Forthcoming reforms mean 2013 will be a milestone year for the UK welfare system, says Lord David Freud
Change is coming
Just over two-and-a-half years ago, when the coalition government came into power, we made a promise to fix the welfare system - a system that was failing the very people it was designed to help. We faced a welfare state that had grown and become so complex it actively trapped people into benefits with no opportunity for change. We have worked tirelessly to bring in a system that encourages responsibility and makes work pay, while ensuring that support remains in place for the most vulnerable people.
The Welfare Reform Act provided the foundations for the benefit revolution and at the heart of the changes we are making is the introduction of the universal credit. This single benefit will create a new culture in which people are ready to take small risks, such as taking on a few extra hours or starting a short-term position, in the knowledge they won’t be walking into a labyrinth of benefit red tape and they won’t be worse off at the end of the working week.
Universal credit will reward people who choose to go back to work by ensuring they are better off in work than on benefits for taking that risk.
Benefits for all
In fact, as our impact assessment shows, around 300,000 people will move into work as a result of universal credit. I hope these families will see not only the financial gain of getting a job, but also the social and health benefits that are associated with employment.
The design of universal credit within the regulations means 3 million families will be better off by around £168 per month. The majority - 75 per cent - will come from the bottom two fifths of the income scale and transitional protection means no one loses out by moving to the new system.
During the summer, the independent Social Security Advisory Committee consulted on the regulations of the universal credit. I welcome the thorough and constructive recommendations they put forward and we have accepted the majority of them, including ensuring that victims of domestic violence have their housing costs funded outside the universal credit.
Trial and error
This coming year will be an important milestone. We are gearing up now for the first delivery in the Greater Manchester and Cheshire regions from April. This will enable us to test the system in a live environment with claimants, councils, and employers before a four-year national implementation programme begins in October, when 8 million households will be moved over to the new benefit. It is a long process that will allow us to learn and develop as we go.
The local authority-led pilots we are already running will let us test the support that must be in place to help people gain the right budgeting skills and to get online in order to manage their benefit payments and any income. This will enable councils’ local knowledge and expertise to be a firm part of what universal credit can do to help people.
The coming year will also see further findings from our direct payment demonstration projects. Paying housing benefit direct to tenants is an integral part of universal credit and while we have always been clear that there needs to be exemptions, it is an important way of helping people to manage their own finances and become more independent. The demonstration projects as well as the existing pilots are helping us prepare for the change, and there will be lessons for all of us.
Universal credit is just one part of our reforms, however. Before Christmas, we wrote to all local authorities to give them more information on the implementation of the benefit cap. The cap will come into effect from April as planned, starting in four London council areas before rolling out to the rest of the country over the summer.
Our welfare reforms are delivering big change so it’s only right that we implement them in a controlled way. A phased roll-out will ensure a smooth transition for claimants and has been welcomed by local authorities and wider organisations.
This approach will also allow the government to monitor implementation closely and learn lessons ahead of national roll-out in the summer. Jobcentre Plus will continue to work hand-in-hand with local authorities to engage and support households focusing on helping them to find work.
Throughout this process my message is clear - our reforms are about restoring fairness and making work pay. But it also mean fairness to taxpayers in that their money isn’t wasted on trapping people on benefits.
We will continue to work with the housing sector throughout 2013 - with a common goal of helping tenants and others who receive our support to reduce their benefit dependency and improve their lives.
Lord Freud is minister for welfare reform