Select Committee on Work and Pensions Minutes of Evidence

Examination of Witnesses (Questions 1 - 19)




  1. Ladies and gentlemen, can I declare the formal session of our evidence open and welcome Andrew Smith, the Secretary of State for Work and Pensions. Thank you very much for coming. We were grateful that you responded to our suggestion that, rather than stick with the original slot we had earlier in the summer, which was literally moments after you had been transported to this new dizzy height of political appointment, it would make more sense for us both if we took a little time for you to get your feet under the table at the Department. I think that will make this morning's session a more meaningful for both of us. For the record, we welcome too Neil Couling, who is Private Secretary to the Secretary of State. This is a huge Departmental Report that we are to cover this morning so we would not expect you necessarily to have every detail at the front of your mind, and if Neil cannot come up with some of the detail then we will get it later by way of notes. We are perfectly happy to operate on that basis. I should say this, and I say this every year, but I mean it every year, that we get enormous help and assistance from, in particular, the liaison team of the Department but also from the rest of the departmental staff right across the whole Department. When we go on visits we are always treated extremely well and we get assistance which we appreciate. If you can find some way of reflecting that back down to the level of the front desk we would appreciate that because it is genuinely felt and meant. We get very good service from the Department in all of our work and that helps us enormously, and you should know that and it is said absolutely from the heart. That is the easy bit over. Now we can perhaps turn to the Department. There has been a huge change since your predecessor was here. We have got a new Secretary of State, we have got a new department, we have got a whole welter of change in terms of policy. Employment is at record levels and that is a significant factor for the new work aspect of the Department. We have had an industrial dispute, which was not easy, which we have seen in the last 12 months. There have been major reforms to the CSA. We have got some new ideas floating around about benefit sanctions that we have been hearing about over the summer, and of course there is a lot of controversy in the national press about pensions. There is a huge agenda. I noticed that you described yourself as feeling thrilled when you were appointed. Are you still thrilled and, if so, why?

  (Mr Smith) Thank you very much. I thank the Select Committee for arranging the meeting. I found it useful to have an informal session which we had in the summer and obviously it made sense to arrange things this way. I thank you very much for your very kind remarks about the support you get on your visits and the good working relationship and I will certainly be very pleased to pass those generous remarks on to all the staff concerned. I do on the whole prefer them to be nice and co-operative with the Committee. Can I also say that, especially given the scale of change which you have referred to, the dimensions of many of the issues that we are dealing with in these crucially important policy areas, a constructive working relationship with the Select Committee is especially valuable because you have got a very important role yourselves in informing the wider public debate which is the essential backdrop to everything that we do. I am very grateful for that good working relationship and I just want you to know that I value it. In terms of being thrilled, yes, I am still thrilled. It is an enormous privilege to be leading the Department through such an exciting period of change. It is especially rewarding given the key principles and goals that we are working to in terms of trying to ensure there is full employment in every region, in enabling all disabled people to make the most of their potential and enjoy full civil rights, tackling child poverty, ensuring pensioners have dignity and security in retirement. These are very important goals, very close to my heart, and so it is an exciting responsibility and I am privileged, as I say, to be able to be doing the job. As you have mentioned, one of the biggest challenges of course is that we are carrying forward new policies, new measures and reform whilst simultaneously attempting one of the biggest change programmes in Europe, completing the restructuring of the Department and our agencies, modernising our antiquated IT, taking with us the many thousands of staff who are working for a different agency than they worked for previously (and they are our greatest resource in all of this). Ensuring that that goes as smoothly as possible is a very big managerial task, so both on the policy front in terms of the social issues we are dealing with and in terms of management it is a very big job but I am greatly enjoying it and I do believe that building on the foundations that we have put in place we can and will deliver on our policies of work for those who can and security for those who cannot, that we will get more people into jobs, more children and pensioners out of poverty, reform benefits and transform the rights of disabled people in our community. A lot done, a lot to do.

  2. Before I ask colleagues to respond to that opening statement, a very brief question from me which is a predictable one. The Departmental Report does refer to it in some detail at the end. It is the question of the qualification of the accounts. This is obviously something that the Department has inherited. I see you have been talking to the NAO about trying to do something about that. It is a significant worry, is it not, that a big spending Department like your own cannot get the Comptroller and Auditor General to sign off the accounts? Is this one of your priorities in your stewardship of the Department that over a period of time, hopefully a short period of time, we will get cleared accounts?
  (Mr Smith) I very much hope so. You are absolutely right. It is very important. I understand and share the concerns about this. I would see the modernisation which we are undertaking as being an absolutely key factor in ensuring that we can get accounts which do not have to be qualified and, as you say, we are working very closely with the NAO on this[1].

  3. So it is a priority for you?
  (Mr Smith) Yes.

Mr Mitchell

  4. Secretary of State, can I open up the discussion and move on to what must be one of your biggest concerns at the moment, and I am sure will be touched on in many of the other things you mentioned in your opening remarks, and that is pensions? As the news, I am sure, has reached you, this Committee is going to produce a report. One of the biggest studies we are doing this year is in the field of pensions. We read every day in the press about the tremendous difficulties there are in this area. It will be enormously helpful for the Committee to find out how you think things are today and what plans you have for the future. I am conscious of two points about the world of pensions. The first is that by tradition the House has always tried to move where it is possible on a joint all-party approach to pensions because it is so long term. I was the Government Whip on the 1995 Pensions Act and I remember the extent to which the Committee work on that Bill was much more collegiate than adversarial. One of the things is that in so far as it is possible it does tend to get done on as all-party a basis as possible. Secondly, of course, in the area of pensions nothing tends to happen in a hurry but things build up over a period of time and there is no doubt that there is a huge crisis for people as they look towards whether they are going to have adequate funds and be able to retire. Can I ask you what is to be done, what your considered view is, having been in this difficult job now for some months? Have you ruled out setting up a Royal Commission, for example, to look into the future of pensions? It seems to me that amongst a number of grave difficulties facing the Government this one must be right at the top of the list and of course it lands on your desk.
  (Mr Smith) Indeed it does. Your reference to the all-party dimension to this is one that I share. As you say, pensions policy is by definition something for the long term and it is obviously in everybody's interests if there can be as much of a shared agenda as possible. That does not mean of course that where there are difficult policy choices to be made, as there are in this area, we are going to be able to agree about everything. Neither does it mean that the lowest common denominator approach would get you the best policy. It does mean that we need a well informed and wide-ranging public debate. That public debate is already under way but it needs to continue around the options for the future and it needs to be one that can establish as much agreement across and beyond party lines as possible. All these of course are issues for the Green Paper which we will be publishing later this year and you will understand if I cannot anticipate this morning what is going to be in the Green Paper.

  5. Can you say when?
  (Mr Smith) Later this year is as precise as I can be at this moment. As I have said previously though, it is quite clear that you need a partnership approach here, one in which of course Government has a very important responsibility to put the right framework in place but where there are also responsibilities for employers, employees, financial services, industry as well, and we need to get everybody working together on this. In terms of what is to be done in the challenge as I have stated it before, it is one that you will all be aware of, the remorseless arithmetic that people are living longer (which is a very good thing) and with us all wanting a good quality standard of living in retirement it does mean that between us we have to save more, work longer or some combination of both. That is why in the Green Paper we will be analysing and setting out the options for precisely the sort of framework which I have described. It needs to be one moreover which simplifies the pensions landscape, and the fact that so much of this is an impenetrable maze for people is another reason why they do not think about it today and put it off until tomorrow and too often put it off until it is too late. There is an important agenda of simplification and minimising the regulatory burdens and making it easier for employers to make good schemes available and make it easier for people to raise their level of saving to the levels that they need and want. An important guiding principle here is one of informed choice and for informed choice people need clearly to be able to understand the options which are open to them; they need a simple range of products. I think they need—and this is what we are developing with pension forecasting and combined pension forecasts—as accurate an idea as possible of what income they can anticipate. All of these things and more will be in the Green Paper, building on what we have already done, of course, improving the basic state pension, introducing the pension credit, the new income guarantee and tackling the priority problem of poverty affecting today's pensioners, which was obviously something which we had to address as soon as we could after coming into office.

Mr Dismore

  6. I just want to raise with you the merger of the two Departments and how you felt that was going because the particular concern I have in my own patch is that we are still operating from separate buildings. It is still operating as separate organisations. I can illustrate that by a case which I would not expect you to know the details of, but it is a Miss Townsend in my constituency, a lone parent who, after eight years on income support, was able to get a job. She feels extremely disgruntled because she was effectively dealing with what was to her the DHSS who told her nothing about lone parent advisers, gave no advice on WFTC on which she lost out, and gave her no advice on the clothing allowance of £150 that she could have got. She only found out about these after the event when it was too late to claim them. They are trying to unscramble it but she feels very let down by the Department because, having heard all about the merger and so forth, effectively the DSS half of the operation still did not know even of the existence of lone parent advisers. When she went back to complain about it she was told, "Oh, this is done randomly", which is clearly not satisfactory, so what is going on in terms of trying to merge the two halves of the Department where they are still effectively operating from separate buildings and unless and until that proper merger can be achieved it is, certainly in my patch, a long way off yet?
  (Mr Smith) First of all on the specific details of the case that you raise, if you would like to let me have those details I will look into this.

  7. I use that as an example.
  (Mr Smith) I do appreciate the point that you are using it to illustrate the general challenge of such a big structural reorganisation. The straight answer is of course that it takes time to implement a merger of that scale. We have rolled out the first 56 Jobcentre Plus offices. We have a programme of rolling out 200 a year over the next few years. There is a very big job of work, as I said in my introductory remarks, in the reorganisation of staff and, of course, as well as premises and IT, there is the question of training and the definition of roles and connecting up much more effectively than we have in the past the benefit side of the operation if you like with the job-seeking side. I know you have made visits and have seen this for yourself but where the integration has happened there is a transformation in the quality of service and the help which is available to people so, whilst I can understand your impatience that we are not able to do it more quickly, I can assure you we are doing it as quickly as any sensible advice would say it could be accomplished.

Mr Goodman

  8. Following the publication of the Green Paper on pensions are you committed to legislating in this Parliament?
  (Mr Smith) That is something that I will have to set out in the Green Paper and I am not going to give commitments of that nature this morning, except to say that of course we will want to move as expeditiously as we can. We do want to get on with this. That has just reminded me that I did not answer the previous question about a Royal Commission. I am not this morning ruling anything in or anything out. Neither do I want to set hares running. My views on a Royal Commission, or other bodies that might be deployed in order to help build the broader consensus, are that it is one thing if you have discussion on the basis of the Green Paper and if there are specific emerging proposals where it makes sense to have a Royal Commission then I would not rule that out, but, as I say, neither am I setting hares running. I am not sure how impressed the public would be if we simply took this challenge now and said, "Actually, we are handing it over to a Royal Commission". I am not sure that they would feel that we were engaging with sufficient priority ourselves in addressing the very real policy challenges there are in this area.

  9. They certainly would not if you just handed them the problem but they might on the back of some government proposals for wider consultation and for some action to be taken.
  (Mr Smith) As I say, I am not ruling things in or out this morning. A commission or similar body can work best if there is a defined issue that they are dealing with within particular terms of reference. That points to there being a stronger argument in relation to the "how" than perhaps the "what".


  10. I want to go on now to areas of child poverty but can I ask you a brief supplementary about Andrew Dismore's important question? There was a press comment that 20,000 members of staff were going to be taken out of the system over the next two or three years. Is staff morale high at the sharp end of the delivery?
  (Mr Smith) I think people are excited by the changes that we are bringing about and, as they see the benefits of the investment, both in the more proactive approaches which are at the heart of our policy and in the investments in better premises and working conditions, I believe people can see that there is something in the deal for them here. Yes, it is a world of change. We are all in a rapidly changing environment. Yes, there are challenges. Of course, people have apprehensions when there is change but I believe they can understand the value of the reforms that we are bringing about and I believe they can see how we are able to give a better, more responsive service to the public in that way, so there are benefits for them. It is true that as a consequence of the way in which the business we are operating in is changing, not least as the benefits of the IT investment come on stream, the balance of the nature of work will shift more from routine processing tasks towards the front line engagement with members of the public, but there are rewarding and important jobs there. I think anybody who has spoken to personal advisers and heard about the remarkable experience of what they have contributed through the New Deal can see that there is an intrinsically important and rewarding job of work there. Yes, it will involve a net reduction in the staff, we think of some 19,000 across the next four years. We wrote to all members of staff about this. They heard it first from us directly and, yes, of course we are engaged with the trade unions and will want to carry it forward in a consultative way that carries people with us. It is worth underlining that our staff turnover is something like 9,000 a year anyway, so that shows how even what is a big change could be managed within the turnover.

Andrew Selous

  11. Can we move on to child poverty? Your Department had a consultation over the summer in trying to measure child poverty through a series of indicators. Can you tell us when you are going to be able to bring concrete proposals forward in this area and if you believe that we will be able to have a robust and credible measure of child poverty?
  (Mr Smith) By next spring I would expect us to have published our response to the consultation. The consultation has gone well and there has been a lot of interest. Not only have we had written submissions but we have been able to draw on face-to-face sessions that have been held with poorer people and with younger people to get their perspective on the issue. Obviously, some of the submissions we have had are highly technical. This is a technical area as well as a very important and human area, and of course it is crucially important that if we do adopt further measures we get this right.

  12. You said that there is a technical area as well as a human area. I think it is probably pretty widely accepted that the relationship between child poverty and family breakdown is a very close one. This country either tops the league or is in second place in terms of divorce and relationship breakdown, lone parenting, with a quarter of children in single parent households as opposed to only one in ten in the Netherlands, and, for example, on things like infant mortality and teenage pregnancies we are either top or second in the whole of Europe. What do you see is the Department's role, liaising with other departments, in actually trying to do something preventative about this, rather than just picking up the pieces? There are estimates from reports like The Cost of Family Breakdown Report, from the Lords, the Commons and the Child Protection Group, that your Department picks up around £15 billion a year from these sorts of issues. How do you see your Department working with David Blunkett, who I believe takes the lead in this in trying to turn that tide, and perhaps getting us down to a situation more similar to the Netherlands?
  (Mr Smith) First of all, as you acknowledge in your question, factors such as low income, unemployment, housing problems, health problems, are all additional pressures which obviously can aggravate relationship difficulties and family breakdown. Obviously these are crucially important and are priorities for us.

  13. There are other countries in Europe who are perhaps less well off than us who seem to be doing better than we are in some of these other measures.
  (Mr Smith) As I say, it is none the less important to be delivering and making progress on all of those things. This is a challenge which confronts us across government and it does mean that cross-agency collaboration, what we are able to do in partnership with local authorities, is very important as well. I could point to the Sure Start initiative, for example. You ask what can we do that is preventative. That is very preventative. It is getting in right at the beginning, it is working—

  14. Do you intend to roll that out across the UK? There are many areas in a constituency like mine which has significant pockets of deprivation where Sure Start is not there.
  (Mr Smith) There is a substantial further roll-out that is provided for in the spending review and of course we are learning from the experience and the benefits all the time and that programme has a great deal to commend it. There are other areas as well. What we can do in asserting and upholding standards as far as anti-social behaviour is concerned is a very important dimension to this wider challenge as well.

Ms Buck

  15. I think we would all be impressed with the progress that has been made towards reaching a target in lone parent employment but there are some aspects of this where we do need to do a considerable amount of future work. One of the things I would like to ask about is, are you content, particularly with the extent to which the childcare component of the working families tax credit has helped lone parents and parents generally with the cost of childcare, because I believe (and I will be corrected if I am wrong) that the latest figure is around 160,000 families receiving help, which is actually a tiny proportion of the total lone parents and all families in need. The average award is less than £40 a week which is about a third of the cost of the average nursing place. What can we do to use the childcare component of the new tax credit to reach a larger proportion of people in need?
  (Mr Smith) Of course promoting its availability is very important and the advisory support that is given to lone parents through programmes such as the New Deal for Lone Parents is very important in that respect. I agree with you that there is a big remaining challenge here but we should not understate the progress that has already been made, the fact that we have for the first time more than 50 per cent of lone parents in jobs, the fact that childcare provision has been expanding very fast. Of course, we need it to expand still further and it is one of the reasons why the new unit, the Early Years, Sure Start and Childcare Unit, has been set up jointly under the DfES and the DWP. That does give more of a focus to the relationship between childcare and supply and take-up, and people moving into jobs which I very much welcome.

  16. I know there is always a balance to be struck with being positive about progress that has been achieved and I certainly do not want to underplay that at all, but do you not think it is a worry that after three years of the working families tax credit such a small proportion of parents are entitled to assistance through the childcare tax credit? What can we positively do to make sure that lone parents in particular, as we move into the new tax credit, actually do get more assistance towards their childcare costs?
  (Mr Smith) Of course the level of the credits, like everything else, is kept under review, obviously bearing in mind the evidence that you are pointing to in this area. I come back to what I said previously though. Certainly with the promotion of its availability and the right sort of advisory support the New Deal for Lone Parents is making good progress as a programme. We do not relax. We are not complacent. The other thing which is very important here though is the supply of childcare as well and how much confidence people have in its suitability for their children. That is something which the new unit is doing intensive work on. We are getting a better take on the numbers of places for childcare of different sorts which are becoming available, trying to analyse the reasons for and variations in that supply and what can be done to ensure that that supply is accelerated in a way that people have the confidence to take it up and use it.

  17. I would like to ask you a couple more questions on that but before I do, and sticking to the issue of the tax credits, not specifically for lone parents but for all parents in poverty, I asked this question to Nick Brown when he came and did not get an answer and I really would like to know whether there is some concern and some commitment to doing something about the extraordinary degree of regional variation in the claims for the tax credits. If you take, for example, the constituency of Tottenham, it ranks ninth in the entire country for unemployment. We also know from statistics that there is extensive low pay and yet it ranks at 237 for the number of people who are taking up the working families tax credit. Clearly in some parts of the country there is an extraordinary mismatch. Birmingham, Ladywood and Sparkbrook, which have the highest unemployment, also have the highest number of people taking up working families tax credit. Clearly something is not quite working but where there is unemployment and where there is poverty it is not necessarily the case that people will then be using working families tax credit as a step up.
  (Mr Smith) You raise a very important question as to whether there might be a distinctively London dimension to this. There is a study which I have just seen—draft reports by William O'Connor and Richard Boreham—that is looking specifically at lone parents in relation to the labour market and how far there are special factors at work in London. It is very interesting. It points out, for example, that the variation in employment is greater, comparing London with the rest of the country, for whites than it is for ethnic minorities, for example, and obviously I will be pleased to share this report with the Committee as soon as we can. They also say that analysing this—and research reports quite often say this—is proving a lot more complex than even they might have anticipated.


  18. It needs more research.
  (Mr Smith) They are recommending that we need more research but, having had a quick look at it, they may well be right. I share your concerns. We need to do more to get to the bottom of this. One can point to other factors in London as well. Housing costs are a factor and a perception amongst people against working might not be so great. More apprehension about their being able to get their housing benefit back if it has been changed when they have gone into work, the availability and suitability of childcare and issues about getting children to it might particularly be an issue. There may well be other factors as well. It will be very interesting to see the contribution which our proposed piloting of the standard housing allowance is making. I am not saying it is going to solve all of this but certainly, coupled with the rapid reclaim facility, it should at least, if promoted and explained to people properly, lessen their anxiety about the risk of losing housing benefit.

Ms Buck

  19. That is very helpful. There is clearly an element to which the issue of information and advice and support contributes to this. I do not think that is the main reason but there is an element there. The work that lone parent advisers do in supporting people is absolutely critical but could I ask you whether you will guide the Department and make sure the Department is making better contacts, particularly with organisations like the Early Years Development Partnerships responsible for planning and overseeing childcare and creating new childcare places, because there is at the moment a very patchy record indeed about how the two areas of service relate, and there are not any integration targets so, for example, the Early Years Partnerships are charged with setting up targets for delivery of childcare but the Department for Work and Pensions lone parent targets do not relate to that at all and there is very little dialogue going on? A local example, which I am certainly not asking you to comment on, is that the Department for Work and Pensions commissioned some outreach projects, did the contracting process and hired some outreach projects, and the Early Years Development Partnerships had never even heard of them, did not know what these projects were. You have statutory organisations responsible for liaison with parents, responsible for planning childcare and delivering childcare, the perfect organisations to be part of an outreach process and yet an outreach process is planned completely independent of them. That has happened, there is nothing we can do about it. Can you assure me that you will try and get to grips with this and make sure it does not happen again?
  (Mr Smith) You ask me will I reinforce the importance of co-ordination in this area. The answer almost certainly is yes, and it is not only something I am saying we are going to do in the future. I believe the steps we have already taken, the joint responsibility which we now have with DfES and with the new unit which clearly is going to be our principal avenue of liaison and co-ordination with the Early Years Development Partnerships, but not only that but the decision we have also taken to have a childcare partnership manager in every Jobcentre Plus, are of crucial importance. The definition and operation of that role is going to be very important at the local level in more effectively bringing together the supply of the right sort of childcare with the labour market opportunities which are open to people.

1   Please refer to the supplementary memorandum from the Secretary of State to the Chairman of the Committee, paras 14 and 15, Ev 19. Back

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