. They are not sufficiently precise to identify the pensioner credit person, but we can at least ask for postcode data on energy supplied." That radically reduced the number of records we needed.

The thought process that goes into trying to make this straightforward and automatic, none the less not wanting generally to catch your data and my data if we do not need to, is the sort of thing we do routinely. In one sense it is the precision with which individual data sharing requests are made that gives most of your protection, because the legislation just provides a gateway. The gateway would have enabled me to do this, but the thoughtfulness of my staff basically means we are trying to keep it to an absolute minimum. We do not want to be awash with data that we do not want usefully to use.

Mike Driver: It is worth just noting that on pages 32 and 33 of the accounts, we have a summary of the personal data incidents, which you will see are very low in 2011-12. I was just checking with my colleagues that in 2012-13 we have had no incidents we have reported to the Information Commissioner that we would need to disclose in the accounts.

Q85 Debbie Abrahams: The new check-first approach will ensure that benefits will be paid only once DWP has verified applications. How long will the checks take? How will you ensure that the receipt of benefits to genuine applicants is not delayed unduly?

Robert Devereux: I am sorry. Could you read that again? I am not familiar with the question.

Debbie Abrahams: How long will the checks take once somebody’s application has been verified?

Robert Devereux: It is the "check" bit that I am querying.

Debbie Abrahams: The check-first approach.

Q86 Chair: You have already spoken about the fact that you will check all the details and everybody’s information before you pay benefit. We were told that is called the check-first approach.

Robert Devereux: That sounds very plausibly named. At the moment, we are paying new claims in the order of 10 or so working days. I would expect that, if we are going to invite people to think differently about how they do the verification, we do not want to make that longer if we possibly can. That said, if I have material doubts about a case, you would probably expect me to chase that up as efficiently as possible rather than just pay because we are getting to a particular threshold. We are not embarking on this with a view to taking ever longer before we pay people. Since we end up back-dating this anyway, there is no great advantage to us in that. That said, we will want to keep an eye on the way it works through to make sure it is not taking too long.

Q87 Chair: But with universal credit it is imperative that it is very quick, because it is all the money in one payment, apart from council tax benefit.

Robert Devereux: It is paid four weeks in arrears, so in practice we have slightly longer before the payment goes out than we do at the moment.

Q88 Chair: But if it is four weeks in arrears, people will want to draw down their first payment somewhat in advance of that.

Robert Devereux: There are provisions at the start of the claim to make an advance, but we come back to the same thing. I am not in the business of deliberately delaying people’s claims, but, by the same token, I am accountable to Parliament to make sure we do not overpay people. We have to find a sweet spot where most of this is done properly and quickly, but, if I have some real nagging doubts, I do not think I will put it in payment just because I have reached some artificial point.

Q89 Debbie Abrahams: I understand you have a massive team of 1,000 staff working on clearing up the backlog of incorrect benefit payments. How long will it be before that is addressed?

Robert Devereux: I have two different teams. One is doing some work on pension credit and the other is doing some work on the other means-tested benefits. In a world in which we do not have the sort of sophistication that I have been describing would come with universal credit, I have got errors and changes in the system that are not being captured, so it is still worth my while making sure I invest in the calls I described earlier, with people ringing up and checking that things are right.

As to the 1,000 people, it is a large team. At the moment, for every pound they spend on themselves, they collect more than £10 in benefit saving, so this is absolutely a sensible investment to make. It is not a sensible thing to be designing the system around, so we are not designing universal credit with a view to having an army of people checking it. The whole point is to try to design a system where it is kept right because the claimant can see it online. We have gone to the trouble of doing validation and we have designed the rules so that a lot of things that go wrong, we know automatically without anybody having to tell us. For the moment, and for so long as the legacy benefits continue, if I am saving £10 for every pound I invest, I will continue with that.

Q90 Debbie Abrahams: I am still relatively new to the Select Committee. It has never been explained to me why fraud and error when reported is all lumped together, and it is also misused when reported, particularly in the media. I remember asking last year about how it is misreported. Isn’t this one way where it can be conflated so that the media can just latch on to the overall figure instead of the issue around the error?

Robert Devereux: In the last year we have done quite a lot of work in trying to understand in even more detail than previously what normally happens to some of the cases that are properly found by the statisticians to be wrong on a day. Imagine that I look at a claim today and it turns out that the customer has failed to report something-maybe earnings, for the moment. Quite a lot of customers eventually tell us that is wrong; they just do not tell us promptly, so it is counted as incorrect in the statistics. It gets multiplied and you call that £3 billion, but in practice for all those things that are to do with customer errors, we go on to collect a lot of that back again. We are not really quoting a net loss to the taxpayer by using figures that are snapshots. The same goes for fraud. When we have found it, we have collected it back. In the conversation I have alluded to, when Lord Freud and I met the PAC, one of the topics was: what is a better characteristic of what it is the system is losing? At the moment, I am firmly of the view that we are overestimating what is being lost.

Q91 Stephen Lloyd: The current figure of £3.2 billion does not include the £500 million or £200 million that is clawed back, so that is a gross estimate as opposed to a net estimate.

Robert Devereux: Correct. The reason I think it is relevant to the question you just asked me is that the things we typically collect back are obviously the errors as opposed to the fraud, because if it is fraud either I have found it or I still do not know about it. As to fraud, the number in there is probably the right one, but it might lead us to think that we want to report fraud separately from another concept, which is that people have made mistakes. How much have we lost consequent upon recovering the mistake that we now agree they have made? That might give us a rationale for reporting it separately. I cannot promise that the media will not add those numbers together.

Q92 Stephen Lloyd: What I would add to that mix is trying to work out some sort of empirical number that includes the fact that £320 million was clawed back by the DWP. There are two things. My colleague talked about, for the reasons you have explained, splitting fraud and error. It was only when you said it that I suddenly realised. I have always seen the £3 billion, £4 billion, £3.2 billion, or whatever. I share my colleague’s concern about conflating fraud and error when error could be over 50% of it, but it never occurred to me that that is a gross figure. I would be interested hypothetically to say, "In 2011-12 our estimate is £3.2 billion, and six months later, after we’ve clawed a lot back, it is £2.8 billion". Do you know what I mean? It could be quite a significant sum. I do not know whether there is a way of beginning to think about getting that into the pot.

Robert Devereux: I alluded to the fact that I have begun to think about that. This year will be the first year that we collect £1 billion in debt. To give you some idea of the extent of our recoveries, for whatever reason, £1 billion will be collected by the Department. This is a non-trivial number when the total amount of customer error is itself of the order of £1 billion, so by connecting together these two thoughts, there would be a route to tell a slightly different story about the way the published figures come out.

Debbie Abrahams: That will be positive.

Robert Devereux: I think it would, too.

Chair: We have kept the best to last: work capability assessment. It is the one thing that probably all MPs get more complaints about than anything else, including CSA, which was pretty bad. We have not even gone there.

Q93 Stephen Lloyd: Professor Harrington has highlighted the importance of the role of the DWP decision maker in ESA claims and in particular their ability to make judgments and not be bound by the Atos report. However, the DWP’s own recent research report said that decision makers feel they have less control over decision making now than previously. What are you doing to ensure that decision makers are, as promised or intended by the Harrington report, able to make properly informed decisions that take account of all the medical evidence and are right first time?

Robert Devereux: That is an important question.

Q94 Stephen Lloyd: It is a long question. The Harrington report says that decision makers are going to be flexible. Your own research report says decision makers feel they have less control.

Robert Devereux: One of the things about the WCA is that, because the Government are committed to keep improving it, it does keep changing, so a question that is worth just checking is the extent to which the response you are getting from staff is consequent upon them being right at the point their research was conducted in implementing his recommendations in the first phase of this. As I understand it-I will check for you-in fewer cases are we simply going with what the mathematical score might have indicated was coming out of the assessment itself. In fewer cases are we simply following the arithmetic. That suggests to me that our decision makers are exercising increasingly more of the judgment that Professor Harrington has invited them to take. If, for example, X% of cases were producing a different answer when the decision maker looked at it than you might have thought by just reading the report, and that had stayed the same after everything Harrington had done, you would imagine it was not making much difference. In practice, rather more of them are being decided differently from the way the report suggests.

Q95 Stephen Lloyd: When will we see that data? You are absolutely right, because one of the points of the Harrington report was to allow DWP decision makers more flexibility.

Robert Devereux: Yes.

Q96 Stephen Lloyd: That should in theory reduce the number of people who then go to tribunal and appeal.

Robert Devereux: Strictly speaking, that is a different thing. Certainly, in respect of our own decision makers we are trying to make sure they are very familiar with what the test is trying to do and the way in which Professor Harrington is inviting them to step up to the plate and make these decisions. As I understand it, the evidence is that rather more of those decisions are different as a consequence.

Q97 Chair: To clarify the process, we have heard from the decision maker that when there is a difference between what the decision maker would like to recommend and what the Atos WCA has recommended, a person from Atos sits with the decision maker and they then work out who they are going to go with. In these circumstances, anecdotally the decision maker feels that more are going with the original Atos decision rather than the decision that they wanted to make.

Robert Devereux: I do not know the answer to that. The trouble with anecdotes is that you do not know whether they are statistically significant. The facts I was told when I came in were that, in aggregate, looking at the number of decisions that were not the same as would be the case on immediately reading the report-to say, "That is a score of X," and therefore they are in or out-there are more decisions now where the decision maker is taking a different view than was the case a year ago.

Q98 Stephen Lloyd: We are talking of percentages. That is the key thing, because clearly the numbers are going up because of the direction of travel that the Government are pursuing by putting people through tests. The percentage is crucial. Would it be possible for the Department to supply the Committee with, say, the percentages now compared with 12 months ago? Harrington has had about seven or eight months to bed in. In theory, if you are able to do that, we would be able to tell whether it has gone up or down.

Robert Devereux: I am being cautious about quoting a number now only because I want to be absolutely sure we get the right figures. Let’s do that. If you are going to ask me whether they are just rubber-stamping, the only calculation I can make is the way I have I have just described it. I understand that it has changed.

Q99 Chair: It may be that some of the decision makers would want more to change. There might be more change than there was previously because of that.

Robert Devereux: But they are the decision makers. Everything that we and Professor Harrington have said is, "You are the decision maker; it is not a recommendation." We are not outsourcing the decision to Atos. We have asked them to run a test, which even Professor Harrington said is the right test. We are scoring this up, but he is simply saying, "Please will you just stand back; read it carefully, and think what you want to say by way of decision." If lots of my staff would wish it to be different, they have it in their gift to make it so.

Q100 Stephen Lloyd: We have got a number of questions here but they are terribly important. On WCA, there is a whole area where we are all waiting in Parliament for statistics. Publication of up-to-date stats on the outcome of IBR reassessments, to take that first, as opposed to new ESA claims, has been delayed since July because of problems in ensuring their accuracy. What are those problems, and when do you expect the DWP to publish those statistics? This is ESA/IBR.

Robert Devereux: I have come here with every number you would like on ESA but not IBR, so the answer is that I do not know. Can I drop you a line?

Stephen Lloyd: Come back to me on that. I have others, but that is important.

Q101 Chair: Why were the ones pooled in July?

Robert Devereux: I do not know. This is part of my preparation that I have not picked up on. I have gone through all the ESA stuff, but I have not picked up a difference in the IBR stuff.

Q102 Stephen Lloyd: Perhaps you would do that, please. I would like to go the appeals and then come back to that, if that is all right, Chair.

The next thing is appeals, which is down to stats again. We are all aware of the changes as a result of Professor Harrington’s report, of which I was broadly very supportive. I live in the earnest hope that the number of successful appeals, depending on how you define "successful"-where the customer has gone to the tribunal and has succeeded and the original judgment, whatever the word is, is overturned-will be reduced. I posit that we will know whether Harrington’s changes are beginning to show an improvement if the number of successful appeals starts going down from the shockingly high 40% that it was. When we took evidence from the Minister for Employment, Chris Grayling, in March last year, he said it was too early to tell whether the implementation of Professor Harrington’s recommendations was having an impact on the high level of successful appeals. Are you able to update us on the situation now? When are you anticipating that the figures will be released into the public domain?

Robert Devereux: Generally speaking, as a Department we are pretty good on management information. My colleagues have just won an award from the Institute for Government for their work on unit costing in particular. When it comes to appeals, one of the things that bedevils it is being able to track cohort data. I know lots of information about what is happening in Atos, in the Department and the Courts Service, but stitching that together and saying that a particular one came before Harrington part one, or before these changes, is difficult. It is quite hard to say I know that by a certain date this will all wash through the system, because at the minute it is almost as if I have three different sets of data. But you are right in your assumption that, if Harrington is successful in what he is doing, it would tend to reduce the number of appeals, but it is only one of many things that are going on here.

As to some of the other things we are doing here, we are moving to a position where we will require mandatory reconsideration of anything before it can go to appeal.

Q103 Stephen Lloyd: Has mandatory reconsideration been started yet? I was not aware of that.

Robert Devereux: If it is requested, reconsideration has been in the system for a long time. The prospect of change-I do not think it has happened yet-is to say, "You may not go to the tribunal until you have had it properly reconsidered."

Q104 Stephen Lloyd: Would that be a paper reconsideration, or would the individual have to go to another face-to-face assessment?

Robert Devereux: It is not another face-to-face assessment; this is for another decision maker to look at the evidence, speak to the claimant and say, "You’ve asked me to look at this again. Is there anything else you want to tell me that you haven’t already told my predecessors so I can reconsider it properly?" One of the things you will know, if you ever go and sit in any of the tribunals, is that a large number have the effect of people turning up with evidence we have not seen previously. There is something about the process which means people are turning up and putting information in front of the tribunal which has not been put in front of my member of staff.

Q105 Chair: That is because they are never asked.

Robert Devereux: With respect, that is unfair to the substantial work people do all the way through this process to try to get the information. You should not assume that everybody is simply delivering everything that might possibly be required at the start. I observe only that there is a lot of new evidence. The other thing that happens at tribunals is that they make a different judgment on exactly the same fact. Mandatory consideration is one step in this. The second thing we are doing is working with the courts to understand with much greater clarity than we previously had why the decision is overturned and what thought process was gone through so we can try to make sure we have had that thought process before you get to it. That is an important part of developing the appeals story.

Q106 Debbie Abrahams: As I understand it, there is a 56 or 57-page assessment application form. Presumably, a lot of people think that, surely, in 56 pages they should be providing all the information that is required in that bureaucratic process. I just park that one.

Robert Devereux: If they have done that, the tribunals would not be telling me that people are turning up with new evidence.

Q107 Chair: They are turning up with new evidence because the evidence very often costs them money. They think they have filled in a form which gives all the new evidence, but by the time they get to the tribunal of course they will get their GP or consultant to write, but there is nothing in the ESA50 form which says that. Very often it discourages that kind of extra expense to the claimant, because you would hope the claimant would get through WCA on the face-to-face interview and what they have got in ESA50.

Robert Devereux: For people to go through a face-to-face and not seek to explain what sorts of things they thought they might have-

Chair: That is the basic problem of the WCA. Everyone keeps telling us that some people turn up with all the documentation and the assessor does not want to see it. The assessor makes assumptions and asks, "How did you get here today?" If they took a bus, therefore they can get a bus every single time for every single journey. There are a myriad things. You just need to hear individuals’ experiences of going through the documents.

Q108 Debbie Abrahams: I can give you one case in my surgery last week. A man with a tumour on his pituitary gland had provided a consultant’s letter to say, "This is what he is restricted to and what he is able to do." It was ignored, and that was on top of the 56-page application form.

Robert Devereux: I am in no way seeking to deny those experiences, but, when you ask me about how the WCA is operating, we are anxious to make sure that it is being operated properly and with some quality. You might ask me by what mechanisms I know that. This is relevant. We go through a process of checking what has been happening and then checking the checkers about what has been happening to try to establish what sort of level-

Q109 Stephen Lloyd: The checking of the checkers started with Harrington.

Robert Devereux: No; I believe that predates Harrington. I do not think he has made that observation. It is just in ordinary contractual practice. What we are trying to do here is establish what level of reports are not well done. We have set targets and potential penalties round all that stuff, but, as to the sorts of numbers coming out, 2%, 3%, 4% of these reports are not turning out to be the quality we would like.

Q110 Stephen Lloyd: There is one thing across party, possibly for different reasons but often for the same reason, where we are all waiting for the data. Let’s say that from the coalition’s perspective, it is a challenge when you have a 40% successful appeal rate. From the candidate’s perspective it is horrifying, because all the MPs around the table have constituents who have succeeded in appeals and have gone through very stressful processes. We also have people who have failed in their appeals, perhaps quite rightly, but there is so much hyperbole around this issue and almost scaremongering in some way, and very understandable fear in another. We need to know whether it is still 40%, 35%, 55% or 25%. I spoke in a debate only last week, as did my colleagues. If I remember rightly, I said that if there is still a 40% success rate in appeals, we have a challenge with the Harrington changes. I understand that there are two or three changes happening as well as Harrington, but it was months ago when we got data on the 40% appeals. When will we get the new data?

Robert Devereux: I do not know. I will let you know when the next figures are available. Let’s just think about how this process is going. The other thing you are aware of is that, consequent upon the Harrington changes in particular, all the people doing these assessments started to take longer to do them to start with. First, they had to be taken offline to be trained; secondly, they took longer. From memory, the time it took to do assessments rose originally from 50 to 65 minutes, and it has gone back to 50 minutes. That has produced quite a big backlog of work in the Atos world. In turn, that means things are going to take a long time to work their way through the system so you can say of the October 2012 appeals data, "Oh, that’s good. Harrington has now had an effect", because there are still quite a lot of things going through the system. Sadly, this is quite a long process.

Please don’t imagine that simply because Harrington was in principle implemented in June 2011, today’s appeals data are telling you that Harrington has been successful or otherwise, because my expectation is that there is quite a lot of stuff in the system which needs to go through. It is a perfectly fair challenge to ask when I am going to know that, but when I gave you an answer earlier about my current difficulty in connecting together these data sets to give me decent MI, I have asked the people who are good at connecting together data to see what they can do to produce much better information so we know, when we look at a cohort of information about appeal successes, which months we are talking about in terms of whether they were pre or post Harrington; otherwise, we will be lost.

Q111 Stephen Lloyd: I understand that, and thank you for that comprehensive answer. Can you give the Committee any indication, even if it is within different cohorts and with the splits you are talking about-which is a point well made; I am not entirely sure the media and others will understand it, but there you go-of when it will get the next cohort figures? We have not had any stats on the appeals.

Robert Devereux: You have no cohort figures at the moment. All you have is the observable decisions of tribunals in individual months. If I had the figures today of what the tribunal has done in October, they would be a mixture of pre-Harrington and post-Harrington cases. The best answer I can give you is to say that will remain the case for a long time. It is much better that you ask me to go away and see whether I can possibly string these data sets together, because, on the face of it, if everyone has a national insurance number presumably we ought to be able to do a little bit of imaginative work here, but it is more complicated than it looks. They are trying to do that. We established an appeals task force with the Courts and Tribunal Service precisely to try to get behind all the different data sets so we can start to answer these questions. I know it is unsatisfactory not to know the answer, but we are trying to find out.

Q112 Chair: One of the reasons for fewer appeals for DLA is that the form says, "Don’t provide any medical evidence. We will ask for it; we will get it ourselves if we need it." The problem with WCA is that the individual does not know what the assessor will need, so they do not know what evidence they should get to turn up for the WCA, whereas if it ends up at appeal they will throw everything into it. Perhaps part of the answer you need to look at is getting the information after the WCA and before the final Atos thing is written and they then source the medical evidence.

Robert Devereux: To my knowledge, that is not something the good professor has observed as being a critical step.

Q113 Chair: It was you who said that the problem was that they were turning up with new information at the appeal stage. There has to be something fundamentally wrong at an earlier stage if this is the first time you have seen it, and it was crucial to the decision making.

Robert Devereux: And it pre-existed the tribunal.

Q114 Chair: Part of the problem is the cost as well. Under DLA, the cost falls to the Department; under WCA, it falls to the claimant. If someone is on very low income and has a clear disability, they will think it will be obvious when they turn up to the WCA and it is not. They did not think they would need a consultant’s letter to say they are quadriplegic, yet they do. It is only at the tribunal that that comes out. My welfare rights people in Aberdeen tell me they have a 90% success rate on appeals. That is partly because they sort out the things that do not have much chance, but they are getting people who come with nothing and no points at all and they are getting through quite easily on appeal, so there is something fundamentally wrong with the way WCA is collecting the information and doing the assessment.

Robert Devereux: All I can do is repeat what I said previously. Even Professor Harrington thinks it is the right test. It is absolutely critical that we get the right information with which to do that assessment. The steps we put in in respect of the sort of things he recommended should be done from June 2011, with healthcare professionals making a personalised statement, start to make it clear to people why the decision may have been made. Introducing mandatory reconsideration means that people think there is something else going on, and they get a chance to talk about it. Hearing from the tribunals how they can make a different decision on the same facts would help. All the right sorts of things are happening to try to get behind why we find ourselves in a position where so many appeals are resulting in changes. All I can say is that tracking that through the system is something that I, in preparing for this, have put some welly behind to try to make sure we get that done properly.

Stephen Lloyd: I agree with you. I think a lot of the right things are being done, but all of us are unsure until we see the data.

Robert Devereux: Me, too.

Q115 Stephen Lloyd: Let me ask one more question on ESA. We are all well aware of constituents who are claiming ESA and appear to be called back for reassessments very soon after a successful appeal. It does not leave anything to your imagination how blindingly frustrating and chilling that can be, because in the case of some of my own constituents, literally within two or three months, after they have waited eight months to go to an appeal, they are called straight back for a reassessment, even though they won the appeal. What is the Department doing to ensure that the frequency of reassessments is-it says here "more appropriate", but I would say "more sensible"? Is there any thinking-through of that?

Robert Devereux: I want to make sure I have got the problem straight. If there had not been an appeal and we put somebody, for example, into the work-related activity group, we would routinely expect to see that person again, because that is the way the system works.

Q116 Stephen Lloyd: It says "within a year", but it often goes back to when the whole appeal began, so it can be three months after the appeal has been won.

Robert Devereux: So the original decision, post appeal, was wrong-

Stephen Lloyd: According to the tribunal.

Robert Devereux: According to the tribunal. I guess the question then is: if time has elapsed, what would you like it to be?

Q117 Stephen Lloyd: I would do it from the day of successful tribunal appeal, because then it is a year. That is how people think.

Robert Devereux: To be clear, the year is not a matter of administrative convenience; it is supposed to be what the healthcare professional making the assessment thought was the point at which the condition might have changed. They may have got the wrong answer originally, but they may still be right on that. It is at least arguable that simply adding a year is administratively convenient but is not sensible, but I hear what you say. Let me go and think.

Stephen Lloyd: Please do, because I am sure you can appreciate how you would feel if you were in that position.

Q118 Chair: The former Minister, Chris Grayling, said on "Panorama", which I am sure you saw, that that was ridiculous and changes were being made. We have found no evidence that any changes have been made. It is certainly still happening.

Robert Devereux: Let me check.

Q119 Stephen Lloyd: We get the real power in front of us; we get the permanent secretary.

Robert Devereux: You know how it works.

Chair: If you listen to any of the debates, that causes more angst and anger than anything. Somebody with Parkinson’s disease has to fight even to get to the WRAG or support group. They have a degenerative disease and two months later they are back on the treadmill again. It is horrendous.

Q120 Stephen Lloyd: Even though I appreciate it is bureaucratic and I do not see it as some giant conspiracy, it does not take any imagination to think how in that situation I would feel. I have gone through all this and won the tribunal and two months later I get a letter. I would think that is personal-it would not be me being irrational-even though I know it is not.

Robert Devereux: I should probably gracefully withdraw, but we are spending a lot of money on this benefit; it is taxpayers’ money. If your request is that, in the event of the state going through a process, which it believes to be true, but a tribunal overturns the result, in all circumstances you will have a year on that benefit before we come back to it, I understand why you ask me that question. However, you will understand why I promise to go away and think about it rather than say "yes" immediately, because it is not self-evident that that is the best way to protect taxpayers’ money.

Stephen Lloyd: I know you will go away and think about it, and I am sure you will come back with something sensible.

Q121 Chair: Can I very quickly ask a few questions about the contract between yourselves and Atos for the delivery of WCA? The NAO highlighted that even though Atos did not meet some of its targets nine times out of 10 you did not apply any financial penalties, which were already written into the contract. Why not?

Robert Devereux: This is quite a misleading statistic. Can I explain why? The way the contract is structured is that we are trying to get the contractor to deliver good performance month in, month out. In all honesty, if they are not going to meet the performance in one month, I am most interested in making sure they recover that and put it back again. You and I may both wonder why it was structured in this way.

Q122 Chair: Part of our problem is that we do not know how it is structured, because every time we ask the questions, we always get the answer that it is commercially confidential.

Robert Devereux: I do not think this bit is commercially confidential, because possibly I will not be able to answer the question you have asked me unless I explain it. In respect of one element of this, a failure in one month, as it were, enables us to say to the contractor that unless this is remedied we will be making a charge against them, but if they do remedy it in the course of the next three months and hit the performance and put right what went wrong, we will not be making that additional charge. At the end of the day, taking one month with another, I just want performance. The National Audit Office points to the very fact that we observed that performance in one month was not quite right. They then observe that, because the company earned back, as it were, that particular thing, only one in 10 is actually sticking, but that is to misunderstand the nature of the contractual provision which was put in place.

Q123 Chair: What would Atos have to do to get a penalty from you? What kind of things would they have to get wrong to incur a penalty?

Robert Devereux: The contract contains clauses, which I will go and check to make sure it is not commercially confidential. If the quantum of all those payments, which I am explaining can be earned back, rises to too high a level, they are clearly at risk of being in default of the contract.

Q124 Chair: They are meant to be delivering 11,000 WCAs a week, are they?

Robert Devereux: The total flow into them from ESA is about 130,000-odd a month.

Q125 Chair: That is a lot more than 11,000.

Robert Devereux: You mean the face-to-face bit, do you?

Chair: Yes.

Robert Devereux: They are, yes. Let me come back to the question.

Q126 Chair: My understanding is that they are sending out 11,000 letters a week but not doing 11,000 face-to-face assessments and there is a big backlog.

Robert Devereux: There is indeed.

Q127 Chair: Does that incur a penalty?

Robert Devereux: I hesitate to do it this way round, but let me be clear. In any contractual arrangement, penalties depend a little on what both parties are doing, so if the Government decide on the back of Harrington to change what they require of the contractor, and it starts to take 65 and not 50 minutes and the entire body of healthcare professionals has to be retrained, the backlog in the first instance is a consequence of the evolving nature of the test, and it is not, on the face of it, an immediate shortfall on the part of Atos. There are a number of factors here. First, the test has been evolving, and the consequence of that is that you lose time and find you are unfamiliar with a new thing and it takes a while to do it. Secondly, the Department itself projects for Atos how many ESA claims there may be. This is not a straightforward process. Recently, we have underestimated the number of ESA claims that have come, so both those things, on the face of it, contributing to the backlog are potentially to do with the Department.

The third one is back in Atos’s territory, which is that they need to recruit enough people and keep them trained and not have high turnover, which is to do with their position on this. Fourthly, in turn that is not unconnected with the public coverage of all of this, because if you want to recruit and retain people you do not want to find that you are constantly in the news. There are four factors going on here.

You will find that, in contract law, any lawyer who looks at it will say, "Hang on a minute. What are the salient features of that? How would I manage the contract?" Realistically, we are managing this contract to take account of what they have done that they should not have done and what we have done which has changed the game. That is the nature of the conversation that is going on. I think it is a mistake to say that backlog equals Atos’s failure equals why I have not penalised them.

Q128 Stephen Lloyd: I understand that, but what I might float up, first, is why have fixed agreed targets if nine times out of 10 there are no financial penalties? Secondly, as you were talking, I had a brain wave. I have worked out how I am absolutely certain you will reduce the number of appeals and improve Atos’s reputation, which is important because of what we are trying to achieve in helping people get back to work. You set them a target based on the number of successful appeals. If they get X amount of successful appeals against them, they lose money; if they get Y amount of unsuccessful appeals they gain money. I absolutely guarantee you as a good, solid liberal capitalist that will improve the figures.

Chair: Getting it right first time is the phrase.

Robert Devereux: But not in a world where the Chair has already been asking me to let my decision makers have more discretion about whether they take their advice. When people go to appeal it is a combination of a process all the way from the moment they ring a member of my staff to make a claim, through the bit we ask Atos to do, and the bit we ask the decision makers to do. I agree with you that in principle the best way to optimise the system both for DWP staff and Atos would be to minimise those appeals. That is a very sensible thing to do, but I come back to the point that-

Q129 Chair: There could be an element of that. There are probably 20 people in every constituency who get zero points in the Atos assessment and end up being put into a support group, not the WRAG. That is a huge discrepancy. Surely, that illustrates that perhaps they are not doing particularly well. There are no penalties for failure as far as we can see in this contract.

Robert Devereux: The contract we have has got measures of quality, which I have described previously. Has the test been done properly? We are going back and retesting what is going on here, as well as measures of quantity. The question started with: this is an outrage; they have got all these backlogs. I have tried to explain why the backlogs may not themselves be to do with Atos. If you jump ship and then say, "Hang on a minute. The decisions at the end of the day are about quality, not quantity", that is a different argument. I agree with you, but, as things stand, I have a contract that was signed in 2005, well before I arrived, and it has a certain contractual structure to it. If you are encouraging me to think laterally about whether that contract might be revisited, you won’t be the first to suggest that.

Q130 Chair: Indeed, but you do have a contract coming up with the new PIP.

Robert Devereux: Yes. You would imagine that we might have learned some lessons in the way we are constructing that contract.

Q131 Chair: It is interesting you said that one of the problems facing Atos is that, because of the negative publicity, they have difficulty in recruiting and retaining staff, but you have just given two thirds of the mainland GB contract to Atos and they are having to subcontract to Lanarkshire Health Board.

Robert Devereux: Before we went to personal independence payments we had a quite good piece of work done externally on the nature of the healthcare professional market: its propensity to want to work for us and the nature of the test we are doing. The PIP assessment is different in nature from the WCA assessment. One is testing function and capability and one is assessing the extent to which the disability affects your life. It is genuinely our view that there are more healthcare professionals who will be available and competent to do that second test for PIP than has been the case with WCA. More particularly, it remains the case that the evidence we have is that a lot more people in the healthcare world are prepared to do sessional work than Atos to date have made use of. For example, all the nurses that Atos use are employed by them. That is not the same as the number of nurses who might be prepared to do one or two sessions in addition to their day job in a hospital. Looking at the evidence of the market-they have been to doctors, OTs and all kinds of things to ask, "How would you feel about doing this sort of work?"-I do not think there is any doubt that, in the PIP assessment, we should be able to find a deep enough labour market not to have some of the constraints which Atos have found.

Q132 Chair: That is all very well if you were doing just PIP or WCA, but you will have them both together. At the same time, you are also introducing universal credit with huge numbers of face-to-face assessments.

Robert Devereux: Yes, but let’s do some facts here. There has been a problem of backlog for the reasons I have explained with where this has got to, but, as we stand now, of the seven groups of geographical areas, two are within normal tolerance for backlogs, so they have enough staff already. Two more are likely to be so before Christmas. The average across the country is likely to be back on track by the end of November, so bit by bit Atos have enough people to do the test as it currently stands within the prescribed time limit. It is working through a backlog which is an historic problem that takes a while to get through.

Q133 Chair: Have you got those figures, because we have not been able to find out the number of face-to-face interviews? I have one constituent-I do not know how widespread it is-who was put on to the WRAG before they went through the WCA. That was an IB reassessment.

Robert Devereux: I am talking to you about the total number of assessments, whether it be face-to-face or IBR, against a metric which says, "We expect you on average to deliver your report within 35 days." Two parts of the country are already doing that now; two more will be doing so before Christmas. The concern that you started with, which was that there are not enough professionals to go round, would not be borne out by those facts.

Q134 Chair: You are going to have to do probably more than 100,000 face-to-face interviews a month, and once the two come on stream it will be more than that.

Robert Devereux: As I have explained, the two things that will be in addition and will enable us to have a bigger market are, first, that the PIP assessment will enable me to use more healthcare professionals who are currently not being used under Atos, in particular occupational therapists. Secondly, the contractors, by making better use of sessional work, tapping up people who will do a bit of work on the side rather than insisting on employing them, will find there is more than enough people who are prepared to do this, even at the sort of prices we are talking about, because they ask questions about price as well. It was quite a sophisticated piece of work. I am not sitting here thinking that, because I have extant backlogs in Atos, it demonstrates that there are not enough healthcare professionals to do both WCA and PIP in future. That is not the case.

Q135 Chair: Will there be something in the PIP contract that gives a payment by results; in other words, they do not get payment by volume; it is about getting the assessment right first time?

Robert Devereux: I do not know the answer to that question, but I will go and check.

Q136 Stephen Lloyd: You did mention, quite rightly, that we are dealing with an old contract from 2005. I would also welcome a little briefing from your Department about how the new contract with PIP shows the more sensible and flexible learning process that the Department has been through in the last few years.

Robert Devereux: I am very happy to send you that.

Mike Driver: On Atos there is a contract review going on at the moment.

Q137 Chair: It was originally up for replacement in 2013, but it has been extended.

Mike Driver: Yes.

Q138 Chair: But, surely, if it was extended that would have been the opportunity perhaps to take a longer look at it?

Robert Devereux: In the real world, if you are sitting on a large backlog you are trying to get rid of, it is not an easy contract to have any leverage over.

Q139 Chair: I am sure Atos do not think it is an easy contract either.

Robert Devereux: They don’t, but if you simply say that, surely, we could have got somebody else to do it immediately, just think what a potential bidder would look at. They would want whatever the current situation is-I have explained why the backlog is the way it is-to be put back in its box before they would want to take it on. We have gone to a different contract structure for PIP. It is not a national contract; it is in different lots and has different sorts of things in it. I am very happy to write Mr Lloyd a note to explain what we have learnt.

Q140 Chair: But we are still struggling, because the question you could not answer was about the statistics for IB reassessments and the volumes and outcomes.

Robert Devereux: I am not clear about the question. Could you just repeat it and I will write to you?

Q141 Chair: Stephen asked you a question about the statistic release for those who were on IB and have been migrated to ESA. The July statistics were pooled. We have not got any statistics on volumes or outcomes since way back in March. Without that, we cannot make a judgment as to whether what you are saying is accurate, because we do not have any of the stats.

Robert Devereux: I understand. I am sorry about that.

Chair: Thank you very much for coming. It was meant to be a bit quicker than this, but it always seems to happen on a Monday when we are not up against the sitting of the House. Thank you very much for coming along and giving us your time this afternoon.

Prepared 7th November 2012