Work and Pensions Committee - Minutes of EvidenceHC 569

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Oral Evidence

Taken before the Work and Pensions Committee

on Wednesday 10 July 2013

Members present:

Dame Anne Begg (Chair)

Debbie Abrahams

Jane Ellison

Graham Evans

Mike Freer

Sheila Gilmore

Glenda Jackson

Stephen Lloyd

Nigel Mills

Teresa Pearce

________________

Examination of Witnesses

Witnesses: Rt Hon Iain Duncan Smith MP, Secretary of State, Lord Freud, Parliamentary Under-Secretary of State for Welfare Reform, Howard Shiplee CBE, Universal Credit Director General, Department for Work and Pensions, and Suzanne Newton, Real Time Information Programme Director, HM Revenue and Customs, gave evidence.

Q1 Chair: Can I welcome you and thank you for appearing before us this morning, Secretary of State. Obviously, we were up in the North West looking at the implementation of Universal Credit and that visit possibly raised more questions than answers, so we are very glad that you are able to be before us this morning. Could you perhaps begin by introducing your team, just for the record?

Iain Duncan Smith: Yes. Thank you very much indeed. Can I, first of all, introduce Suzanne Newton, who is the Programme Director of RTI from HMRC? I know there was some interest in RTI; we have quite a strong message to send on that, so Suzanne will be here to talk about that. On my left is Howard Shiplee. Howard is now the SRO for the Universal Credit programme. As you know, we had the sad death of Philip Langsdale in December last year, who was a brilliant external manager of programmes-he did Terminal 2, and was one of the serious CIOs of his generation. Sadly, he died in December. We then went out and brought Howard on board. I thought it might be useful if I passed round his biography.

Chair: We already have that. We have gone paperless, Secretary of State, you see, so we have it all on our computers.

Iain Duncan Smith: Very good, okay. Excellent. Well, anyway, I have them here in case anybody likes paper. If you do, I am more than happy to hand it to you, but the main point I would make about Howard is that, before he came to us, he was the person who delivered the Olympic Park. It was his responsibility, and he has been a project director, manager, etc., and you will see from his CV that he has a phenomenal background in delivering projects on time and within budget. Certainly, the Olympic Park was, and our success last year was hugely down to the unsung heroes who did that.

Last, but by no means least, is my Minister, Lord David Freud, who is responsible for welfare reform.

Q2 Chair: Thanks very much for appearing this morning. I understand that you published a written Ministerial Statement at 9.30 this morning, but we have not seen it.

Iain Duncan Smith: It literally goes out at this moment. I did mention it to you yesterday. Perhaps if I pass this over and then everybody can have a copy of it.

Q3 Chair: So that is now in the Vote Office. Obviously, the first question we were going to ask was in terms of the implementation timetable-whether everything is on track.

Iain Duncan Smith: Do you want a minute or so just to read through that, because that covers quite a lot of what is entailed in there? Would it be helpful? I am quite happy to wait while you have a look at it.

Chair: Once everybody has a copy, perhaps you can just talk us very briefly through it. That might be the best thing, because nobody else in the room has a copy of it. Give us the salient points of what the sequence is.

Iain Duncan Smith: Shall I just read it out very quickly? Would that be easier?

Chair: No, just give us the salient points.

Iain Duncan Smith: Okay. In essence, what we have laid down here, we were going to do anyway, but I thought as I was appearing in front of the Select Committee, it would be better for me to be here at the time that I do it rather than to do it afterwards or anything like that.

In essence, what we are doing is taking it from beyond the pathfinder and setting out the three strands of roll-out that will come postOctober. The first strand is that we are going to drive a huge amount of the Universal Credit programme itself out to pretty much all the Jobcentres. That will include a training process for 20,000 people working within the Jobcentres to get the advisers trained up. The second strand is really about the increase as a result of that and the commitment-the investment into all the Jobcentres to bring them up to speed with the digital ask. That is, basically Internet Access Devices (IADs), devices, instructors, the ability to instruct various people who come in who may not themselves be already online. That process has already begun, but this will improve it enormously. The third element of the strand is the roll-out to the regions of the IT hub that will go to each of these regions, and you will see that in the strand there as well. Those three strands will be the process that takes place postOctober.

I also mention in there, with Howard Shiplee’s determination, the parallel development using the new digital services from the Cabinet Office plus us, leveraging off the lessons we have learnt from the successful implementation of the Universal Jobmatch, which was developed and implemented inside a year. Some of the techniques will help us enormously enhance the IT solution running into next year. Howard Shiplee is engaged in that process alongside the overall management of the programme, and the two will mesh together next year. That is the plan behind it.

Q4 Chair: We have questions on the IT and what has changed, so bear that in mind while I ask questions about the roll-out. Most of what you are saying here is not the IT stuff; it is the other things around Universal Credit, the Claimant Commitment, access to computers, and things. It is not really a national roll-out, is it?

Iain Duncan Smith: It is exactly that. It is, in fact, a process of taking Universal Credit out, managing it, landing it correctly and successfully and, essentially, making sure that between the period of October 2013 and 2017 we have Universal Credit, it incorporates those benefits and people access them, so it is a roll-out. If you look carefully at it, something in the order of 1 million to 1.5 million people in the course of next year will be involved in some form or another in Universal Credit as claimants. The point about this that is important-I might get Lord Freud to say a word about this-is we should understand that there are two elements to this. The IT is the platform that delivers the automation. Universal Credit itself is about the cultural shift that improves the likelihood of people going back to work. That is where all the predicated savings are. That is the reality, and we are already, as I said, rolling that out from October. The point that I would simply make to you is that the roll-out is on the basis of what we think works best. We have made a lot of changes in the course of the last two to three years. For example, we did not originally have a pathfinder in, and I took on board some of the suggestions that had been made here by the Committee that we needed to ensure that we understood where the problems and difficulties lay, learn from those, take the time to implement those lessons and ensure that what we roll out works and works well for those who need it.

Q5 Chair: What we found when we visited the Pathfinder was that the only claims that were being processed were incredibly simple single JSA claimants. In other words, they had to not be in residential or supported accommodation, they had to have a bank account, they could not have any family and all they were claiming was JSA.

Iain Duncan Smith: That was always the plan. That was originally always the plan and we decided that was the best way to do it. That was the original plan.

Q6 Chair: My question then to you is: is what you are calling the "national roll-out" just to that cohort of claimants, or will you start to include more complicated claimants?

Iain Duncan Smith: The system does capture more complicated claimants even as we roll out for the simpler claimants.

Chair: But not yet it does not.

Iain Duncan Smith: It will in the course of it, and I think Lord Freud can say a few words about how that is managed.

Lord Freud: We have a principle that, once you go into the system, you stay in the system. So, in practice, we will be getting more and more complicated situations, and our objective is to track those very specifically as we get this going.

Q7 Chair: But you are talking tiny numbers. You are talking very small numbers.

Lord Freud: The way to do really effective introductions of IT is to do small numbers so that you can ramp up later and learn the lessons. You will have seen the AshtonunderLyne and the Bolton centres. You saw them. What was incredibly valuable was handholding each single group going through, and then you can iron out and learn the lessons, and then you can ramp up to large volumes. The reason we are going the way that we are going, which is testing every element that we can, is there are lots of different groups and types of people. We need to understand how all of them work through and we need to get the time to do that, so that when we ramp into scale, we know exactly how to handle them.

Q8 Chair: I can understand your argument if you are talking about ramping up the numbers of single JSA claimants-the simple ones. I cannot understand your argument, because no one is testing-we certainly did not see it-what it would be like for someone who has two children and all the other things that will have to be in place for a more complicated claim to be processed. We did not see that at all. So my question is: when you go to national roll-out, will it just be for that simple, straightforward, very narrow cohort that are presently able to claim in AshtonunderLyne?

Lord Freud: We will start off with our national footprint using the same criteria; we may adjust them somewhat. The objective is, as some of those people become more complicated-and they do include housing, and they will get partners-

Q9 Chair: That will be incredibly slow. What is your timescale for that?

Iain Duncan Smith: With respect, this Committee has constantly said they did not want to see us go too fast with this. What we are doing here is starting with a core group, and then, as their lives essentially complicate them in, we capture the whole of that life, so we are able to look at and study that process.

Chair: We understand that and we have no problems with that.

Iain Duncan Smith: That was the original plan.

Chair: As a Committee, we have said that we would rather you get it right than rush it-absolutely.

Iain Duncan Smith: That was the original plan.

Q10 Chair: However, there is rushing it and there is a snail’s pace.

Iain Duncan Smith: We are not snail’s pacing. The point about this is there is a lot of what we learn from the Pathfinder, and we will be publishing that in the autumn. For example, the issues around access to IT and the ability to go online. This is early research-it will be published in detail-but the early findings are that something around 90% of those who are coming in are doing their applications online.

Q11 Chair: Yes, but that is because they are a very narrow cohort of younger people, possibly staying at home with parents.

Iain Duncan Smith: Yes, but with respect, Chairman, again, our original prediction for that was something in the order of 50%, so we have already learnt something about people’s ability to access that. I simply give you that as an example of the learning process.

Q12 Chair: Again, Secretary of State, I think you are misinterpreting my question, which is that that very specific, narrow cohort is not typical of your average Universal Credit claimant.

Iain Duncan Smith: With respect, Chairman, we never said that we were going to do this any other way. From the word go, we talked about the original roll-out. We then changed that to a pathfinder process, so we made modifications. Then we said we would roll out on the same principle, but what we would then do in 2014 is expand to all the other types of claimants.

Q13 Chair: The original timetable said that from April 2014 all new claimants of existing benefits would go on to the Universal Credit system. Is that still the case?

Iain Duncan Smith: That was on Jobseeker’s Allowance.

Q14 Chair: No, no, it was not. In the original timetable we were promised in October of this year there would be a national roll-out of the initial thing, but we were told initially that for existing benefits-JSA, tax credits, all the things that will go into Universal Credit-all new claims from April 2014 would go on to Universal Credit. From what you are saying, that is no longer the case, is it?

Lord Freud: Are you referring to this very early November 2011 timetable?

Chair: Yes, which was the original timetable.

Lord Freud: What we talked about there was "some working tax credit claimants who currently work a small number of hours but could work more", so it was not universal. That is what it says there.

Q15 Chair: Certainly, I think most people who have been following this in detail thought that all new claims would go on to Universal Credit from April 2014. I am just looking for you to agree that that is not going to be the case.

Iain Duncan Smith: Well, it is not specifically in what you might have taken from that.

Q16 Chair: For people who are on Income Support, for instance, new claims for Income Support will go on to Income Support; new claims for a number of people who are on Jobseeker’s Allowance will still continue after 2014.

Iain Duncan Smith: I wonder if I can bring Howard Shiplee in, because he is the guy who is delivering this. Do you want to come in about how you intend to do this?

Howard Shiplee: I am not going to attempt to give figures; I have been in post for now about eight weeks. I have a number of points. First of all, programmes of this complexity, in my experience running major programmes, go through a number of phases. One of them is learning constantly, and one of the important points is there is a lot of learning that is happening now from the Pathfinders. They also reach a point of reflection and review, which I think is equally very important, taking account of external circumstances, technological advances, alternative approaches. Indeed, on the London Olympics, when we started designing the iconic Aquatics Centre, for instance, we realised we had to make changes in the way the design processes worked. Indeed, we discovered that had we attempted to do this about four or five years earlier, we would not have been able to do it because the technology did not exist.

So one has to reflect what is happening, and I think the issue here, for instance, is that one of the big lessons, first of all, apart from the pathfinder, is something has happened, which is that there have been advances in the digital approach to designing business processes of this type. The establishment of GDS, the Government Digital Service, which is only very recent, has helped to give us a new opportunity, which takes account of some of the issues that you are searching for here.

The Pathfinder, first of all, has demonstrated that the IT systems work. Going forward, the digital approach is going to provide us with a more rapid and responsive solution in the longer haul, but it also gives us a real opportunity to test products on more complicated claimants as we are proceeding. That is really important and, if I may, I will return to that. We can test on real people in small groups, testing behaviours and understanding behaviours of claimants, and then we can expand that. I think that is a really important point.

Q17 Chair: I understand all of that. Can I therefore ask you, by the end of this year, how many people do you expect to be in payment of Universal Credit?

Howard Shiplee: I think it would be wrong for me at this stage to make any statements about that. We then create a situation where, from my point of view as the SRO, I become hostage to fortune, and that is unrealistic.

Q18 Chair: Is it hundreds, because it is only 200 at the moment? Is it thousands? Is it tens of thousands, hundreds of thousands? Are we talking large numbers, small numbers?

Howard Shiplee: The first thing is I am concerned with making sure that we have a safe and secure landing in 2017 with the total population of Universal Credit on the process, so I therefore understand exactly the point you are making. We are proceeding now with a digital design development and build team, which includes our own people, particularly our own operational staff, so we understand how processes work in reflecting how things happen in the field, and we are also looking at the benefit that the claimants are themselves reporting.

I was at an exercise yesterday where we were seeing the first outputs from couples, which is a more complicated area. One of the areas that was coming out of that is that once we have established how the processes look, the businesses processes and the way the process works, what we will then want to do in the new approach to designing these business processes is to start testing in hundreds, in thousands and then in larger numbers. We intend to do that as close to our centre of operations as we can so we can start developing a level of confidence, and we will be testing so that when we do roll out, we have a much higher level of confidence in what will be rolled out. So I think to some extent it is a slightly different approach from the one that you may have anticipated before.

Q19 Chair: It is quite different, in fact, from what the Pathfinder originally envisaged. You are changing quite a lot of the process of implementation.

Iain Duncan Smith: We have been changing that for the last couple of years. We did not originally have a pathfinder. We have implemented that because that was the point about the process of learning as we go forward. Again, the real point here is that we can stick rigidly to a summary plan made in 2011 or we can say, "Look, the purpose is to deliver in the period from October 2013 to 2017. We want to get into very large volumes in the course of next year." We want to look at exactly what you said earlier on: being able to bring in tax credits and Jobseeker’s Allowance people at the same time. That is exactly what we want to do and we plan to do in the course of next year. My point is about getting to that in a safe and secure way in the period between now and that point, which is what we are trying to do with this process, which is why we are rolling out in the way we are rolling out.

Chair: There are obviously questions around computers and IT and the technical things. There are questions on that in a moment, but I am going to bring in my colleagues who have all been jumping up and down.

Q20 Sheila Gilmore: I suspect, with all due respect, Secretary of State, part of the problem we are grappling with here is that, as often happens with all Governments, initially it said this was going to be quite simple and straightforward, and a lot of people said it would not be, and I think you are right to do this slowly. In terms of an individual who is on the pathfinder, if they fall sick, if they get married, get a partner, children, maybe their partner’s children, you will deal with them. You have mentioned tax credits and JSA, but obviously a lot of people would come under the umbrella eventually of Universal Credit, including all the people on Employment and Support Allowance, for example.

Lord Freud: That was a point I was touching on just a short while ago. Rather vulgarly we call it "lobster pot", which is a term that we probably should not have introduced. What that means is that once you get on to UC, however your circumstances change, you stay on UC. The reality is we already have-you probably saw some going through-quite a few people who went on as JSA claimants and have, in practice, become tax-credits-equivalent claimants, because they are working now and have RTI feeds showing what they are earning and we are adjusting for that. So we already have those two types to monitor through. People will start getting partners, having children, and so we can develop that. We will also, most importantly, look to really test some of the most vulnerable people, because those are the ones we need to get absolutely right. So we will be testing those through as we roll out.

I know you are looking for the change from the date in late 2011 when we were talking about our process. The big change is that we have gone massively over into testing and building systems around it, so we had not thought about the pathfinder at that stage; we were just getting the system up. That established the RTI feed and how that works. We had not been looking at the direct payment demonstration projects and working that through so that we know exactly how to make sure that people can pay their rent and get that right.

Iain Duncan Smith: Which we have extended for another six months, so that we can get the best information out of it.

Lord Freud: The local authority pilots going into the Local Support Service Framework is a huge change in our approach and are really inclusive. We are doing now a whole set of in-work conditionality tests. If you look at it, we are testing elements on a big scale and types of people within it, before we pull it all together and do the big volumes.

Iain Duncan Smith: Which is in 2014.

Lord Freud: This is something this Committee, in particular, advised us last time: test these systems so that they work for people.

Q21 Glenda Jackson: But you are not, are you? The people that you are testing are the easiest people. The Secretary of State told us this morning that, of their own volition, 85%, I think, can access the new system without any assistance from anybody else. These are very small numbers that you are looking at. They are the simplest of cases, so how on earth are you going to achieve the evidence that you keep telling us you are going to learn from when the cohort is so narrow and so simple? You did not have plans before. You have just told us now that you entered into this and you have learned from what you did not know. You are now attempting to tell us that it is all going to be easy-peasy because you are going to learn in this way. So when are you going to introduce the testing of the most complex cases, how many people will be in that, when apparently, according to this new Ministerial Statement, there are going to be six national centres dealing with everybody who will be a claimant and will eventually come on to Universal Credit? Can you pick out all those questions in there?

Lord Freud: Yes. I will deal with that, because it is a really important matter that we have systems to handle the most vulnerable people. That is clearly a matter of concern to this Committee, to us, and to many stakeholders who talk to us. It is the core concern. We are aiming to test our processes very carefully with those vulnerable groups.

Q22 Glenda Jackson: Starting when?

Lord Freud: Pretty soon.

Iain Duncan Smith: Part of the October roll-out is to do those kinds of cases within that roll-out.

Q23 Glenda Jackson: That is the experimental period; so in October is when you start learning.

Iain Duncan Smith: That is the point of testing against what we believe will be the expectations of people’s behaviours.

Q24 Chair: I am now slightly confused. Can I just be clear? You said originally it would be just the JSA claimants, and once they were in the system, they would become the more complicated ones. Are you now saying that at some point soon in the future, in October, there will be a different cohort that will come into the system? You will start identifying different groups, perhaps of vulnerable claimants; they will come into the system, and you will micromanage those ones in the same way as the JSA claimants have been micromanaged.

Lord Freud: There are two levels here. Clearly, we will see a variety of people even in the simple system because circumstances change, so we will see how that works.

Q25 Chair: By their very definition, they will not be the most vulnerable.

Lord Freud: Some of them.

Iain Duncan Smith: Can we just be clear? The point that the Welfare Minister made earlier on to Ms Gilmore was that that process, which was loosely described as "lobster potting", means once you are in-so whatever your change-you get it.

Chair: I understand that.

Iain Duncan Smith: Can I just finish, Chairman? Whatever your change, you get it.

The second aspect of what we are doing postOctober is we are then selecting some more difficult groups to run through the process to ensure that we understand how that works against our expectations, because we have done a lot of profiling and testing in this process.

The third element that is important to understand is the parallel work that is taking place with the final developments in digital solution in terms of the IT.

All those three then mesh together next year to give us an expanded roll-out across all groups and-as our hope and expectation is on this, and I believe it will be the case-across both tax credits and Jobseeker’s Allowance. So we will meet our original goal but do it in a different way, but getting, I believe, pretty much to the same point as a result. The key point is we want to do just that point. In fact, Lord Freud was on at me about making sure we had some special facilities to test a number of those more complicated cases that may not be captured in the process of what we call the "once in, stay in" process.

Q26 Glenda Jackson: When will this process start and who will define these groups? Where is the profiling being carried out now and who is doing it?

Lord Freud: Howard should pick up, because he is building the process.

Howard Shiplee: I can explain what we are doing at the moment in terms of the programme as opposed to aspirations about the roll-out. What I am doing is what I have done in the past, and it has worked in the past. After the tragic death of Philip Langsdale, when I came in, first of all, I set aside 100 days for the programme. That is not to stop the programme. That is simply 100 days to reflect on where we have got to and start to look at the entire and total plan going forward, for the reasons that you have quite rightly given.

Q27 Glenda Jackson: Excuse me, you have absolutely no evidence at all to make that retrospective assessment. The only people you are dealing with are in very, very small numbers.

Iain Duncan Smith: I am sorry, Ms Jackson, that is simply not true. You are making a statement that is simply untrue. The Department for Work and Pensions is responsible for dealing with all of the most complicated cases on a daily basis. We have a lot of evidence and understanding, from both officials and from Members inside the Department at Caxton House, about how the nature of those relationships works. We are responsible for the sickness and disability benefits; we are responsible for people who have problems through Jobseeker’s Allowance and get disability benefits. All of those are parts of experience that we then bring. So that evidence is being brought to bear to define and be certain that what we are doing within Universal Credit actually works for them.

Glenda Jackson: But none of them are part of the initial roll-out of Universal Credit.

Iain Duncan Smith: I am sorry; I disagree fundamentally with what you are saying.

Q28 Debbie Abrahams: Picking up on that, Secretary of State, when we visited the Pathfinder sites last week, the DWP officials who accompanied us expressed considerable concern about premature roll-out of the system to more vulnerable people. Recognising exactly what the Chairman said, only 282 of the least vulnerable claimants are currently being dealt with. I am still unclear, I have to say, whether you will be doing a similar pilot/pathfindertype approach with more vulnerable people, but what is most important: rolling it out prematurely or getting it right? We need to make sure we get it right for the most vulnerable people.

Iain Duncan Smith: Thank you, Ms Abrahams. Can I simply say that is exactly correct, which is why we are doing it this way.

Q29 Debbie Abrahams: How many people are going to be involved? Is it going to be 282?

Iain Duncan Smith: We are not talking about hundreds of thousands. We are talking about thousands of people coming through a system that we can then follow, monitor and judge before we eventually expand to national roll-out later in the year. So we are doing it and we are taking our experience of what works for those complicated people, so we are meeting that demand.

Debbie Abrahams: You have not reassured me to any great extent.

Glenda Jackson: You don’t have any experience.

Lord Freud: Just on this, as you will remember, even when we were looking at this two years ago we were planning to put the most vulnerable towards the end of the queue, for obvious reasons. So we have time to test really small numbers-and I am talking about tens to start with-to get those lessons and then start to get maybe a few hundreds to test the vulnerabilities. There are a lot of things to test: appointee systems, what happens with people when they have-

Q30 Debbie Abrahams: You talked about 1.5 million by next year. You just mentioned earlier on 1.5 million.

Iain Duncan Smith: 1.5 million people who are accessing some part of Universal Credit; it could be the Claimant Commitment or whatever. Those are the numbers that will already be on the Universal Credit ask, but what we are doing in the process running through to that is this business about looking carefully at those problem groups-difficult groups that may have certain problems about being on Universal Credit. We have already been doing a lot of work on that over the last year; a lot of the work through the trials in the local support services we have been doing. All of that has been happening. My point is we are doing exactly what you are asking, which is we want to land this at the right moment, not against an artificial timetable but against the timetable that says we can cope with those people and we can understand how they will react to the system. Honestly, historically people would have gone ahead, just hit the button and rolled out. We are not doing it like that.

Q31 Stephen Lloyd: Secretary of State, if I can come in on that point, the issue is not that you are doing lots of roadtesting because, as you quite rightly point out, with the Chair I have been on the Select Committee from the beginning and we have been through this many times. Clearly, we were always anxious and concerned that you did sufficient roadtesting before you did the roll-out. Clearly, you have taken that on board and you have been doing a lot of additional roadtesting, which is good. Do you accept, Secretary of State, that the reason there is an element of fractiousness here is that, while on the one hand, yes, you are taking on board and the experience is showing that you need to do a lot of roadtesting-and I am all for roadtesting, and we have said that from the beginning as much as possible-that means the national roll-out to the whole global picture has changed, and effectively we have only really heard that today. That is why we are pushing you on this. It is not that we are saying we do not approve of all the testing. I have been saying that from the beginning, as has the Chair, as has the Work and Pensions Committee. What has changed slightly is, as a consequence of what you have been doing and the additional roadtesting, the timetable for the main global roll-out. That is fine, but that is where we are trying to drill down to. Does that make sense?

Iain Duncan Smith: Yes, but bear in mind the original outline plan had us doing a very piecemeal roll-out into various centres; what I used to call "mushrooming" out into all those processes. That, in itself, was going to be a much more staged process. What we have introduced in the last year and a half is a couple of things. First of all, we introduced the pathfinder, because I believed that what we would learn from this would be that we could find out what happened once you started to run some of that through the centres. That completes its process in October; about 7,000 in total will end up going through that pathfinder. From there, we have decided that we want to roll out through October onwards into 2014 on a wider scale to understand the regional aspects of that, because there may be variations and changes, and it is worth understanding that plus the more complicated cases. As we then mesh what Howard Shiplee is doing with the digital design on the roll-out, later in 2014 we will be able to upscale the volumes at a more rapid rate, but that is after we have understood exactly what changes we have needed to make. So we will bed the changes in and make sure what we land lands effectively.

Q32 Stephen Lloyd: That makes complete sense to me, but would you accept that, from our perspective, that is a change from what perhaps was said when you were last here? We are not saying it is wrong to do all the roadtesting. My God, we have been saying road test until it comes out of your ears with something like this, particularly with the more challenging demographic groups that my colleagues have talked about. But what it does mean is that there is a reasonably significant change as to the volume and the capacity of the roll-out that the DWP are now doing on UC. I am not saying it is a bad thing. I think it is a good thing, because I think there is more chance that this will work, but it is, would you accept, a bit of a significant change in language, demographics and capacity?

Lord Freud: Howard, you should just go through the process.

Howard Shiplee: I think what you are looking for is what the programme is.

Q33 Chair: We want an idea. The original concept that we were told and Parliament was told was that, by 2017, everybody who is on a working-age benefit would be on the new Universal Credit. From what you have said this morning, that is looking increasingly unlikely.

Iain Duncan Smith: No, no, that is correct. We are bound to the timescales set: between October 2013 and 2017, all of those who fall within the ambit of Universal Credit will be on Universal Credit. That is exactly what we will be doing. In the initial phases of this, the stages, Chairman, and we are being clear about this today, our roll-out, exactly as Mr Lloyd said, needs to take consideration of any of the variables and changes we need to make sure both mesh within the IT platform and within the cultural shift; in other words, how the advisers manage that process. The learning process started with the pathfinder, will go on through the postOctober roll-out, and, as I said, we are rolling out UC to every single Jobcentre, but the IT bases will roll out to the six regions. That will help us inform later in 2014, so as we then mesh those two elements together, we will expand in larger volumes once we have learnt those lessons.

Q34 Chair: I accept all that, so I go back to the question I asked, which again was on the original timetable. If you are saying that 2017 is still on track, the idea was that by April 2014 all new claims for working-age benefits would go on to UC. From what you are saying this morning, that certainly will not happen because that is no longer your envisaged stage-by-stage testing and roll-out.

Iain Duncan Smith: We are looking to get all new claims-and this is the point about the modifications that they are doing at the moment in parallel with this-with Jobseeker’s Allowance and tax credits the two key bits, within 2014 and start to bring those together and ramp up on the volumes.

Q35 Chair: Will that be all new claims, because from what I have gathered this morning not every Jobcentre will be doing UC by April 2014, or will they?

Iain Duncan Smith: In the course of 2014, Jobcentres will be doing Universal Credit.

Q36 Chair: You cannot put all new claims into UC by April 2014 if not every Jobcentre is operating-

Iain Duncan Smith: I am not bound by the artificial date of April 2014. What I am bound by, Chairman, which is my point, is that within 2014 we will, I believe, achieve significant volumes moving on to that from the new entrants. We will come back to discuss with you in the autumn in more detail how we think that will land.

Q37 Jane Ellison: Moving on to another part of this section, talking about the lessons learned and adjusting the Pathfinder pragmatically, many of us were very impressed by the staff we met on the visit and how positive they were about the programme and, clearly, what they felt they had to contribute to those lessons. What I would like to understand a little bit is, as you are taking this time out to look at everything, to learn from the Pathfinder, how you are going to make sure you really take on board the lessons from the staff.

Iain Duncan Smith: I am going to ask Howard to answer that, because that is a daily process.

Howard Shiplee: I think it is a really important issue, because there are a number of issues around the whole programme, and one of them is the cultural change, both of the way the claimants behave and the way our frontline staff behave. What you probably found is that they like what they see and they like what they are doing.

Jane Ellison: Yes, they were very positive.

Howard Shiplee: We are getting a lot of feedback from them. This is not an IT programme; it is a business change programme. I just would emphasise that. What we then have to do, and in my opinion it is one of the big challenges of this programme, is to make a cultural change with tens of thousands of staff who are on the frontline, and that is part of what we are doing. Do forgive me for returning a little bit to the whole issue of our programme. What we are currently working up is the detailed programme that will underpin our ability to get to the overall date of 2017. When I mentioned the 100 days that I have taken, that does not mean that we have stopped work. We are carrying on with work and we are carrying on with our development, but we are putting in place a number of elements that are going to support our level of confidence, which I anticipate will grow over time.

The first one is a programme that identifies key dates and key activities throughout the period, so now we can measure our performance accurately against what we are committed to do. The second one is that we have looked at what we call our overall strategic intent and we are reestablishing that, resetting that, so we are totally clear and have clarity on what it is we are doing and how we are doing it. The third thing we are doing is we are looking at the way we work. We are having to adjust the way we work, so we are creating a complete new handbook for our team. Our team has contracted somewhat and that is on purpose: we want to get small again while we start, then we will grow our team out. We have also restructured our team, and a very important element is not only do we have GDS in full support and embedded in our team, but we have, importantly, now brought in a lot of people from the operations side of the business, so we can be confident that the business processes we are developing, when we take them out to test small hundreds, thousands and larger numbers as we move into next year, will meet business needs and are taking account of our agents in the field. All of those things, I hope you will appreciate. I have taken 100 days to get to a position where we can increase our level of confidence in what is being said to you.

Q38 Jane Ellison: Where would you put your level of confidence at the moment?

Howard Shiplee: I see no reason why this programme cannot be delivered within the due dates that have been established and within the budgets that have been allocated to us. That has been underpinned by other recent reports.

Iain Duncan Smith: Can I pick up on one thing as an illustration of this answer? It is quite important. The Committee here and others were very sceptical about our ability to deliver the RTI feed. There was a lot of scepticism about that. This is absolutely bang on time-it is ahead of it, if anything-and we are already picking that up through the feed in the pathfinders. In fact, that is so much so that, in two or three cases, we have been able to demonstrate some people have been making claims who failed to tell us about their existing earnings. The RTI feed has picked that up, and because that has been so successful, we are looking to find a way to back load that into our existing processes, so that even ahead of the Universal Credit roll-out, we can do that. So the RTI side of it is rolling along absolutely the right way.

Chair: I have to say that was where we were sceptical.

Q39 Mike Freer: First of all, I just want to put some balance into this debate. As one of those of us who went on the visit to see these Jobcentres, I certainly found it impressive. Every member of staff I spoke to was enthusiastic about the UC programme and felt that the cultural shift was working extremely well and the IT was working extremely well. We saw the back office where they were mapping some of the niggles in the system, and they were totally enthusiastic about the way it was being implemented. I do not want the ministerial team to go away thinking that the Committee were disappointed, because certainly I was not.

I also think it is absolutely right that you are spending time to get it right. The fact that some Members have tried to criticise you for expending huge amounts of energy to get it right is lamentable. You are absolutely right to spend this time to get it right. Too often Governments have wasted years and millions of pounds rushing IT systems, so as far as I am concerned, take as much time as you need to ensure that this system works, because it is crucial from what we saw in Bolton in the pathfinders.

Could I just turn you on to the hub in Hammersmith? Having read through the Statement, I am not quite sure whether Hammersmith is simply going to be a pathfinder hub in the same way that Bolton is, or whether it is going to be a hub for all UC claimants in the London region. I just wonder if you could talk me through what is going to be happening at Hammersmith.

Lord Freud: Basically, it is a bit like the four pathfinder sites. We are just expanding it out. These are large Jobcentres and they will have a catchment area, Hammersmith being in the London area. We will see a representative sample in that area, and that is what we are doing around the country with that particular idea.

Iain Duncan Smith: The idea from there is, when you expand in each of the regions, you understand the nature of the shifts and changes in the regions, and the advisers, who are then trained up, are trained up to understand that there are peculiarities within that region. When you expand out, you expand out with that knowledge. It is the first phase of the expansion.

Lord Freud: What you get from that, of course, is the knowledge within each region of how to run it, and that can be spread through the region, so you have a base of knowledge. Clearly, as Howard said, this is a business-process change and a cultural one for Jobcentre Plus staff and other staff, and getting that base of knowledge, which is spreadable within each region, in business terms is critical.

Q40 Sheila Gilmore: I am all for testing, and I think many of us said right at the beginning that this was going to be a very difficult project, and we were kind of poohpoohed on that. Two years ago we were given evidence: Lord Freud told us all about agile and how wonderful it was going to be. Now, in some ways, the language is very similar: it is a business process. What happened to the previous thing that we were told was going to be so different from previous computer roll-outs and, therefore, it was going to work well? Some of us were at those sessions.

Iain Duncan Smith: It is different, because agile allows us to do this. All the way through with agile what you do is you review where you are and you modify as you go forward how that is going to work. The previous way of doing it was you all worked away, worked away, worked away to an end date, you then hit a button, went live, and if it did not work, it did not work. We have seen that happen on too many occasions in the past.

Q41 Sheila Gilmore: So this is still agile.

Iain Duncan Smith: Yes. The development was agile.

Q42 Sheila Gilmore: Why was it necessary to stand back? We are either hearing it is a continuation of what was happening or we are hearing-and I think Mr Shiplee is telling us-that he comes in and, effectively, has to start again.

Iain Duncan Smith: No, he is not starting again. Do not misunderstand what is happening. What I have asked him to do to assure himself and me that the programme in terms of what he has to deliver is one that works, and we have altered the process of how we deliver on the basis of what we have discovered as we go along, and to be clear in his own mind and for us that those dates and delivery times are doable, and that we will essentially move to that.

The point I made about the agile process was that throughout the agile process you do exactly that: you review key sections to make sure that what you are about to do is the right thing to do, or is there a variation? You would not have done this in the past. The way we are doing it at the moment would not have been done in the past. What would have happened is people would have beavered away, they would have taken little account of anything going on around them and then they would have dropped something, and if it worked, it worked; if it did not, everyone then cried foul. What we are saying is we are checking and testing all along the line and saying "Actually, there is a better way." For the last year, we delivered Universal Jobmatch, for example, and that was off an incredibly short timescale to develop and implement. We have more modifications coming in now, but we have, for example, 5 million hits a day on the back of that, and that was off a oneyear development.

The technology shift that took place in the last two to three years has allowed us to think that we can introduce some of those techniques into this to improve the process and both lower the cost of Universal Credit delivery and make sure that it is more flexible as it rolls forward. Also important is the securing of Universal Credit, because of course you have online access, so what we need to ensure all the way is that we have the best relationship between the IT and the security. These changes are about making sure that in 2014, as we bed that in, that process works better and, as I said, more manageably and cheaper.

Chair: That sets us up neatly for our questions on IT, because we did feel that it perhaps was not quite operating as smoothly as you have suggested this morning.

Q43 Nigel Mills: When we saw the software in Ashton it seemed to be working and it looked relatively user friendly to my untrained, nonexpert eye. I am just not clear now what was originally envisaged to be in the IT build that now will not be and what will be coming in to replace it instead-the new digital whatever it is. Can you just talk us through what is not there now and what will be?

Iain Duncan Smith: Can I do the top line on this one and then get Howard in on the detail? I kind of entered into the IT stuff on the last answer. The point I want to make is that going forward we were always making adjustments. Originally, we might have seen it in a slightly more rigid way. We are now taking a slightly different view about how that should work. The IT front end that you have seen in the Pathfinder was designed about a year, a year and a half ago. It works well, but there are some limitations in it, for various reasons. Some have commented about, for example, not being able to leave your contract open whilst you are doing something and you have to keep it closed. That is because of access and cloning of people’s identities, getting security. What we are doing in parallel now is looking in the last phase of this at whether, by using the new techniques, we can improve that process so that it is both somewhat swifter and may give us the flexibility to be able to allow people to do more with this in the final roll-out iteration next year.

Howard Shiplee: In terms of security, this is a very important issue. The types of threats that exist-and I do not want to go into too much detail-mean that it is very important that there is capability to respond to these threats and adjust parts of the system very quickly to reflect the threats. By moving to the process we are now in, that gives us a much higher level of confidence that we can achieve adjustments in the system, when it is live and in the longer haul, that will mean we can mitigate threats when they materialise. They will, we believe, materialise very quickly, and therefore we have to be in a position to respond quickly. The answer is not simply to turn off the machine, because that would be a major problem, so one has to be able to respond by modifying the system as it is operating in order to take account of threats, if that makes sense.

Q44 Nigel Mills: So it is a security risk that means changing the IT.

Howard Shiplee: It is security mitigation. If your IT is designed on a more flexible basis and your whole approach to how you adjust the business process is more flexible, you are in a far better position to deal with external threats, because this is a very unusual arrangement. This is probably the first of its type in the world in terms of a bank, which it is, of this type. Therefore, one has to be prepared for the type of threat we are not so used to, and we have taken a lot of advice on that as to how we can ensure the protection of the funds and the identities within the system.

Q45 Nigel Mills: One aspect of the planned system that we did not see at Ashton was the ability for a claimant to manage their own account online from home. That was turned into using a call centre. Is that an option that will come back in to the final build?

Lord Freud: Yes. That is absolutely one of the things we are looking for, and that ties straight in to what Howard was saying. That ramps up the security requirement; therefore, how that works is one of the central things that we are currently working on. Our plan would be exactly that you would have a relationship with Universal Credit that would be an online relationship-not for everyone, but for those who can handle it.

Q46 Nigel Mills: One other observation we made of the system when we were up there was that the operators effectively had to manually reenter information between two or three different systems. They had to take stuff out of the appointments system, put it in the Universal Credit system and then reinput it into the text messaging system to send the message to the claimant. We saw one person having to write on a piece of paper names, addresses, national insurance numbers and appointments, then go and rekey that in to two separate pieces. That did not strike us as very efficient and creates a risk of a transposition error. Are you expecting the final system will have links and clicks, and you can file things in the document-management system and link them through, and everything will be allsinging, alldancing?

Lord Freud: You will have seen a bit of cutting and pasting going on, particularly between the work-services platform and the UC platform. We are basically looking at integrating those on a standard Windows platform, but as we move the systems forward we will make that a lot less clunky, obviously. Those are not terrifically difficult bits of integration, so that will be in the plan.

Q47 Teresa Pearce: Ms Newton, hello. Could you tell me, in 2012-13, how many employer and pension schemes were included in the RTI project?

Suzanne Newton: During the pilot year, we had over 60,000 schemes join. That covered over 6 million individual records.

Q48 Teresa Pearce: Can you tell me what percentage or how many of those were pension schemes?

Suzanne Newton: I cannot off the top of my head. There were a few large pension schemes in there, but the total number of pension schemes I do not believe to be large; it would be in the tens, I would imagine.

Teresa Pearce: You think it was a minority of the schemes.

Suzanne Newton: Yes.

Q49 Teresa Pearce: Could you tell me how many schemes had been predicted to be included in the pilot?

Suzanne Newton: During the pilot we had a maximum capacity to take up to 250,000 schemes during that first year. That was very much determined by what software developers told us, so our pilot year was very much led by software developers. Those developers put forward nominations. We did not meet that maximum capacity for a raft of reasons. That said, we did have more than sufficient to test; we had a sufficient range of different employer sizes and types, so we had everything from nannies, hill farmers, right up to large public-sector and private-sector organisations.

Q50 Teresa Pearce: It has been widely reported in the press that you were expecting 250,000 but only got 60,000. What you are clarifying now is it was not an expectation; it was a capacity.

Suzanne Newton: We had a capacity to take up to that number of schemes.

Teresa Pearce: That is quite interesting, because I thought you had massively failed there, but clearly I am wrong.

Iain Duncan Smith: We massively succeeded.

Q51 Teresa Pearce: It is interesting what was just said then. The National Audit Office has looked at HMRC’s annual report and qualified it in respect of tax credits, but was quite critical of the RTI scheme. It said that it was over budget, not fully resilient, not qualified for financial accreditation and may miss its roll-out target. Could you tell me what your rebuttal is to that?

Suzanne Newton: I will take the cost first. I think it is worth saying that RTI is a significant change. It is the biggest change we have made to Pay As You Earn in over 70 years and, as a Department, we recognise we need to invest to do that well. When we first came up with the initial cost assumptions back in 2010, that was based on us delivering a rather different solution and it was a high-level cost at that stage. As we worked through and as we consulted with stakeholders, the solution that we had developed and that ultimately went live both with the pilot and then the national roll-out in April 2013 changed quite considerably.

One of the things that changed was that pilot. When we made our original cost assumptions we were assuming a sixmonth pilot of only a few hundred Pay As You Earn schemes. What we changed in response to that consultation was having that much greater capacity to pilot schemes during the pilot year and to have a whole year. That frontloaded and drove some extra cost. There were also some new costs that we identified as we went through, including needing to update our accounting platform, so moving off an old legacy system for how we account for Pay As You Earn on to a new employer accounting system. That has driven some increases since our original cost estimate, but nonetheless the business case remains very strong. Payback will be by the end of 2014-15 and we will have savings of over £500 million for customers and HMRC by the end of 2014-15, so it is still a strong business case.

Q52 Teresa Pearce: What about the other criticisms? There has been a criticism that it is not fully resilient.

Suzanne Newton: In terms of resilience, what we believe we have built is a costeffective resilient architecture. The IT is resilient at component level, so if we have a particular box that fails or a particular issue that fails, we can swap that very quickly without the service being affected. The end-to-end service is not affected, essentially; the front door remains open, employers can continue to send us data and we will make a change.

In the highly unlikely event of a catastrophic incident that took out, say, a whole one of our data centres, that would require some more time in terms of being resilient. From an HMRC point of view for Pay As You Earn data, that is an acceptable level of risk and in terms of working with colleagues from UC, we have agreed a process that would fall into place to ensure that people got their benefits at the right time.

Q53 Teresa Pearce: If there was a problem, the PAYE system is safe, but my concern on this Committee has always been that I have a belief that the DWP is used to dealing with big IT systems, whereas HMRC’s history has not been as successful, some might say. My concern has been the interface, so you are fully happy that the PAYE system would be safe, but what about the interface with the DWP and how it will affect Universal Credit?

Suzanne Newton: How long the particular interface would be out would depend on the particular solution, but ultimately the claimant selfreporting would be the ultimate contingency solution, as it is currently for current benefits. But I must stress that it is a highly unlikely situation that the whole of a data centre would be taken out.

Q54 Teresa Pearce: Why is the system not fully financially accredited?

Suzanne Newton: Financial accreditation is an internal Government accreditation for how we account for Pay As You Earn information. We have plans in place to achieve that accreditation by October this year. This is not about employers paying the wrong amount, and it is not about RTI not working; it is about how we develop our own accounts within HMRC-how we account for money within HMRC.

Q55 Teresa Pearce: When we went to look at the pilot, there were a lot of quite interesting things that we saw. One of them was the way RTI had been used to catch where people said that they did not have a job and they clearly did, which is a good use of the RTI. However, they said there were very few people who came into the RTI system who were on their claimant base, because most people did not have work or, when they came into RTI, it was work that had ceased and now they had come on to claim. It was quite a small amount of people that we looked at that actually did have RTI. So we are still not sure how it would work where you have got somebody who has got multiple jobs and may have different spellings of their name. Would it all run on the NI number?

Suzanne Newton: Yes. The NI number is the chief bit of disignatory detail, though we do match on other things to make sure we have got the right person.

Q56 Teresa Pearce: Will everyone have a UTR1 like they do for self-assessment?

Suzanne Newton: They will not have a UTR, but we use various bits of data to match and ensure. I have got the latest figures, if those are helpful for you. As of Monday, we had had 250 what we call "interests" set on our database for UC claimants. So that is basically where they come in and claim, the identity has been verified, and a flag is set on our system to say, "If you get any RTI about this person, please send it to us." Of those 250, 84 individuals have had an RTI data feed sent across. Of those 84, 41 have had their UC reduced as a result of that RTI data feed. Those figures are increasing day on day, and, as you say, it has been quite interesting in terms of what we are finding, from misunderstanding to potential fraud at one end of the spectrum.

Q57 Teresa Pearce: One other point about RTI is that there has been a lot of concern from small employers about how this will affect them, and there is some research-it is only a small piece of research from the Forum of Private Business that has come out this week-where SMEs have said that they have had an 8.5% increase on compliance costs in the last two years, and they are blaming RTI for much of that. They have said that many of them do not feel confident to be able to do this, so they are having to go to external payroll bureaus. They have had an 11% increase in their costs; the bureau basically put up their prices, as they know that these people need it. What are you doing to work with small employers to make sure that they are on board for this and they can actually deliver? Apart from the fact that Universal Credit is not going to work as it should if HMRC’s RTI does not work, small employers are also going to be hit with penalties if they do not deliver. SMEs are under a lot of pressure as it is, so what are you doing to support them?

Suzanne Newton: Just sharing some figures, in total we have 1.5 million Pay As You Earn schemes operating RTI. That is about 80% of the total base.

Teresa Pearce: They will be largely larger employers.

Suzanne Newton: 86% of SMEs have already joined RTI, and 83% of micros-those with nine or fewer employees-have already joined and started reporting RTI. That exceeds our expectations of both of those employer groups. We have been doing quite a lot of research with those employers who were in our pilot population to understand how they found it, having been in RTI and gone through the first end-of-year process. What they tell us is that although there was an initial fear factor to coming on, once they started reporting RTI, the vast majority found it easier. They saw it reduced their burdens. In terms of the particular survey you mentioned, I have not actually seen that, but there are a number of support things that we are doing. There is various online support in terms of guidance and webinars. We have run a whole series of face-to-face events around the country to help small employers. We do have our own Basic Pay As You Earn Tool, which is suitable for those employers with nine or fewer employees. That is free software to report to HMRC, and there is support through our contact centres to help them use that product.

Q58 Debbie Abrahams: The Secretary of State mentioned the useful arrangement around the interface between RTI and DWP for checking up on fraud. However, I wanted to ask about validation of data that is coming from you to DWP. I could give you a number of examples where there have been errors around information that has been provided that have not been picked up. What are you doing to validate data and ensure that real issues around fraud are being detected and not mistakes?

Suzanne Newton: In terms of the quality of the data, as I said earlier, the primary match is around the National Insurance number. What we know is that the data quality that employers are sending us is generally high. So 99.5% of the data employers are submitting to us is matching to a valid National Insurance number on our systems.

Q59 Debbie Abrahams: My point is: is it accurate? What if somebody is mistakenly, for example, on an employment roll and they left three months ago, and there is this overlap-which has happened. As I say, I have got examples of that.

Suzanne Newton: Under RTI when somebody leaves, that will come through on the regular stream of data. Are you talking under RTI or are you talking in past Pay As You Earn? In past Pay As You Earn, that starter and leaver process was not always operated in a timely manner. Under RTI, they would have got the starter and leaver information regularly.

Q60 Debbie Abrahams: I am talking about human error and checking up on human error to see that people who have said they have left a job have actually left the job.

Lord Freud: In practice, what matters is if they get paid by the employer; we will see it. So we will be tracking the actual cash. If they do not tell us they have left and they stop paying them, we will see that because we will not see a feed. That kind of error is not going to be a problem. This summer, we are very carefully going through all the data to make sure we pick that up. There are always niggles in this area. You are quite right, and we are spending a lot of attention-jointly, the two Departments-to make sure that we really understand every single thing that can go wrong on these feeds and get them right. So you are absolutely right to have that concern, and we are addressing it.

Q61 Jane Ellison: I think we all found it very interesting seeing how RTI is working. There were one or two things for which it was clearly opening a window, a greater understanding, to what was going on. One or two people were clearly working. It struck me that there is also an opportunity in that, potentially, when you are reviewing how the pathfinders work. We saw a couple of young guys, for example, who were clearly doing one day a week, whatever, with a company, and I wondered whether the job advisers or the people in the Jobcentres would also have the flexibility, for example, to say to that company, "Well, they are clearly doing a job for you. Why do you not take them on as an apprentice?" So instead of just seeing RTI as a way of checking up, you could also see RTI as a way of actually opening up opportunity.

Iain Duncan Smith: Yes, I think you are absolutely right, and this is the point: the point about Universal Credit is-and we get fixated on things like IT-it is about a cultural shift. In other words, it is as much about helping people to advance in work. So what we are going to be introducing, under UC-which we want to trial in the next few months-is in-work conditionality. In other words, the advisers stay with the individuals when they are in work, when they are doing a certain amount of time, and discuss with them, and even with the employer, whether there is more time they could do or perhaps they need to get another job to build up their hours. Certainly, that is one of the areas. You are right that the RTI becomes a tool in that process, so it is as much to help as it is to check up, as we have discovered already. One particular individual during the course, when confronted with the evidence from the RTI programme that he already had a job, said with astonishment, "How did you find that out?" The answer was, "Because we get it from the RTI feed." So it does both ends of that; it begins to make people realise they cannot fool us on this one and, and at the same time, we will understand there is a problem and help. So the advisers will stay closer, as a result, to the claimants.

Q62 Nigel Mills: I think, having seen the RTI, most of us went from being a little concerned to saying, "Actually, that looks like that is working fine". So I think HMRC have a clear pass on this one today. I think the Secretary of State mentioned that you were perhaps trying to link the RTI into the existing systems rather than wait for UC to have the full power of it. Is that correct? Is that something you think the system can actually achieve? That sounds like a really powerful tool.

Iain Duncan Smith: Can I just get Lord Freud to say something about it, and Suzanne may like to say something correspondingly?

Lord Freud: One of the things we are looking at is what we are calling a fraud-and-error-proof concept to see if we can exploit the RTI feed just on JSA, because it is quite surprising, as you will have seen, to see someone coming in claiming JSA when he or she has actually got a job. Clearly, one of the things we are piloting is whether we can use that feed more generally to find out other people who are doing that who are not necessarily on UC.

Suzanne Newton: From a technical point of view, we would re-use the existing links, and from an HMRC point of view, we are also looking at how we use that RTI data in the existing tax credit system. In some pilots this year, and then from next year, we will be using that RTI data more around renewals of tax credits to reduce tax credits claimants’ burden in terms of doing renewals. We will provide RTI the information back to them.

Q63 Graham Evans: My observation from the pathfinder in Greater Manchester was that it seemed to be working very well. What impressed me most of all was the staff-highly motivated, good management and leadership, and an esprit de corps there with people committed to helping find people jobs and get them back into work. How confident are you that you will get 80% of Universal Credits claimants online by 2017 given the number of vulnerable groups or people who are not IT savvy?

Lord Freud: As you know, our target to start with is to start at 50% and move up to 80%. There is a big educational aspect to that. We are going to put a lot of resource into that because that is one of the areas that the Local Support Service Framework is about. The two big exclusions are digital and banking-financial. Those are the two areas where we are building this relationship with the local authorities through this framework to put some help in. What is interesting is that there is a variety of response. We have already seen, somewhat to our amazement, to be honest, that around two in 10 of the people going on to the pathfinder are actually doing it on their smartphones. Since we have not built it at this stage with a smartphone app, that has impressed the hell out of me. The other thing that is also very encouraging is the use of family and friends. Roughly, again, a similar number use family and friends. In fact, when I was there-I went up a little after you to Ashton-under-Lyne-it was quite nice to see a rather elderly gentleman making his Universal Credit claim with his son helping him through. I actually would expect quite a lot of that support from family, and I think that is to be encouraged.

Q64 Sheila Gilmore: I am not sure that people in their sixties all want to be called elderly, Lord Freud.

Lord Freud: I can only agree with that. I am not sure he was even 60, to be honest. I was thinking in IT terms-anyone over about 35 is elderly. So there is a lot to learn on how we do this. It is a huge ambition and it is transformative socially for the country-not just because we want to do it for UC. We are taking it at that level with that kind of resource, and we are prepared to put a lot of resource into building up that capability.

Iain Duncan Smith: I would just make the point that this is why, from the October roll-out, we are committing a large amount of money to invest in upgrading all of the Jobcentres. I would at this point invite-I think I mentioned it to you, Chair-the Committee to perhaps visit the Hammersmith one, which is a Jobcentre of the future. You will see a huge number of internet devices and also advisers available to support and help anybody coming in to do that. It is worth remembering the reason behind this, which is that over 90% to 95% of all the jobs now require some kind of ability or skill with IT, so it helps people then improve their job prospects with the assistance we are going to give them.

Q65 Graham Evans: Okay, on the example in Greater Manchester, the Jobcentre Plus there seemed modern enough. There were lots of terminals and the staff seemed very motivated and capable of helping and advising their clients. However, we have been told that in Scotland, the Jobcentre Plus will not be able to help their claimants and their clients with IT. How are you going to make sure that when there is the roll-out, that all Jobcentre Pluss’s will be able to help their clients?

Lord Freud: Clearly, we have just announced-or we have just said today-that we are putting another 6,000 IADs in. All Jobcentres will be covered in that programme.

Iain Duncan Smith: There are 2,000 out there now, so that will take it to about 8,000. That will include all of the Jobcentres. That is a commitment over now through 2014.

Q66 Graham Evans: Just a quick question to Mr Shiplee. One of the niggles on the IT system at the time was a save-and-return; when you are filling things out online, you get distracted and you move on, you come back and it has gone. You have to start again. You mentioned about the Government Digital Service earlier on. Is that an IT glitch that perhaps could be fixed?

Howard Shiplee: I do not think it is a glitch. There are aspects of security about that-getting halfway through, leaving something effectively open and then returning to it. In many ways it is safer to shut it down and start again from a security point of view. But that is being looked at at the moment. As I mentioned, I was looking at what we call a "show and tell" yesterday that was one of the first stages of looking at couples and how it works. It is very interesting that it was being tested not on a computer screen but actually on a telephone interface. That is quite an interesting point, because in order to get facts and figures on the telephone, you have to really sort out exactly the questions you are asking and the responses. Many of us have tried to design forms, and you have always designed a form that is very complicated. Again, the way we are doing this is getting down to the real nitty-gritty and making it very user friendly by minimising questions and making it very clear as to what is happening. I think the answer to your question is, yes, in time, we will address that issue.

Graham Evans: Perhaps, Chairman, we could get the app for our iPads.

Q67 Stephen Lloyd: Secretary of State, the last time that you appeared before us, you confirmed that resources would be made available to the advice sector to help people on to Universal Credit. Now, I know that you have come up with the Local Support Services Framework, so I would like an update on that as well and resources to local authorities, but, in particular, the advice sector, because this was something that I know we had a bit of a discussion of last time. Could you update us on those resources as to where we are at with timetabling?

Iain Duncan Smith: Yes, I will get Lord Freud to pick up the details on that because he has been directly involved in that. It is worth bearing in mind that there is a lot of work taking place in the Jobcentres now to get people on to Jobseeker’s Allowance online. We are further ahead than we thought. About 56% now of all claimants are actually making their claims online. There are about 1,000 new digital champions to advise anybody coming into Jobcentres, to talk to them, to help them through, to show them how that process can work. Regardless of whatever their claim is, we are trying to get them to do all of those claims online. So there is a big process. Do you want to talk in a little bit more detail about the Local Support Services Framework?

Lord Freud: Yes. We have decided on this approach through the Local Support Services Framework, which means that it is very much a relationship between us, the local authorities, the third sector and other providers that may come in. There will be some national providers. I am particularly thinking about Money Advice, where we have a slightly wider arrangement. We have got a national framework agreement and then, in each locality, we will have them. It will be up to each locality to work out the best way of getting the right services, the appropriate services, to people.

Q68 Stephen Lloyd: When you say each locality, forgive me Lord Freud, who is the decision-maker within each locality? The DWP representative, Jobcentre Plus, or what?

Lord Freud: Currently, we are just working out the detail of that. Clearly, one of the most interesting things is that we have not yet got a proper mapping of what the services are in any one place. We are currently working with two or three local authorities to get a mapping of what the services are and their costs in a locality and then look at them. Clearly, this is a really good opportunity to start making sure we do not have any duplication and that we get services really focussed holistically on getting people supported in all the ways they need. There is a lot of money going in already in this area. The issue is getting it all coherent. One of the other things we are looking at is that CAB have been doing some pilots, if you like. I know that Tameside has been talking to CAB on that. There is a whole range of work to do here, and we are looking to publish that framework document later in the year.

Q69 Stephen Lloyd: Have you got a date? Do you think it is likely to be before October or post-October?

Lord Freud: I do not have it absolutely in my head. I suspect it is likely to be a little after October.

Iain Duncan Smith: Towards the end of the year, that is for certain.

Q70 Chair: Just before we leave the IT, there are obviously things that were meant to be there in the original design-the save-and-return, the claimant’s ability to manage their own accounts-that are not, for various reasons, going to be in the new system. Mr Shiplee, you were talking about new technology coming along. Is it essentially that the original design of the IT does not really deliver what it was meant to deliver and you are actually going to be bringing in something completely new?

Howard Shiplee: No, that is not the case. We are currently reviewing all that has been built, as I have said. As you have already accepted, the existing systems that we have are working and are working effectively on the pathfinder. What we are now looking at is ensuring the utility of our existing systems, our legacy systems and the systems that have been built over the last 18 months relevant to where we are going, and maximising the utilisation of those to ensure that we can dock in the new systems that we are designing.

Q71 Chair: So the rumours that there is a large chunk of the IT that simply did not work and has been dumped are not true?

Howard Shiplee: No.

Chair: We are on to claims and payments.

Q72 Debbie Abrahams: Could I first of all reiterate some of the points that have been said by other members about the visit to Greater Manchester, including my own area of Oldham? I was impressed with the staff; they really did perform very well, and I was also very impressed with their honesty about where there are still glitches. On that visit, we heard evidence from the Citizens Advice Bureau and other welfare support agencies as well. In the same way that Mr Shiplee has talked about the huge cultural change that is part of this process-part of the process not just for claimants but also for staff-the welfare support agencies mentioned the real stress that has been put on increasingly vulnerable people as a result of the cumulative effect of the different welfare reforms that are under way at the moment. We have talked now about the implementation of the online digital-by-default aspect of the changes.

A very powerful example was given that it is great if people do have support, but suppose you do not have the support? One person was asked to use a keyboard for the first time and had no idea what to do with it. They pressed a button and kept on pressing it. So, that is stressful. Many of these claimants, as you know, have mental health issues, and this is hardly going to be helping them with that. Specifically, because this is a very important aspect of the accumulative stress that many of our most vulnerable claimants are facing in relation to the change in how housing costs are paid, I wanted to find out from you how and whether the most vulnerable claimants have been included in the pilots, and how effective they have been in identifying the most vulnerable in undertaking those pilots?

Iain Duncan Smith: I am going to ask Lord Freud to cover some of the details of the pilots. Also bear in mind that we have extended this pilot by six months, because we think we have gleaned a lot of good information, and we have agreed with everybody that we can actually get more information by making sure we capture everybody that is likely to be in the mix that goes forward to Universal Credit. So, do you want to pick up some of the details on that?

Lord Freud: Yes. We have learnt a lot from the projects. Basically, the crude figure that is standing around now is that there is a 94% collection rate. What we have done as a result of what we have learned is we have designed the system now that works. I made a speech 10 days ago laying out how we would do this, which is to keep the people who could not handle direct payments on managed payments and to move other people on to direct payments, i.e. payments from tenant to landlord; and if they ratchet up two months of arrears, move them back on to managed payments, but start worrying about interventions and what to do at the one-month equivalent point. We would have a rapid arrears recovery process so that the landlords, particularly of social housing, who are concerned about ratcheting up arrears, which would undermine their finances, would actually see a rather limited financial impact. That is the system that we have developed.

One of the most interesting findings is the costs to the landlords and the changed relationship between the landlord and the tenant. We have taken a lot away from that. There have been some very positive stories and situations that have come out of that. The landlords have really started to help their tenants transform their lives in many instances. They have also discovered some horrific things they had no idea about. They discovered one father wrestling with a heroin addiction for instance in one of them, which nobody knew about, with four children also becoming addicted, as the older son was. The fact that it is re-establishing the relationship between tenant and landlord is valuable. But the lesson for us is, once you strip away the actual project costs, who takes the costs, which are a social investment if you like, and where do they go within what will be the Local Support Service Framework? So that is the area we are working on now.

Q73 Debbie Abrahams: Can I ask what sort of proportion in the pilot have you been dealing with around the most vulnerable tenants?

Lord Freud: We are having a full study done on that. 6,000 people are currently on it. It is roughly 7,500 that went on it out of a total potential population of I think 12,000, but do not hold me to that figure. I will just double-check that and give it to you. We do not think there is any particular bias-we will find out when we do the full study-in who we are getting. We think we get a pretty representative group of social tenants in that. That is something for the researchers to confirm, so we will not know for a little while, but those are roughly the figures. Then we have run this switch-back process when people have not handled it, and that has gone relatively smoothly. So we have picked all of that up to create something that still gets a lot of people managing their own rent. We will be working with councils and social landlords to make sure that we keep the people who cannot cope after the beginning. So that will not be just our decision; we will do that co-operatively.

Iain Duncan Smith: This is the important bit. The thing that I would draw from what Lord Freud has said is that there is something very positive. In fact a colleague from the Labour Party came and saw me the other day and said that they had already experienced the idea that landlords under some of these projects are actually now engaging much more with their tenants. The result of that is that they are getting to know a lot more about them. Those were some of the points you made. So there is a bit of a cultural shift.

The second thing that is important is that we have taken on board the concerns that the Committee and others have had about ensuring that those who may have a problem or part of a problem stay off this process, if those landlords nominate them in discussion with us. However, we do have a programme together to work to get them resolved so that they actually can begin to cope with some of their financial issues, because if they cannot cope with their financial issues by paying rent, they are going to find it very difficult to move back to work. So we are giving them the scope to be able to say, "These people are simply, at this present stage, not ready for that," and if we agree with that, they stay on the managed payment.

Q74 Debbie Abrahams: Can I also ask then, if you are in listening mode, for you also to take on board the issue that still exists around inappropriate sanctions? I have mentioned this before. It is an increasing issue. It was also mentioned by the welfare support agencies. We have talked about cultural changes and the need for cultural changes. There is still a tendency for inappropriate sanction use, so I hope you will take that on board.

Iain Duncan Smith: We do take that on board, and we will make it part of the process that we are looking at at the moment.

Q75 Stephen Lloyd: I am very pleased to hear that Secretary of State, because you are quite right; that is something we have come to a lot around the anxieties of that percentage. Simply our concern was that they would not be able to cope with the direct payment into their bank account, so that is very encouraging. I also like what you were saying about finding those people working with the landlords and then actually going through a process to help them get off that dependency, so I am delighted that you took on board what Work and Pensions said about that. However, to flag up one thing, if you are looking at, say, only 4% or 5% potentially of social housing landlords, you will know with the scale of some of them that, if they do not get paid, or say there is a hiatus for anything up to the two-month period you are talking about, that could have a substantial impact on their P&L2. So I am sure you will be working with the social housing that has 45,000 rented houses or what have you; if it short 5% of that, that is going to make quite a substantial impact on their budget.

Lord Freud: We have done some pretty elaborate sums on this, and in practice, when you spread out the process and only allow it to be two months and have it pulled back between six and nine months in the arrears, the actual financial strain is not that great. I will not put a figure out there; I will let the social landlords work that out, which I think they have. Even on that figure, there is also a benefit to them because, currently, they have quite a few people who have partial housing payments and are responsible for the rest. They then have a problem collecting those arrears. Those people will now be on Universal Credit, so will be in the system that I have described, giving housing associations, effectively, a state underpin. We have designed something which is very deliberately designed to take that financial concern away.

Q76 Stephen Lloyd: That does sound very encouraging. If I can just drill down a little more on the particular vulnerable groups, there will be some people who will always, or certainly for a very long time, remain vulnerable. It is the reality of it, no matter how passionate and determined we are to transform people’s lives. Is there a recognition within the programme that that may well be the case and, for some, it just may need handholding, if not forever certainly for quite a considerable length of time, because that is the reality, unfortunately, of some people’s lives?

Iain Duncan Smith: There is, but I would just repeat that, having done all this work, and given this process that allows us to, through discussion and nomination, keep people on managed payments through this process, it is important that we do not make assumptions on everybody and just dismiss that as a process that they are not capable of anything. What we have found in quite a lot of the work that has been done are people who, quite often, have been written off in that category but can turn their lives around and become part of the mainstream process and able to engage, to a greater or lesser extent, elements of their lives. It is the whole programme of change that is important. The caveat is that we keep people constantly reviewed and helped. If they show progress, we want to move them on. We have this let-out that, if it does not work, we can bring them back into managed payments, but this should be a dynamic process, not an opportunity to park people, which has historically been the problem with the system. This should give us an opportunity to constantly ask the question: why is this person not on a direct payment? Are we doing something about it? It is about constantly reviewing that.

Q77 Stephen Lloyd: When someone is flagged as being in that situation, whether by IT, paper or an individual, it will be red-flagged that they will have an eye kept on them going forward, with possible support mechanisms to move them-who knows-back into the mainstream. That is part of the whole thinking.

Iain Duncan Smith: If at all possible.

Lord Freud: There is an example that is worth giving, where we had an ex-offender who had drug and alcohol issues and no bank account. The instant assumption would be, "This is quite challenging". With some quite light-touch assistance, however, he opened a bank account, which meant that he managed his rent payments pretty well-he is one of those who runs absolutely smoothly. Having got the extra confidence from becoming more financially literate, he was helped to start a small business as a window cleaner and reduce his reliance on the welfare system. When you see the theory in practice, the Secretary of State’s point about not writing people off but trying to help people in that way is really important.

Stephen Lloyd: It is, and I concur with the sentiment.

Glenda Jackson: Which bank agreed to give him an account?

Chair: Glenda, I am going to bring you in anyway.

Q78 Stephen Lloyd: Just one more question, Glenda, and then you can come in. On the online process, is there an algorithm or what have you to identify someone who could be in that particular vulnerable group? In other words, the question is: how do we identify them online? Is there a system?

Lord Freud: This is in the detailing, which is exactly the point of what we need to be testing. Somebody who really cannot handle it online will tend to go on the phone or come in face-to-face. We will have to take it from there and we will have processes to do that.

Q79 Stephen Lloyd: Potentially, if not more than likely, a number of these individuals would be red-flagged also by the social housing, the landlord or the advice agency.

Iain Duncan Smith: There is a combination of groups who come together to look at a problem case: "This is an individual or family in a particular set of circumstances". The whole idea around this is that the agencies then look at that individual and try to figure out how they can change that process. Right now, what happens is each individual agency just writes them off because "Our remit is only to pay them benefits. We pay their rent for them", so they are not really interested in whether or not they have a problem. The good housing associations do a lot of this already but there are others and councils that do not. It is to get everybody up to the best practice, and that means that, if they then look at somebody, we have a programme whereby we can check back and ask what we are doing about them.

I know there was an interjection from Ms Jackson about this, and the answer is, in that particular case, and in others, my hope is that the housing authorities and others ideally will work with the banks to give them that kind of assurance that these people can open bank accounts and that, having done some financial work and training with them, they are in a much better position to become stable and decent citizens.

Chair: We have a question on bank accounts coming up. I will bring Glenda in now.

Q80 Glenda Jackson: I am grateful for that. My interjection simply was: if there was a bank that was prepared to trust someone, would you please broadcast that? That might encourage other banks, if you see what I mean.

Iain Duncan Smith: I am very happy to do that.

Lord Freud: We are doing an exercise currently with the Treasury to improve access and the minimum standards of basic bank accounts. There is a lot of work going on there. We are also exploring budgeting accounts, which we are looking at very closely. As this Committee will know, we are also working very hard to raise the capacity and capability of the credit-union industry, which we have put £38 million into doubling. There is a lot of work going on in this area.

Chair: Now we are straying into the question that Nigel has, so I am going to bring Nigel in.

Q81 Nigel Mills: As I recall, there was some tendering process or expressions of interest that you sought a little while ago and which closed a little while ago. Can you just update us on how many bids or expressions of interest you got, and is that going forward?

Lord Freud: It was a prior information notice. What it does is start a dialogue. We had an extensive dialogue with providers and stakeholders in this area of budgeting accounts. We are currently just considering our approach to that financial product and hope to be coming out with something in the not-too-distant future.

Q82 Nigel Mills: Is that shortly or soon?

Lord Freud: We will come out with our approach. I do not think it is going to be exactly what we envisaged to start with, but we are doing a lot of work on this.

Iain Duncan Smith: The banks themselves have expressed interest in this anyway, so they are driving forward. Bearing in mind that about 90% of potential UC claimants already have bank accounts, the focus is on the remaining 10% who we are dealing with here. The point he was making about credit unions is quite important. We absolutely and desperately want to see-and we are doing whatever we can at the moment to try to build credit unions up-credit unions offering some of the solution to some of those with credit difficulty: a gentle introduction to the idea of a banking process. The money we have put behind them is to try to amalgamate some of these credit unions to make them bigger, and also to encourage others to enter credit unions. I would hope that all MPs would now subscribe to credit unions, and the same goes for civil servants and everybody else as a process of trying to build up their bank-account process. Normal banks-not credit-union banks-are also part of that.

Q83 Nigel Mills: Do you have any suitable jam-jar expressions of interest?

Lord Freud: It is an interesting market because it is not necessarily pure financial-banking players that are interested in this area. It is a very interesting marketplace.

Q84 Chair: Is that a no? That is what we have heard: that none of the major banks are interested in jam-jar accounts at all.

Iain Duncan Smith: I think they are. It is just a matter of trying to get them-

Lord Freud: We are having a different dialogue with the major banks around, as I was describing, basic bank accounts and the enhancement of them. One of the things that is most encouraging in this area is that I understand that the Fairbanking Foundation was accredited today, I think. That is an organisation which looks at certifying bank accounts. It is one option for people to look at in identifying a safe bank account for people to use.

Q85 Nigel Mills: When would you envisage that somebody who needs a jam-jar style bank account might have that facility available to them? Is that in a year’s time or is it a distant dream?

Lord Freud: It is not a distant dream but I cannot give you any detail.

Iain Duncan Smith: The important point is that we are discussing with the Treasury now a process to engage the banks in defining that with them and with us. We will be in a stronger position, once we have engaged in that process, to be able to tell the Committee what dates and deadlines are. We are quite determined that this is something we do want the banks to do. I and Lord Freud want to speak to all of the major banks. I was meeting with the new Chief Executive of Barclays the other day to say that this is a social responsibility as much as anything else and that they do need to be in this area as it is part of their remit. That is a personal view. I think there are the beginnings of a real change in attitude. We need to do a bit more work with the Treasury on this to get them a bit more incentivised; nonetheless, there are the beginnings of a shift out there.

Q86 Sheila Gilmore: Would you consider, with your Treasury colleagues, reviewing the decision not to make it an obligation to provide basic bank accounts? That was the proposal of the previous Government, which the Treasury said, at the beginning of your Government, they would not do. Would you review it?

Lord Freud: There is a process going on currently of dialogue with the banks on basic bank accounts. I think it would be premature for us to say that much more about where that is going.

Iain Duncan Smith: Could I put it this way? It is something we are constantly discussing right now with Treasury and others, if that is helpful.

Chair: We will look forward to hearing that.

Iain Duncan Smith: It would certainly be helpful, from the Committee’s standpoint, if the Committee were able to make some suggestions in that direction.

Q87 Chair: I do save into a credit union, and what is being asked with the jam-jar accounts is beyond the capability of most credit unions. Indeed, there is not full coverage of credit unions, so I do not think they will fill the gap. They are a useful service but, with the numbers we are talking about, it really has to be the banks that have to step up to the plate on this.

Iain Duncan Smith: We agree with that.

Q88 Glenda Jackson: Attached to that, but not directly, are you speaking to the payday-cheque people on the issue that they protest that they do not take benefit claimants, but on an anecdotal level they most certainly do?

Iain Duncan Smith: I personally dislike payday lenders. I will put that on record quite happily. As a Government, the Department for Business, Innovation and Skills is looking at their business model quite severely at the moment. My instinct is that they do operate in an area around our claimants, and I am not happy to see them in that area, so the Government is looking at all of that at the moment and I am strongly of the opinion that the action that we are taking and further action may be necessary.

Q89 Debbie Abrahams: Support Paul Blomfield’s Private Members Bill.

Iain Duncan Smith: I will rest on what I just said. I am in enough trouble already in that one, I am afraid.

Q90 Sheila Gilmore: I have a fairly brief question. There has been some discussion about the fact that, without a second-earner disregard, some families will not be able to get out of poverty. Do you have any plans to look again at this?

Lord Freud: I am fairly firmly on the record on this: this is not something which is baked-in. It will be slightly more concrete than the second-earner disregard, but the main thing is the expense. It will be quite expensive to have it. One of the things that I am ambitious to see is very thorough testing, with randomised controlled trials, of every aspect of Universal Credit as we get it going, just to see what the response is when you change key parts of it. Whether you change work allowances, tapers or whatever, what do you see happening? What pays for itself and what does not? Clearly, one of the early things to test would be to see what the effect of a second-earner disregard would be, whether it is beneficial, what it really costs and what it does to behaviours. It is something that we can test.

Q91 Jane Ellison: Could you update the Committee on current thinking on passported benefits? In particular, free school meals is probably the biggest interest.

Lord Freud: We are currently working on-and, hopefully, we will not have to be too discreet for too much longer on it-an interim stage, where we have, effectively, a set of thresholds whereby we provide interested Departments that want to use our system to passport from with enough information to produce something that is pretty similar to the current situation.

Iain Duncan Smith: It pretty much works-as we believe, anyway-for things like free school meals. It is up to the Departments now to decide how they want to do this. It may also be an opportunity for them to do this in a different way. It is up to them; our job is to try to say, "These are the levels at which we can give you the information", and go from there. Some have decided they want to do it in a different way, and they will be making that clear in due course. There is another opportunity too: I would simply say that they make the decision because now, with Council Tax Benefit essentially being localised, exactly the same information is available at the local level. Some may choose to use hooks or information at the local level. What we have arranged and what Lord Freud is talking about is, if they are asking us to do it, we have made arrangements about where and at which points in income, as it were, they will be able to hook the information to.

Q92 Jane Ellison: Are you setting deadlines for when people have to make those decisions?

Iain Duncan Smith: We want to do it as soon as possible, really.

Q93 Jane Ellison: I am just thinking that it becomes relevant as you start to get some of the more complicated families.

Iain Duncan Smith: I absolutely agree with you.

Lord Freud: As we get into families and volumes, we will need it.

Iain Duncan Smith: We think we are pretty much ready on this, so it is up to Departments now to decide finally whether they want to do it that way or not. We are pushing them at the moment to make that decision, but we think we have a solution to that.

Q94 Chair: In some ways, depending on what they decide, it could be that the passported benefit takes away the work incentives. Are you keeping them aware of that and can you say to a Department, "No, you are not doing it that way. The whole basis of Universal Credit goes out of the window."

Iain Duncan Smith: That is why we have offered a solution to them that we think encompasses that process, and it does work and delivers to the right people. We have yet to have a final decision from all of them.

Lord Freud: We have an interim position, as I described, with thresholds. The issue then becomes: is there a strategic, longer-term solution? Clearly, we had a very interesting report from SSAC3, which came out a year or so ago now and which discussed, among other options, tying some of the passported benefits even more closely, a bit like childcare. There is a range of options, ranging from what the Secretary of State was describing, which is putting in passporting somewhere else, to tying it much more tightly to the work incentives. That is clearly something that we are going to have to look at.

Iain Duncan Smith: It is worth saying that we can absolutely guarantee that those who need these supports etc will get them, but it is worth observing, as we did when we went down this process, that this is also an opportunity to rethink what has been going on. People have used the benefits system just to attach additional bits and pieces all the way along, which is not the core design of what the benefits system was meant to do. In other areas such as health etc, they just need to think about how they want to do this for their passported benefits. There are about 20 passported benefits.

Q95 Chair: That is part of the very good reason, in as much as it saves them the bureaucracy. These other organisations and agencies do not have to do their own assessment. They can use benefits as a proxy.

Iain Duncan Smith: My question to some of them is: is this telling you enough and the right information about why you are giving this passported benefit to someone? Are you missing some people because you have just a very crude device of attaching them to the benefit? For some, yes, things like free school meals etc; for others, it has just been a very easy process-things like water rates etc-and you think, "Hang on, this may not be the way in which you define your would-be client group that needs this particular benefit." We have asked people to take this as an opportunity to review this, to see whether or not there may be a better way for them to deliver a requirement to those who genuinely need it.

Q96 Chair: Going back to our original questions, where you say that you are going to start testing the more vulnerable groups and the more complex cases, you are going to have to make a decision pretty soon.

Iain Duncan Smith: We have some interim measures but you are absolutely right. We are ready to make those decisions; we just have to wait for the Departments to come up with their designs.

Q97 Chair: We have a whole series of questions about the benefit cap, housing benefit and discretionary housing payments, but that would probably need another two hours, and I think you would probably want to get away and the Committee would want to get away, so, if you do not mind, Secretary of State, we might leave that for a more discrete session.

Iain Duncan Smith: I am very happy to return if you want to talk about that specifically.

Q98 Chair: Part of the reason for today was just so we could take stock and look at the areas that perhaps need a bit more attention for us in more detail, and that might be an area for us to do that. Can I thank you and your team for coming along this morning? We really appreciate your time. We know how important Universal Credit is to the Government’s strategy of delivering welfare reforms, and part of our job is to give you a hard time; that is what we are here for. We see that very much as our role and we thank you for answering our questions as well as you could.

Iain Duncan Smith: Could I just say one thing in conclusion on this? First of all, thank you for that. Second, I hope you will take from what we have said today that we have taken on board a lot of the concerns that the Work and Pensions Select Committee has made to us over the last year to year and a half in the way in which we want to roll this out and to mesh the two elements of this, so that we get the volumes on the back of our understanding of what the difficulties and changes will be, giving us just enough time to make sure that we can implement all of that. This process that we have announced to you today is hugely centred on listening to local authorities and to the Work and Pensions Select Committee, and making sure that what we do not do is just steamroller ahead but that, as we implement it, we implement what we know we can do and learn from those pathfinders.

Chair: We have barely scratched the surface of all of that with you this morning, so thank you very much for coming along.

Iain Duncan Smith: Thank you.