Fiscal Discipline in Social Security: DWP under Labour in 2015
Liam Byrne MP, Labour's Shadow Work and Pensions Secretary, in a speech at Chance UK, today said:
[CHECK AGAINST DELIVERY]
Thank you very much to Gracia and Chance UK for hosting us here this morning.
Your extraordinary work providing support to primary school children who are at risk of developing anti-social or criminal behaviour is widely acknowledged on all sides of the politics - and it’s a great privilege to honour it this morning.
By intervening early, you help save society long-term costs of crime and unemployment – costs to the child, society and the social security system.
My friend David Robinson at Community Links in East London once told me a phrase I rather like: "It’s better to put a fence at the top of cliff than an ambulance at the bottom".
That's the spirit in which you work.
Today I want to develop that theme and develop the arguments laid out by Ed Miliband and Ed Balls in June. This morning I'll show how reform of social security needs to be better organised so that it too saves money and stops costing money.
Three months ago Ed Miliband set out the Labour way to put our social security system back on an even keel. An even keel for the long term, after the costs of the worst global financial crash since the 1930s.
Ed's great insight was that controlling social security spending and putting good values and common sense back in the system - like the responsibility to work, decent pay not poverty pay, and help for those that need it - are not conflicting priorities.
In fact, it is only by reforming social security with the right values - what I've called the work ethic and the care ethic - that we’ll be able to bring costs down and keep the system affordable for the long term.
I don't think you can have moral credibility without financial viability.
But this financial discipline can only be achieved by a Department which is itself disciplined, competent and ready to deliver.
Now once upon a time, the Government promised a revolution.
But over the last month, it has become crystal clear that the so-called revolution is in very, very serious trouble.
In his excellent book ‘Instruction to Deliver’ Professor Michael Barber says this:
“Delivery is more than a series of activities – it is a fundamentally a state of mind."
Well, I'm afraid something seems to be very wrong in the mind of the man at the helm of DWP.
He has the mandate to reform. But the instruction to deliver seems to have got lost somewhere in his office.
There is now a private joke in Whitehall.
To err is human. But to really foul things up you need Iain Duncan Smith.
It seems like every day we have more news reports about projects in trouble.
It is beginning to feel like every single major reform is in crisis.
The unfortunate reality is that the high minded ideals simply haven't been matched by some good old fashioned hard work.
We need DWP back on track.
It was this time last year that things started to go seriously wrong for IDS.
When people started to look at his record, as well as his boasts.
Rumours began to swirl around Whitehall that senior ministers were not happy with his performance.
Cabinet colleagues started to wonder out loud whether his big projects were heading for disaster.
In the spending review George Osborne kept up the theme. He singled out the raft of failing programmes at DWP not in private but on the floor of the House of Commons.
And it’s no surprise the Chancellor is worried – these failing schemes are costing the taxpayer a fortune.
Things got so bad last year that the now Lord Finkelstein was dispatched to Newsnight to explain the reasoning behind sacking IDS - only to be made to look a fool as the PM lost his nerve the next morning.
To be fair to the newest member of the upper chamber, he had made a compelling case.
And the case is simple.
Iain Duncan Smith does not do delivery
You at Chance UK must be disappointed by this. You worked closely with Iain Duncan Smith when he wrote Breakthrough Britain.
In that report, he promised to put an end to social breakdown.
He promised to tackle disadvantage and poverty early.
He promised to tackle educational disadvantage early.
But as our hosts know, young people most of all are being let down.
There are 2.6 million children living in absolute poverty, an increase of 13% since 2009-10.
And as last week’s figures showed, youth unemployment is edging back towards a million.
Long-term unemployment is rising,
The benefits bill is £20billion higher than planned,
This is a huge challenge for Labour.
As Ed Balls has said, we can’t plan for extra spending in
So we will have to look even harder at how every penny is spent.
As a responsible opposition we need to start planning for how we clean up this mess today, so the next Labour government can start to get social security spending back on an even keel.
Earlier this year, Ed talked about why we think the idea of a long term cap on structural social security spending is a good idea.
We think it would force governments to think and act long term to get reform right.
Over the next few years, House of Commons Library calculations using OBR forecasts suggest that structural social security spending will fall. This is the baseline which we will inherit.
But, there is another part of the budget which George Osborne doesn't like to talk about: the cyclical element.
About 0.5% of GDP - about £8 billion in money terms. This part of the budget is not coming down. In fact, it's going up until 2015-16.
And what we didn't hear from Mr Osborne is any concrete proposals to do anything about this huge line item of spending. These are truly the costs of failure. And the reason why is simple. The reforms needed to make a difference are going very, very badly wrong.
Today I want to highlight the five major delivery failures that lie at the heart of this failure - the mistakes that are already costing taxpayers £1.4 billion - and I want to set Labour's agenda for an alternative way forward.
First, let's look at the reform of disability benefits. It's a major issue.
As one of my constituents put it to me in a residents meeting recently like this: disability benefits are the expression of a civilised society. But we need to make sure the right people get them.
That's why we pioneered reform of the Work Capability Assessment.
When we left office, we were testing the test. To make sure
it was fit for purpose and ready to fly.
But the Government didn't finish this vital test phase. They rolled it out before it was ready. And worse they decided to let the contractor Atos run rings around them.
The result is an almighty mess that is profoundly hurting some of the most vulnerable people in Britain. The most basic of British instincts - our decency and compassion - is traduced daily.
The mess is so bad that anyone taking the Assessment is now 8 times more likely to end up in a tribunal than a job.
The cost of these appeals has soared by a 40% in the last year alone.
We are throwing good money after bad.
The human misery is impossible to value.
But let me share with you the financial cost. £47 million in 2011. £66 million in 2012.
Even if spending on appeals doesn’t increase any further over the next two years, that would mean an extra £287 million over the course of this Parliament.
We cannot go on like this. And we can’t wait until next summer for action.
The time has come for some proper performance management.
The time has come to put a deadline on Atos to start delivering this contract properly.
That means fixing their reports, improving the accuracy of their assessments, meeting targets for customers sent home unseen, clearing the backlog, and radically changing the culture at their centres.
In business a contractor failing like Atos would be given a deadline to turn things around or lose the contract.
We should do the same. They should be given weeks to get back on track.
And if they cannot deliver, the process should start to get them sacked and replaced – without disruption to tests.
Yes, we hired them. But, yes we'd fire them unless there's a radical improvement.
Second, we have the Work Programme: failing and failing badly.
Indeed, it is so bad that it is missing every single one of its minimum performance standards.
The result is higher long-term unemployment, and more people claiming Employment and Support Allowance.
If the Work Programme had met its standards and got more people into sustained work, spending on benefits would have been £119 million lower over the past two years.
We cannot go on like this.
It's clear that we need a different approach - that brings together the private sector and local government and DWP into a new team, and in the coming months we'll set out how we think that can be done.
Third is the Youth Contract.
If anything, it even worse than the Work Programme.
It is now on course to miss its target by more than 92%.
No surprise, when the Government is completely out of touch on this issue – as today’s comments from Nick Hurd show.
There were even reports that Ministers were so desperate to hide their failure that they were using tax payers’ money to pay large employers for existing employers.
Literally money for nothing.
If the current pace of take up of the youth contract wage incentive continues, then the scheme will have missed its target by nearly 150,000.
That means 150,000 young people still on the dole – at a cost of £457 million in 2014-15.
That's why we've called for a tax on bankers' bonuses to create a new jobs guarantee for any young person out of work for a year.
Reform of disability benefits in chaos. Back to work programmes are failing. And then we have housing benefit.
The bill for housing benefit is much higher because unemployment is higher than forecast - and the jobs there are, are too often short-term, low-paid or temporary.
This is a huge issue: as a country we spend nearly five times more on housing benefit than we do on unemployed benefit.
So reform is important - and so is getting it right.
Yet, as the Communities Secretary warned in 2011, the Government's plans may in fact cost more than it saves.
There is now mounting evidence that this is indeed the case for the hated Bedroom Tax.
A policy that is the worst possible combination of incompetence and cruelty.
Even the Prime Minister doesn’t seem to have a clue how it works.
Well I will tell him. It doesn’t. 96% of those hit have nowhere to move to. That means arrears, sky high rents from private accommodation and homelessness.
And guess who picks up the tab? The local taxpayer.
The bedroom tax is already costing the public an extra £102.5 million to implement.
It should be dropped, and dropped now.
To cap it all, this year, DWP have written off £73million of housing benefit overpayments to fraud and error –up 9% on the year before - whilst at the same time sacking 10% of their counter fraud squad.
No wonder the DWP's fraud and error programme is on the Cabinet Office’s list of failing programmes.
There is however a fifth great delivery risk which I fear may dwarf all others.
Universal Credit - once a flagship, now a sinking ship.
And if we don’t fix this mess soon, millions of families’ tax credits will be put a risk – along with billions of pounds of taxpayers’ money.
The IT system is no longer in the danger zone – it’s in the emergency room.
The roll out we were promised this October is now confined to just 10 job centres.
Mr Duncan Smith can’t even tell us how many people he expects to be on the scheme by the end of next year... or next year, or ever.
The Chancellor has been forced to allocate another £300m to implement Universal Credit and the final costs could be much more.
The truth is Universal Credit isn’t doing fine, it’s not on time, it’s not on budget. And everyone knows it:
That’s why the Major Projects Authority has put the scheme on Amber/Red.
Here’s what that means – direct quotes:
Successful delivery is in doubt.
Major risk and issues apparent.
Urgent action needed.
In fact the Major Projects Authority are not even sure the project is feasible.
Who can blame them?
Major contractors are downing tools
Senior staff are heading for the hills.
In April we saw the appointment of the fourth head of Universal Credit in just six months.
The Secretary of State has got to deal with reality.
Stop running away from the truth and come clean.
How bad is it?
What is he doing to fix it?
And, how much will this shambles cost?
But it’s not just the IT:
There are basic design problems which well known, which are crucial to ensuring that people are genuinely better off in work than on benefits, but where we seem to have complete radio silence from the government.
Universal Credit was supposed to make work pay for everyone, but the truth is it will actually leave thousands better off on benefits than in a job.
As it stands, the scheme will reduce the reward for working harder for more than two million people.
Ministers have no solutions to this problem.
They can’t even tell us how Universal Credit will fit in with passported benefits like Free School Meals – This is basic stuff but once again there is no solution – even though the Secretary of State promised us an answer back in June 2011.
It doesn’t stop there. What will Ministers do about the perverse situation where the Universal Credit will combine with Council Tax Benefit to whittle work incentives down to zero?
How will they ensure that the introduction of monthly payments doesn’t result in more arrears, more debt, a bonanza for legal loan-sharks and more hardship for millions?
Today I say enough is enough.
Universal Credit is a good idea in principle but the implementation is a disaster.
We all want this project to succeed, so today I am writing to DWP to ask that cross party talks begin with civil servants so that we can see exactly how bad things are and what's needed to fix them.
If Iain Duncan Smith won’t save Universal Credit, then Labour will have to prepare to clean up his mess.
These are the basic delivery risks that we have to prepare for.
Now alongside some basic grip to get these reforms right, we need a new agenda to bring down the long term costs of social security and put some basic British values back into the system.
We need a system that is sustainable.
That means a Compulsory Jobs Guarantee to tackle the costs of youth unemployment and investing in homes to bring down the costs of housing benefit;
That means reforming tests for the disabled to help them into work and tackling low pay.
That means a stronger link between the contribution someone makes and the benefits they receive.
And it means a cap on social security spending so that the long-term causes of such spending – such as a lack of housing or structural unemployment – have to be faced and addressed.
Policy that works. Not just for cheap headlines but to bring down the cost of social security for the long term.
Because if we are going to turn our economy round, protect our NHS, and build a stronger country we will have to be laser focused on how we spend every single pound.
We know that some tough decisions will have to be made.
We support the Government’s triple lock. But we would end Winter Fuel Payments for the richest pensioners.
At a time when we will need to make difficult decisions, we just don’t think it’s fair to continue giving over £100 million to the richest 5 per cent of pensioners.
And when there is less money around we don’t think bringing back Child Benefit for top earners will be a priority.
And we will also have to look at tightening up the rules on child related benefits for foreign workers.
Most people who come to Britain from Europe work hard and contribute more in taxes than they use in public services or claim in benefits, but we just don’t think it is fair that someone could move to London and leave their children in Paris or Prague and claim British family benefits and send them home.
Over the weeks and months ahead, we will set out how we think these changes can be made as part of a new approach that returns our country to full employment.
Let me conclude.
No-one wants to see this shambles to continue.
Nobody wants to see a department that can’t get the basics right.
But that doesn’t mean we can run away from the problem.
And there is no escaping the fact the Government’s failure will end up costing the taxpayer a staggering £1.4 billion by the end of this Parliament.
That’s bad news for everyone. Bad for everyone hurt by failing programmes, bad for the treasury, and bad for the country.
Labour will bring social security spending under control by
tackling the long-term challenges driving up spending.
And the first thing we are going to have to do is put out the fires currently spreading through Iain Duncan Smith’s Department for Work and Pensions.
We need to tackle these delivery problems head on, before they eat up even more public money.
Because three years into this Government, their promised welfare revolution has collapsed because of a failure in basic delivery.