Lord Freud – 2014 Speech on Transforming Welfare

Below is the text of the speech made by Lord Freud, the Work and Pensions Minister, on 27th January 2014 at the Capita Welfare Reform Conference in London.

Thank you…..I am very pleased to be here.

I would like to use my time this morning to reflect on the past 4 years, and in particular how different the welfare landscape is now compared to 2010.

In short, it is very different. And the change has been long overdue.

We are introducing the most fundamental reforms to the welfare and pensions systems for more than 60 years.

These are structural changes designed to reward work, encourage responsibility and help those who need it most.

And we are already starting to see the impacts of these reforms.

When I started looking at the benefits system in 2007 the employment level stood at 29 million, and there were 3.4 million people on inactive benefits.

These figures stood at a similar level when I became a Minister in 2010 [employment = 29m – inactivity = 3.3m]

Today, the picture looks quite different.

Not only, as many of you will have seen last week, have employment levels hit a record high, rising to 30.2 million.

But we now have 2.95 million people on inactive benefits – a drop of nearly 400,000 in the last few years.

There are a number of factors driving these figures, but I believe one of them is the impact of the structural changes we are introducing to the welfare system.

When I wrote my report in 2007 it was clear that we had a system that was discouraging work, and that had written off large numbers of people as ‘incapable’.

It was a system designed around the lowest common denominator, that took away people’s control of their own lives, rather than empowering them:

– it penalised you if you wanted to work more than 16 hours a week

– it said to people with illnesses and disabilities that we didn’t think they were capable of anything, rather than looking at what they could do

– and for some people it meant that when you earned any money, you lost almost all of it in benefit withdrawals

We know that work is good for you, it gives you a purpose, it has huge health benefits and – most importantly – it puts you in control of your life.

Yet we were saying to some people that they would have more money if they stayed on benefits.

We had a system that was actually pushing people away from being in control of their lives.

So we started changing this, bringing in measures to help people find the right kind and level of activity for them, and designing a benefits system that didn’t assume people were incapable.

Because, as so many people delivering services tell us, the real barrier is how people see or think of themselves.

If they haven’t worked, if they have always been given a lot of help by others and not given the means and support to help themselves, then it is unlikely they will be able to take control of their own lives.

Salutogenesis

Behind this idea of giving back control is a theory I find really interesting, from the work of Aaron Antonovsky.

He argued that a purpose in life – what he called coherence – was crucial to understanding human health and well-being.

Whether we can overcome setbacks such as losing one’s job, or dealing with an illness, or whether they overwhelm us is, for Antonovsky, a function of whether these stresses violate an individual’s sense of coherence.

He says life should be comprehensible, manageable and have meaning.

Essentially that people can manage changes if they understand them, they have the skills and ability to manage their affairs and finally that they themselves have a purpose in life.

If people know why things happen to them, and they have the support and ability to manage their lives, they have a fighting chance of being able to maintain their well-being.

So we need to ensure that we support people’s lives by empowering them.

The longer someone is out of work, the less likely their life is to have an overarching sense of purpose or meaning. The less help people receive at vulnerable moments, the more likely they are to fall through the cracks.

And when you see well-being in these terms, then the Department for Work and Pensions becomes almost as relevant for people’s long term well-being as the Department of Health.

Helping people get into work gives them a purpose and meaning to life that may have been lacking.

This benefits society as a whole – work gives people a sense of pride, lifts them out of poverty and provides a model for younger generations to look up to.

Universal Credit

So we need a more responsive benefit system that empowers people. It should reward them for going into work and increasing their hours, not push them away from it.

And that is where Universal Credit comes in.

The idea behind Universal Credit is to create a much simpler and more flexible system that makes work pay…

…ensuring claimants are better off in work than on benefits…

… clearly showing how increasing hours increases earnings…

…while continuing to provide support for those who need it most.

And by having one flexible benefit with better earnings disregards it allows people who face bigger challenges – such as lone parents or people with disabilities – to take part in the economic life of the country and take control of their own lives.

By spring, Universal Credit will be live in 10 areas. From this summer we will progressively start to take claims for Universal Credit from couples and, in the autumn, from families too.

And our plans are for Universal Credit to roll out completely across the country during 2016, with new claims to all existing benefits that make up Universal Credit being shut down during this time.

From there we will move existing claimants of the current benefits over to Universal Credit, and we expect the vast majority of these to be on the new benefit by 2016 and 2017.

Early indications suggest that Universal Credit is starting to have the impact we are looking for.

We are already seeing that Universal Credit claimants are spending twice as long per week looking for work…

…are applying for more jobs per week…

…and are more confident about finding work in the next 3 months than comparable JSA claimants.

And 70% understand that they will be better off for each additional hour in work.

But while we expect that many people will be able to handle these changes well, we must ensure that help is there for those who can’t, or need support at first.

Local support service framework

That’s why I’ve been working incredibly closely with local authorities to develop the Local Support Services Framework.

This framework will do 2 vital things:

First, it will ensure people are supported to make the transition to Universal Credit by helping them adjust to some new aspects of the way they claim benefits.

And second, it will provide longer term support to the small number of people who find it more difficult to make this transition and need to gradually progress towards independence.

This is not simply about providing service lines for people, it is about supporting them to get the tools and skills they need to take control of their own lives.

A lot of hard work has already been done to develop this framework.

In December 2013 we published, in partnership with local government, an updated trialling plan. This sets out how we will work together over the course of the next year to test exactly what works in the delivery of Local Support Services.

That testing will build on the excellent learning that has already been done through the LA led pilots.

Just 2 weeks ago I held a very insightful workshop with all of the LA led pilot teams.

From Lewisham’s innovative triage process…

…to Bath and North East Somerset’s all-encompassing one-stop-shop…

…and a whole host of other examples, we are gathering some really important learning that will play a major role in the development of the Local Support Services Framework.

Direct payments

We have also been testing support for people through the Direct Payment Demonstration Projects, another crucial part of our efforts to give people control over their lives.

It used to be assumed that people weren’t capable of paying their own rent. And of course this made it even more daunting to move into work and manage their finances themselves.

The demonstration projects enlightened us in a number of ways. We discovered that of course a huge number of people are perfectly capable of managing their money. Across the different areas, the average successful rent collection rate stood at 94%.

And as a result more than half of the organisations involved have decided to leave their tenants on direct payment after the pilots ended.

And because the projects mean gradually increasing personal responsibility, they have also brought to light wider social problems as a result of the closer engagement with tenants.

There’s one particular instance that really sticks with me.

There was a family that was living in appalling conditions because the father was a lone parent of 4 children and struggling to cope with a heroin addiction – the benefit system had taken care of all their payments but isolated them.

Because of the projects, and the increased intervention that followed, the relevant authorities were able to step in and provide the appropriate support.

So for some people Direct Payments have proved a useful mechanism for highlighting where they need support.

But for those people who could be moving towards work, getting used to direct payments is crucial in preparing claimants for a seamless transition, and allows landlords an opportunity to increase their rent collection from this group of claimants in a phased and managed way.

I know there have been concerns about will happen when there are missed payments, or where a household isnt coping. So I’ll just describe the safety net we have here.

After 1 month of missed payment we can review the payment process and the claimant’s payment history.

And after 2 months we guarantee to move rent payment back to managed payments.

And these can be cumulative, so its not just about missing a whole month, but can be about a cumulative failure to pay rent.

So, we’ve learned a lot from the demonstration projects.

Indeed, I think they have been so valuable that I am keen that local authorities think about moving people on to direct payments earlier – so that we are supporting people to manage their own finances before they move onto Universal Credit.

Conclusion

Of course, Universal Credit is far from the only welfare change that we are introducing at the moment.

There are many others that are proving equally crucial in delivering the structural changes needed to drive down inactivity…

…but I’m afraid I do not have time to touch on them all in detail this morning.

Suffice to say that there is still much more work to be done.

I know many of you work in the organisations supporting these changes, and that it is not always easy.

But I think we should all be encouraged by the fact that we are starting to see some positive results.

Whether it be the record employment figures, rapid reductions in inactivity, or the positive feedback we are already getting from Universal Credit claimants, I believe these reforms are starting to work…

…and that we are…

…at last…

…starting to give people control back over their own lives.

I thank you for your support in making that a reality, and look forward to continuing this crucial work together in the years to come.