Welcome to this Work and Pensions Committee evidence session with the Secretary of State for Work and Pensions, Liz Kendall, and the permanent secretary, Sir Peter Schofield. It is lovely to welcome you both. Secretary of State, I understand that you have a brief statement to make.

Actually, no, I don’t. Let’s crack on—I am sure you have lots of questions.

Okay. I will kick off, if I may. When you were before the Committee in November last year, you talked about the importance to you of rebuilding trust in the role of the Department for which you are responsible: trust among the public as a whole, but particularly among the people for whom you provide services. I wonder whether you think the last few weeks, and particularly the experiences and concerns that disabled people and vulnerable claimants will have had, have contributed to rebuilding trust or not.

I know how anxious people always are when they hear about proposed changes in the benefit system. I think we have ended up in the right place now. We have a really positive story about how we will work with disabled people, with the organisations that represent them and with other experts to make sure we get a system that is fit for the future. We are doing some extremely important work to overhaul our safeguarding processes. This is something that I know that you personally, Chair, and the Committee as a whole have done a lot of work on. I hope you have received our initial response to the Committee’s report, but there is much, much more to come in the autumn. At the moment, we are going through the process of reviewing every single aspect of our safeguarding process. I think we are going to be publishing the first ever report on our clinical governance later today. There is a lot of work going on, but I am absolutely sure there is lots more to do.

In our “Safeguarding Vulnerable Claimants” report, which was published in May, we recommended that the Department adopt “a systems-based approach to safeguarding” and, as part of it, that for significant policies the Department consider the “potential health impact on claimants” of the policy that is being implemented. We asked that you “confirm that planned changes to health and disability benefits, set out in the Pathways to Work Green Paper, were prospectively assessed with respect to possible physical and mental health impacts on claimants.” I was unclear, from your response, whether that had been done.

You will know that the huge number of impact assessments and the evidence pack that we published alongside the original proposals went through some of the different impacts that those proposals would have had. I know that in the report you are asking for our chief medical adviser to be engaged and involved the whole way through that process; that was absolutely the case. I am really determined to ensure that all the policies that we put forward absolutely have safeguarding the needs of vulnerable claimants at their heart. You will know that we are going to produce a comprehensive, system-wide approach in the autumn. As I said in our response to the Committee’s report, I aim to make a statement in Parliament about that. I think that is extremely important. Good work is under way in the Department. I know that the permanent secretary is absolutely determined to have not just minimum standards, but the highest possible standards. I am absolutely sure that, whether we are looking at our training, at all our processes or at how we actually engage with claimants, we are making sure that all those safeguards are in place. We need to make sure, at every single step, that that is being done. I hope that once we have completed our review in the Department, we have published our new approach and I have made a statement to Parliament about it, people will be more reassured about how seriously we all take this issue.

It might be worth adding to that the role of the chief medical adviser, whom I think the Committee has met.

A couple of times, yes.

Since she was appointed in September 2023, she has been very much an integrated part of my senior directors and leadership team. She is very influential not just in policy development and policy advice, but in operational activity. It is all part of the work that the Secretary of State describes. We are on a journey in the DWP, but we are convinced that we are heading in the right direction, and the frameworks that the Secretary of State has described are absolutely underpinned by what we are doing operationally to deliver for our customers.

I absolutely understand that. The response indicated that the chief medical adviser had been engaged in this, but that there was a reluctance to publish anything. Has there been an assessment of the potential health impacts of the “Pathways to Work” Green Paper, particularly thinking about the Bill that went through Parliament, given what we know from previous reforms to disability benefits and the harms that have resulted specifically from them?

You will know that we do not publish advice to Ministers, but the chief medical adviser has absolutely been involved at every step of the way. We have published evidence on the impact of those proposed changes on different types of groups with different conditions, and the groups of people that would be more or less likely to be affected by the changes, some of which we are no longer going ahead with. That information has been published, but I am always keen to make sure that we go through any of these issues thoroughly. When you see our statement and review of safeguarding, we will be going through all those issues as part of that. We have responded to your initial report. You will understand that we want to do our own review, complete it, develop policy and make a statement to Parliament about it, so we are in the in-between position at the moment, but I am always keen to look at further suggestions.

As a point of information, I think that impact assessments can be seen as advisory documents, but they are not advice; they are based on evidence. That is a really important distinction to make, particularly in areas that relate to the impacts on health and the potential harms, as I have just said. Let’s move on. You will be aware that in 2022 the Equality and Human Rights Commission decided to issue a section 23 to the Department because of concerns about the deaths of claimants and other considerable issues within the Department. Last May, that was escalated to an investigation about the impact on discrimination against disabled people. Where are we up to with that now?

There is not a lot more to say since we were last here. We have an update in our annual report and accounts, which we published on Thursday last week. The Secretary of State and I met the chair and the chief executive of the EHRC in October, and we very much agreed that we wanted to work in a very collaborative and constructive way going forward. Since then, the EHRC has asked for a number of pieces of information. It has had everything that it needs. Conversations are ongoing, and we are waiting to hear from them.

We seem to be at a similar stage to where we were under the previous Government. A Government being investigated does not look good, does it?

We all want this resolved as soon as possible. Last time I was here, I think I said that I absolutely want to make sure that we are delivering not just on our legal responsibilities, but to the highest possible standards. We have been very open to that. We, more than anybody, want to get this sorted as quickly as possible.

Thank you very much for attending today. It was just last November that you were with us. Reflecting on benefits for people with long-term health issues and disabilities, you talked about “genuine engagement” and not being led by cuts. In March, the papers published that, without consultation, there would be the highest level of cuts for the last 10 years. What engagement was done before that? What were the key drivers? What happened between November and March to cause what appears to be the abandonment of those core principles? What went wrong?

You will forgive me for not agreeing with the characterisation that you have put forward. I never started with pound signs or spreadsheets; I have always started with what I believe can help people with long-term health conditions and disabled people to build a better life for themselves. Our reforms are based on helping those who can work to do so, instead of writing them off and denying them any support, and on protecting those who cannot.

That is what really worries me. It is the whole of this—

If I can just finish answering your understandable question—

Again, PIP is not to do with whether you can work or not.

I am fully aware that it is—

But all throughout this narrative, it has been suggested that PIP is an out-of-work benefit, but it is an in-work benefit.

I have never suggested that.

I think you have given that impression when responding to me and colleagues in the Chamber.

I have never given—well, I have never believed it, because it is not true, and that is not the argument I made. The argument I did make was that we need to make sure that this absolutely crucial benefit is sustainable for the future. If the doubling of the number of people on PIP over the last decade were to continue into the future, my real concern is that the benefit, which is absolutely vital for people, will not continue. I think that where we have ended up is a good position. We will make sure that we work with disabled people and the organisations that represent them to take a really good long-term look at this benefit, to make sure that it really is there for those who need it; that it reflects, as you will have seen in the terms of reference for the so-called Timms review, the need to genuinely be there for people who need it in future; and that it takes into account the big changes that we have seen in disability, society and the world of work since it came into place over a decade ago. That is a really important review. I hope to engage—I am absolutely sure we will—all members of this Committee.

Can you explain—I am speaking as somebody who is registered blind—why you chose not to consult on that element of change that you were pushing forward in March?

Because, at the time, it was going through in primary legislation, and we were obviously consulting with Parliament about that. I do not agree that the “Pathways to Work” Green Paper as a whole somehow lacked consultation with disabled people. We have five collaboration committees on many different aspects of that Green Paper—employment support, de-risking work, the right to try and young people.

But on PIP you did not consult. Is that right: that there was no consultation on the cuts to PIP?

Well, there was with Parliament, and Parliament took a different view.

But you said in November that you wanted to consult with disabled people. And then it comes to the biggest cut in a decade—

We are, on many aspects.

But not on that.

But we are now, going forward.

Can you explain why you chose not to at that time? What were your thoughts behind that?

Because we were passing it through Parliament.

Why did you ignore disabled people, please?

Well, I have answered that question. You might not like the answer, but the answer is that we were consulting with Parliament, and Parliament took a different view. Now, going forward—

That is not disabled people. Why did you ignore disabled people, then, please?

We are not ignoring disabled people. They will be at the heart of the Timms review.

But you ignored them in March. Can you explain why?

We did not ignore—

You chose not to consult.

In fact, from the very day after we published the Green Paper—in the next couple of days—Stephen Timms and I had roundtables with disabled people and the organisations that represent them. We will just have to agree to disagree on this. I do not believe that we have failed to consult disabled people on the “Pathways to Work” Green Paper. Going forward, we will be co-producing the review of PIP in the longer term.

I will come on to PIP, if I may. Secretary of State, thank you. I do not want to exploit all the political problems you have had, and I appreciate the hard work that you and the Minister have done on this. My commiserations for the battles you have fought and lost. I was struck by what you said about getting to the right place. My suspicion is that we are now where you and the Minister probably wanted to get to. We do not have reform of PIP coming, at least for another year; we will not even know what the outlines of reform might be until next autumn, with changes to come much later. Nor will we have any savings, either now or subsequent to that review, because, as Stephen Timms has clarified, there is no intention to make any reductions in spending through his review. Can you confirm that the intention is not to—

We are not driven—

I will just go on to my question, if you do not mind. I am interested to hear your views on that. There are two ways to reduce overall welfare expenditure. One is to reduce the supply of it by introducing cuts, which was the intention of the Treasury, at least until the U-turn. The other is to reduce the demand for it by supporting people to live independently. Am I right in thinking that the position of the Department now is to reduce overall expenditure over the long term through demand reduction, by employment support and other things, rather than by reducing entitlements?

I have always believed in getting the welfare bill on a more sustainable footing. As I said in my earlier comments, that for me remains essential because I want to see a welfare state that is really there for people who need it in future. As more of us live longer with long-term conditions and there are more disabled people, we have to make sure the whole system works for years and years to come. I think the reason we have these problems as a country is that we have failed on welfare because we have failed on work. So there are two things that we are doing—I do not entirely agree with your characterisation. First, we need a much more proactive pro-work system. The heart of the Bill that we put forward—I understand why it is not characterised as that—was to deal with perverse incentives in the system where, essentially, people are almost incentivised to define themselves as incapable of work to be able to afford to live. That is why we are freezing and then reducing the universal credit health top-up and introducing a right to try, so that people can take the risk and try work. I do not entirely agree that it is all about employment support, but that is a large part of it. We had a system where, if you defined yourself as incapable of work, you were left without any support. We want to start to change that, to engage with people and them on a pathway. For some people, as I have said before, literally getting out of the house would be a step forward. Having the confidence to talk to people and be around other people would be a big step forward. Some need skills, but it is a pathway to work. We need to remove disincentives in the benefits system, and we need to provide a pathway to work for those who can work now or at some point in the near future. So I do not entirely agree with your characterisation there.

There is still a £50-a-week incentive to present as incapable of work through the reduced but still substantial LCWRA entitlement. Surely the logic of what you are saying is that that should be scrapped altogether and that PIP should be the benefit that people receive to help them cope with the cost of disability.

We have begun to tackle those disincentives with the change in UC health combined with this really substantial employment support. I should say here that it is absolutely essential that we get the employment support right, based on the evidence of what actually helps people move towards and to get work. Together that is a decisive shift from the system that we inherited. This is proactive, pro-work, but there is more to do. We have finished the consultation on the “Pathways to Work” Green Paper. There were many more ideas in that, but how we actually have that proactive pro-work system is a big change, and we are continuing to make those reforms.

Welcome, Secretary of State. You have talked about the employment support that we want to ramp up for disabled people. The “Pathways to Work” Green Paper discusses that and the investment put into it. Is that level of investment still possible given the changes to the original proposals on welfare reform?

Yes, it is—in fact, it is more now, with the additional £300 million that we announced during the passage of the Bill. It will now ramp up to £3.8 billion in total. We had already put investment into the system, but this is additional funding. We are going to bring some of that forward and ramp up support over the next two to three years, to make sure that in every part of the country there is proper employment support for people with long-term health conditions and disabilities, to make sure that those who can work get the chance to do so.

Sir Charlie Mayfield has played a really important role and has talked about changing the landscape of support for disabled people in the workplace from an employer’s perspective. What kind of changes might we expect to see by the end of the Parliament, and which ones can we ramp up now to get the maximum benefit early on?

This is a really important point, and I should have said this to Mr Kruger earlier as well. The part of the agenda about preventing people from falling out of work due to a health condition in the first place is as important as getting people back to work. I think around 300,000 people every year fall out of work due to a long-term health condition. There is a whole range of things that good companies are doing, and we want to see what more we can do to bring the rest up to the best. We want to look at international evidence on that. It is not just because we think it is right for people who want a chance to stay in work or get back to work; businesses are increasingly worried about the cost of people going off sick long term, and retaining staff is vital. For me, public services and the world of work need to wake up to the fact that as we live for longer and more of us have health conditions and are caring for longer, we need a big, big change. I made a speech at the IPPR recently, and I reflected on what happened back in the day, when women were arguing, “We want to work. Yes, we have children, but we need good maternity pay and leave. We need childcare. We need flexible working.” How did we get record numbers of women into work? Partly it was because we changed the law, but we also put in place the public services needed and changed the culture of work. With an ageing society, we now have to think much more seriously about that for sick and disabled people, because the truth is that as we live for longer, we are going to have to work for longer. I see it as a big societal change. Yes, the Government have a role in that, but the bottom line is that we have to work together with businesses, the public sector and the NHS, and we are just not doing that at anywhere near the level we need to if we are to improve people’s life chances. That is my big mission on these areas.

The Public Accounts Committee recently said that it will be very challenging to meet the Government’s aim of an 80% employment rate. Given the Department’s budget, do you think an 80% employment rate is feasible and/or achievable?

Well, it is definitely a stretching target but—to state the obvious—I am not in politics to be coasting along, you know? We want that stretching target. We have said that it is a big ambition over a decade. I think our employment rate is just over 75%, but there are other countries, such as Switzerland and the Netherlands, where it is over 80%. Japan, I think is just under 80%. Germany is 78%. We want to be up there with the best. I don’t think it is acceptable that our employment rate has not got back to pre-pandemic levels. We are the only country in the G7 where that has not happened. In the Beveridge report, Beveridge said that social security alone would never be enough to give people a good life. It needed to be combined with full and fulfilling employment—those are my words, not his—and an NHS that is as much about rehabilitation as cure. Actually, those principles remain true today. It is stretching, and it should be, because people deserve a chance to work. We have seen, in the one year since this Government were elected, 500,000 more people in employment—the employment rate has gone up. Economic inactivity has come down by 300,000. We have created 380,000 more jobs. There is a long, long way to go, but we have set our jobcentres new metrics. It is a complete change for our jobcentres. We have reduced the disparity in the employment gap between different regions. The employment rate for lone parents, for disabled people—we want to get it up right across the board. [Interruption.] Sorry, Peter.

No, I was going to make exactly the point that you were making, Secretary of State. The Secretary of State and the ministerial team have set us eight metrics, which get to the heart of this, because there are parts of the country where the employment rate is indeed above 80%, and there are groups in the country for whom the employment rate is above 80%. The focus needs to be on those places, or those demographic groups, where it is below—where there is that gap. It gives us the thing to aim for, doesn’t it—the interim stages before we finally get to 80%? We have been absolutely set that framework by the ministerial team, and we are driving towards it.

On the focus of jobcentres, the Minister for Employment told us that one of her priorities is for work coaches to have more time with claimants. Subsequently, permanent secretary, you told the Public Accounts Committee at an evidence session that the DWP would be reducing the length and frequency of many work coach meetings because the evidence shows that it does not make a difference to outcomes. My question, Secretary of State, is this: if work coach support does not help people to find work, why is it mandatory for millions of people to meet with work coaches?

Shall I build on that? As you say, back at the Public Accounts Committee session in May, we were talking about the creation of the jobs and careers service and the opportunity there to take our existing resource of work coaches who are focused primarily on the intensive work search group within universal credit, and move beyond that. As the Secretary of State has said, our priority is to go beyond the intensive work search group to support people, particularly those with health conditions, who previously have been left out of any support at all. What we have been doing, as part of the jobcentre activity review, is trying to work out where we can best deploy our work coach resource, looking at people for whom that resource could be more closely targeted, enabling us to free up resource for those groups who currently don’t get it at all. Among the things that we have been doing is to reduce support where it has been less needed, but that is to free up resource elsewhere, and 1,000 work coaches are being released to support people on the universal credit health journey as part of this programme. That is where it is going: it is to support additional support elsewhere. I was at the Public Accounts Committee again on Monday, and the Chair asked me again about this. Particularly it is at claimant commitment review—claimant commitment stage—where we have reduced from 50 minutes. What I have said is that where you have a situation where a claimant needs longer, if a work coach thinks, “Well, I am 20 minutes in—actually I could do with an extra half hour,” that can normally be accommodated, because we want to do the right thing. But it is really about trying to ensure that we don’t spend time on the things that add small amounts of value, to free up the 1,000 work coaches that we will be putting in place over the course of this year to support customers on the health journey.

We did some fantastic work on additional work coach time. We looked for evidence of what happens when we free up our work coaches to focus on those with health conditions and disabilities. We found that, just by calling and asking whether they wanted to come in for a meeting, we got 3% more people into work. Now, 3% sounds small, but of 2.8 million people currently out of work due to long-term sickness, that is really good. Even better than just getting that 3% into work was the fact that their mental wellbeing was improved, as we were referring some of them on to mental health services. They are also financially better off because we referred people to debt advice to get their finances back on track. We have a resource, and resources are not infinite. Our work coaches themselves say, “We do not need to focus on those people, and we can do that over the phone or online. These are the people we need to spend more time with.” The amazing thing about our work coaches is they know what’s what; they know their local economy and what people need. We have evidence that, if you spend more time with people and refer them to the right services, they can get work and be financially better off.

I am a former trade union official, and I believe in good work. That means not just any job, but jobs where people have good terms and conditions, where they feel secure, where they are developed, where they have agency and a voice and where they have security. I agree that work coaches are phenomenal—I have met many in my local jobcentre. How do you ensure that work coaches have the time to make sure that they are not pushing people into just any job, but that we are making sure that people get good work and good jobs, with good terms and conditions?

One of the points of our reform of jobcentres is to better match the people who need work with the jobs that they need to get, and ideally to get on in their jobs too. I would say that it is not just about what we do within the DWP. Obviously, we have our employment rights legislation to improve the quality of work, and we are creating more good jobs. We have invested £113 billion over the SR in building new homes and clean energy. We are also looking at what we can do as a Department with other Government Departments. I have already met Ed Miliband and everyone involved in the clean energy workforce strategy to say, “Okay, you are going to be creating these jobs. How do we get our people into those jobs. What is the partnership that we can build?” It is similar with the construction industry, because we are building 1.5 million new homes. There is much more that we can do. We are investing in our water infrastructure, creating new jobs. On defence, I think this is about Government saying that we have to be much more joined up. As the DWP, we want to go out there and make a deal with these employers and say, “We are overhauling our approach to employers.” It is not acceptable that only one in six employers has ever used a jobcentre to recruit, so we are overhauling that. We now have a dedicated team in the Department that will have single account managers, and we want to do much more as a partnership. There is a long way to go, but we have made a good start in this first year in office.

I regularly sit alongside work coaches in jobcentres, and the conversation is all about asking, “What can you do? Let’s understand your skills, your employment history, your aspirations and what you want to do.” We want to be connected to employers in the way that the Secretary of State has described. One of the particular successes that we have had over the last few years is sector-based work academies, where we work closely with employers to give our claimants the opportunity to have work experience and training, leading to a guaranteed job interview at the end. There were over 80,000 of those over the course of last year. That is directly connecting people to those roles, many of which are in the sectors that the Secretary of State has described. It is about good jobs, growing jobs and good opportunities for people.

Job coaches tell me that one real problem they have is employers who are concerned about the national insurance rise. Has the Department done an analysis of the impact, not only on the supply of jobs but on wages, as a consequence of the national insurance rise itself?

My experience of talking to employers, even since the rise, is that many are desperate to recruit. They have jobs for which they really need skills, and we have people out of work who we need to get those skills. As I said earlier, we want to make sure that we much better match the needs of employers with the right people who are coming through from us. I know that businesses are under a lot of pressure, but the ones that I have spoken to are still much more likely to talk about the challenges of recruiting. It is not that they are not recruiting at all; they are desperate to get people into work, particularly in those growth sectors that the Government are funding.

Can I ask the permanent secretary what work the Department has done to assess the impact of the national insurance rise on the jobs market?

Those assessments are done by the OBR and were published alongside those fiscal statements in the normal way.

You will know that we are consulting in the Green Paper on a new unemployment insurance, a new contributory benefit, which would be non-means-tested and set at a higher rate for those who have paid into the system. At the moment, we have two separate benefits, JSA and ESA. The argument behind this is about how we can better support people in that really crucial part where you lose a job—they do not have to define themselves as incapable of work for health reasons—and how we revive the contributory principle. Crucially—I think I said a bit about this with the Mayfield review—this is also about how, during that early period when you are out of work, we pile in support to help you get back into work as quickly as possible, because we know that once you are on the health top-up, fewer than 3% of people a year, I think it is, get back into work. This is something that we are consulting on; we have not developed any further proposals yet. You will have to wait until we go through all the consultation responses to the Green Paper, but it is very much about making sure that we better support people during that early phase and get them back into work as quickly as possible, not putting another disincentive in the system that defines you as incapable of work, and reviving the principle that if you paid in, you should get out.

It is something that we are absolutely mindful of. As I say, my experience of working with work coaches is that they absolutely start with the track record that the claimant might have in employment, the skills they have got and how they can get into a role that is appropriate to that skill base, and they give them the time to do that. Obviously, if it has been a long time and they cannot get back into that, there needs to be a different type of conversation, but that is where the conversation generally starts, in my experience.

What we want is for people to get into jobs and stay in those jobs. That is always better done when you match people’s skills and what they want for their lives with the appropriate jobs. That is not always available, but that is partly why this Government want to try to create more, better jobs in every part of the country. I never see the work of the DWP as somehow separate from the rest of the Government’s strategy, which is to say that we do not have enough good jobs in this country. We want to improve the quality of jobs that already exist, but we need to create them, because all the problems we have discussed are far worse in the parts of the country that have struggled for decades—places where whole industries closed and where we need to create opportunities. That is why, whether it is those on disability benefits, young people who are not in education, employment or training, or those claiming universal credit, all those problems are concentrated in the parts of the country that many of us came into politics to represent. This Department’s work is intrinsically linked to that of other Government Departments. I know Peter feels as strongly about as I do: this Department ends up picking up the pieces of the deep-rooted problems from many other Government areas. We have to change that. We cannot work in those silos. Poor health, poor opportunities, low skills, not enough jobs—those are the problems we have to tackle together. We are at the sharp end of it. This comes back to the points raised earlier about the admittedly bumpy ride over the welfare legislation. We have to start shifting resources into the things that really help to create better lives for people. I believe that we are spending too much on the costs of failure and not enough on the better health, better jobs and better skills that we need. That is extremely difficult to shift, because people rely on benefits and have built their lives around them, but we have to grapple with this. Benefits alone are not the solution to a better life, although obviously that is the focus of this Committee’s discussions.

I think we have to be really clear-sighted about the fluctuating nature of many health conditions. We need a benefits system that reflects that. That is an issue that came up in discussing the legislation. We know that some people are able to work on some weeks or days and not others—how do we have a system that does not require those people to always define themselves as incapable of work? Whatever the spokesperson for the Liberal Democrats said, I am perfectly aware that personal independence payments are not linked to your ability to work; they are about the extra costs of living with a disability. What does that mean in the modern world? What more can health and care services do to support people? What is the nature of those conditions, with the increase in mental health claims? All that has to be reflected in the benefits system. It cannot stand still. But these are extremely difficult challenges. As a whole, the “Pathways to Work” Green Paper set out a route to better reflecting all those issues and concerns, but there is a lot more work to do.

Thank you, Secretary of State and permanent secretary, for coming to speak to us today. I would like to shift the conversation to the topic of pensions. The Pension Schemes Bill is going through the House at the moment, and we had the Mansion House speech last night, with the Mansion House accord signed just weeks before. One of the issues that both the Bill and the accord raised was getting the best outcomes for savers and pension savers. For instance, research shows that just 5% of a pension pot invested early in a career, at age 25, in private assets can raise the final pension pot size by 7% to 12%. On Second Reading, the pensions Minister said that the fiduciary duty to act in pension savers’ best interests was not always operating to produce the best outcomes and that “savers are being let down by the status quo.” What concrete plans do you have to address this, and are you considering setting out new guidance?

You will know that the main purpose of the Pension Schemes Bill is to try to produce better results for UK pensioners and savers but also for UK plc to start switching some of those investments. The main way we are doing that is by trying to consolidate those small pension pots into larger funds that are able to take more risks. That is a really important thing that we are doing. There will be more to say about pensions before the House goes into recess, in terms of some of the longer-term challenges facing today’s workers and tomorrow’s pensioners. I am very concerned about the adequacy of pensions. There is the huge benefit of auto-enrolment, but many people are still not saving, and that is a real risk for them. We will have more to say about that next week, but the Pension Schemes Bill is a really important first step to try to bring those small pension pots together, with better results for savers and better results for the UK economy.

I think this is a major innovation, getting into the whole question of value for money for savers and all we can do on that. Greater transparency around value for money for savers is really important. The other area we should focus on is the quality of advice that savers have in terms of what is available and what are the right choices for them to make. There are major steps forward on that, in terms of things the Government are doing but also the work of the Money and Pensions Service and the progress on the pensions dashboard programme, which will enable savers to see what their savings are and hopefully make the right decisions off the back of that.

Fantastic. Secretary of State, you mentioned adequacy. You were absolutely right to raise that. I think I am right in saying that two in five people in the working-age population do not have adequate savings to sustain them at a reasonable level in retirement. What steps are you taking on adequacy?

We will be saying more soon about the next phase of our pensions review. I am concerned about the risk that tomorrow’s pensioners will be poorer than today’s. As a Labour politician, I do not accept that that is good enough, and we need to face that head-on. I am concerned particularly about those on low incomes who cannot even put food on the table, let alone think about paying for their pension in retirement. We have more people who are still paying off their mortgages when they retire and more people who will be renting into retirement. How I see this in the broad sweep of history is that we made some massive improvements under the last Labour Government in tackling pensioner poverty through pension credit and then through the Turner review. That was an amazing success of public policy, but there are new problems today. I do not accept that tomorrow’s pensioners should be poorer than today’s, but that means we have to do the long-term thinking and build the consensus that we need to give people a decent retirement. We all want to look forward to our retirement, but as you say, 40% of people are not going to retire on the minimum defined adequate income. The truth is that that will be terrible for them, but we will all end up picking the pieces of pensioner poverty, so we have to take some difficult longer-term decisions to tackle those problems.

We will take a break for approximately five minutes. Sitting suspended. On resuming—

In relation to our predecessor Committee’s recommendations around indexation of PPF compensation on pre-1997 benefits in relation to the scheme rules, former chief executive Oliver Morley said that there was a case for that. The level of PPF reserves, which now stands at £14 billion, has since increased. We are told that the barrier is that the reserves are on the public sector balance sheet. How long has this been the case? Have there been any changes in how PPF assets and liabilities are treated?

The Pension Protection Fund has been a public corporation since it was set up, so it has always been on the public balance sheet and the reserves have always been on the public balance sheet. The particular way in which the fiscal aggregates work at the moment is that the Government take account of financial assets as part of their key fiscal rules around debt and the capital position. I know you had evidence from the Minister for pensions last month, and I think he has subsequently written to the Committee. The crucial thing—going back to the recommendations from the predecessor Committee—is that any decision on the indexation of pre-1997 assets is a fiscal decision that needs to be made alongside other fiscal decisions in the normal way.

Thank you. I understood that it only came on to the public sector balance sheets in the last few years, actually. I am interested in why that was the case. From the perspective of scheme members, they have had their pension real terms eroded. It is their savings—their investment in the scheme—that has contributed to the PPF reserves, which are not insignificant. How can we justify this to them? Many of them are in their late 70s and 80s and are literally clinging on, given what the Secretary of State mentioned earlier.

1997 was the year that legislation was introduced to require indexation. I appreciate that many schemes had indexation prior to 1997, but it was not a requirement until after 1997, which is the reason for the current status. At the end of the day, the £14 billion of reserves are there to fulfil the role of the pension protection fund, which is to step in if a DB scheme runs into trouble. Obviously it is difficult to predict the future requirement of those reserves, but that is what they are primarily there for.

In December 2024, it was estimated that if a modest increase of 2.5% were given to the remaining members of the scheme, it would be a total of about £133 million over 10 years. We are not talking about massive sums in terms of overall public sector spending, but to the people who are living from day to day and really struggling, it would be a significant difference. I understand the justification, but what about the humanity? Given the position that these people are in now, what can we do for them?

When Torsten Bell came to speak to the Committee, he said that he was absolutely aware of the points you have raised about older pensioners, many of whom are women. He has personally met many of them and is fully aware of all of those things. But there are obviously also wider implications for the public finances. I think he told you that he is aware of that.

But this is their money. In terms of the levy that has gone into PPF, it is their money. It is not taxpayers’ money; it is their money that has been used to provide that levy. Surely they should have a call on that as well.

As Torsten said to you, we are really aware of what is happening and the implications. There are implications for the public finances, and any decisions have to be taken with that absolutely in mind. He is fully aware of it, and he told you that he is looking into it. But there are wider implications for the public finances. I cannot really go beyond the point that he made to you back in June.

He did. We have the Pension Schemes Bill coming up, and I hope there will be an opportunity to consider some amendments to it. The remaining scheme members are dying by the day; surely, for the sake of decency and humanity, we can do something for them.

I understand that this is something that both the previous Committee and you have pushed. Torsten was very open about understanding those implications when he last came here. He has written to the Committee and given evidence to you. That is where we are at the moment.

He has. I will leave it with this: £133 million over the next 10 years, against £14 billion. I will leave it at that. Let’s move on. Next on my list is Frank.

As you say, the ombudsman chief executive wrote to the Committee with a bit more detail about that. The reality was that the unit was successful at making determinations but very unsuccessful at securing funding coming back. This is just a question of what the best way is of using the ombudsman’s resources to get the most outcomes. It was concluded that putting that resource back into business-as-usual activity within the ombudsman was a more effective use of those resources. Let’s remember that all those affected would have already been receiving compensation through the fraud compensation fund, so this is not a question of those who were affected; it is more about the best use of resources and whether this is a route that enables us to get money back from those people who were found guilty of fraudulent behaviour. As I say, in the end, a lot of determinations were made but very little money was secured, so it was simply a value-for-money decision about how best to use taxpayers’ money.

As you say, the ombudsman plays an important role in identifying those scams and fraudsters, and we are always keen to take action to address that. What has proven to be the case is that the work of this particular unit has not been an effective use of taxpayers’ money. For those affected, the fraud compensation fund is the route forward to get redress. On the work of the ombudsman as a whole, by using this money in a different way to get through more business-as-usual cases, I imagine that they will identify more cases that need to be addressed by using the resources more effectively than by pursuing this particular route. As I said, the unit was successful at making determinations, but very unsuccessful at securing money back.

Dominic Harris, the chief executive and accounting officer of the Pensions Ombudsman, is doing a good job in using the resources most effectively. Obviously, we had a conversation in the context of the spending review about the ongoing resources of the Pensions Ombudsman, but I am confident that he and his leadership are using the resources they have in the most effective way to make the biggest difference.

If people have been defrauded of their money, we want them to get it back. We have to make sure that we do that as effectively as possible. What happened here was that actually we were not getting as much of the money back as we wanted, so a change has been made. I want to make sure that this is tackled properly, and we will make sure that we will keep it under review, because it is not acceptable that that has happened to people. We need to find the best way of doing it and, if what we are doing is not working, we need to have another look again—that is an absolutely clear commitment from us.

I thank the Secretary of State and permanent secretary for being with us today. This was raised in a previous question, but I want to delve a little deeper into the long-awaited pensions dashboard, a project that has been reset more than once already. In March, Brian Byrnes of Moneybox said that he was concerned there was still no launch date for the MoneyHelper dashboard, and he was a bit sceptical about the launch date that the private sector would follow. What is your working assumption on when the launch will happen, to really benefit people in claiming their lost pension?

That is a really important programme, for the reasons I raised with Mr Pinto-Duschinsky before the suspension. As you say, it is a programme that did go through a reset. We put it into reset in 2023. We brought in new leadership, and new leadership in the Money and Pensions Service at chair and chief executive level. I am pleased with the progress that they have made. They are on track. The first connections have been made, since April this year. Indeed, the state pension system has now been connected up, and we are on track for reaching the final connection date, which is 31 October 2026. Alongside that, we are doing work around developing the front end, the MoneyHelper dashboard. The Money and Pensions Service is doing a lot of user testing to try to work out how best to use that. We want to make sure that the information is displayed in a way that is helpful. It is one thing to get what I like to think of as the plumbing of the system working—the connections through from each of the thousands of pension schemes. That is a complex job, but bringing that information to people, as we said earlier, is also complex and we need to make sure that people have the right understanding, and make the right decisions off the back of that. That is really important. There is a lot of potential here, and potentially some risk. That is why everyone wants to get this right. There is user testing. We do not have a date for when the MoneyHelper dashboard will be ready. As I say, the final connection date is 31 October 2026, and we are all set for that. We can keep the Committee up to date with that. I am sure that the Money and Pensions Service, as it comes and reports regularly to the Committee, will do so too. The programme is going well and the infrastructure is going well; we just want to make sure that when we display the information, we do it in a way that is most helpful for customers.

One of the things that I was nervous about was that, if people felt that adequacy was a real worry, that might have a negative effect, so we would need to deal with that and give people the advice that they need. We also heard evidence that, in other countries where this has been successfully rolled out, the private sector really had an important role to play. How do we keep the private sector engaged while there is still a little bit of uncertainty, after connection, about when it will be up and running as a dashboard?

That is a good question. There is a lot of engagement from the Money and Pensions Service. It is well connected, through everything else it does, to that wider sector, and the pension schemes themselves are well embedded because they are providing the infrastructure and connecting up the system. The current plan is still that the MoneyHelper dashboard will be the first to market, and obviously commercial ones can flow after that. For all the reasons you have described, making sure that we are doing this in the right way, with proper user testing and a controlled situation, is the best way forward. Ultimately, though, we imagine that there will be a number of dashboards out there displaying information in more innovative ways, but this is such an important step forward that it is important that we get it right.

We have reflected on pension adequacy. How do you envision these dashboards changing people’s view about how retirement looks for them? What kind of behaviour change are we anticipating?

Information presented clearly, and in a straightforward way, is at the heart of this. As we said earlier, making decisions to save for retirement early on in life is the right thing to do; it makes such a difference, and yet so many people put it to one side until later in their career. The dashboard is something that people can have easy access to. It is not the same as looking at your bank account, because the numbers are hopefully not going to move up and down too regularly, but being able to think, at those regular points in life, “Am I making the right decisions about spending money now, or investing in the future for my retirement?” and seeing the difference that their choices make, is so important. We also know that many people, particularly because of the way that careers work at the moment, have a variety of pension pots in different places, and maybe some that they have become disconnected from. Having information about the money that they have themselves is another important part of this. I anticipate and hope that this leads to people making those long-term decisions in a controlled, mature way, seeking advice; but we need the whole infrastructure to work effectively, and we need to avoid people providing the wrong information or encouraging people to do the wrong thing based on the information that comes out in the dashboard. There is a risk of that if we do not get it right.

We are obviously thinking seriously about pension freedoms. There are big decisions when you gain access to your pension about how you make the best use of that for what are longer retirements as we live for longer. Knowledge is power. However, we have to make sure that the plumbing, as you refer to it, and the information is all there. Probably all of us in this room have looked at what is happening for our constituents and the huge challenges that we have here. I see this as a really important part of the next steps as we make sure that people have a retirement they can look forward to, with the information, knowledge and advice they need to make sure that their money and their savings work for them as we live for longer. This is a really important thing and there is much more that we can do there.

Bearing in mind that we have 4.5 million children living in poverty, and childhood is a very short period in all our lives, the slippage that we have had on the child poverty strategy, from being published earlier this summer until potentially the autumn, is particularly disappointing. Can you give us a clear date when that will be published? And can you please explain the unfortunate slippage?

It will be in the autumn—I cannot give you an exact date. I do not believe there has been slippage in this Government’s determination to tackle child poverty. We have introduced a fair repayment rate in universal credit to stop people being plunged into debt. We are introducing free school meals for all children in households on universal credit, which will lift 100,000 children out of poverty. We are dealing with direct pay in the child maintenance service, which we believe will lift 20,000 children out of poverty. We are rolling out—

But can you please explain why the slippage happened?

You said that there was slippage. I think we have taken action and made a down payment on tackling child poverty.

So the child poverty strategy is not going to have any impact—it does not matter. Can you explain the delay? You had planned to do it earlier this year; now it is going to be the autumn, and knowing the Government that could be December. Childhood is a really short period of time. We are letting our children in poverty down. Why are the Government doing that by not publishing, as they promised previously?

I think action speaks louder than words. We have taken action to tackle child poverty—

But can you explain why you have not published the child poverty strategy so far?

Would you like me to answer the question?

Yes, but you are avoiding it. Why have you not published the child poverty strategy?

We want to get this right. We understand that there will be funding implications, and it is really important that we spell out a comprehensive strategy. But we have not had slippage on tackling child poverty. We are putting that into action.

One thing that has been really positive in looking at child poverty is the actions that we have already taken. The free school meals that will be rolled out next September will be a real step forward in terms of how many children can access a free school meal. What do the review and the analysis tell us about how that one bit of policy will improve child poverty?

This is really important to me personally. I used to chair something called Feeding Leicester, a programme to end hunger in my city. That emerged from a survey that we did back in 2018, which showed—this was even before covid—that one in five kids in our city were worried about having enough to eat every single day. That is why we set up Feeding Leicester. Kids cannot do well if they have not got enough food in their bellies. I am extremely proud of the free school meals for those on universal credit; that will lift 100,000 children out of poverty, but will be available to, I think, 500,000 children. Something that has not been recognised from the spending review—far from being slippage, action is being taken—is that it is not just about feeding kids during term time. Our three-year funding settlement on the household support fund—now called the crisis and resilience fund—recognises holiday hunger, and the DFE’s commitment to the holiday activities and food programme will feed poor kids at school and in the holidays, because kids do not stop being hungry when they are on holiday. That is important. I will take a step back from the child poverty strategy. Social security measures are essential to bringing those numbers down, but we must also do more on three other fronts, including bringing down the costs families face, particularly with their utility bills. I am proud of what we have done on the warm homes front, extending support to an additional 2.7 million families, and the warm home discount will really help. We must also get more people into work. The lone parent employment rate has stalled, and we need to do more to get second earners into work. We had clear evidence from the child poverty taskforce that having a second earner in part-time or full-time work was a strong protective factor against child poverty. The other element of this is the very early years of life. We now know just how important the first few years are for children’s brain development and social development. I ran a charity called the Maternity Alliance before I became an MP. I saw how important the very early years are, including pregnancy and the first two years. Rolling out Best Start family hubs is critical. I understand that inevitably the focus on the child poverty strategy has been about social security measures, but it is much broader than that. Yes, it is about that, but it is also about work, the best start in life and financial resilience for families. In so many families, if one thing goes wrong—the cooker breaks or the washing machine goes—they are plunged into poverty. We must take action on a broad range of fronts. I am very proud of the start we have made. We have a hell of a long way to go, but we have had some down payments on our child poverty strategy, and Bridget Phillipson and I will be forging forward to do even more in the autumn.

I am a Welsh MP. In Wales, there has been an awful lot of work to try to mitigate the impact of child poverty, including work on the cost of the school day, universal free school meals for primary school children, and our long-established breakfast clubs, which have been in place for, I believe, nearly two decades. Despite those measures, child poverty in Wales remains stubbornly high. I believe strongly that joint work between our UK Government and, in my case, the Welsh Government, is crucial to making a difference to child poverty, not just to mitigating the impact, but to drilling down to the root causes. How will the Government work with the devolved Administrations to deliver the child poverty strategy—accounting for devolved policy areas that are likely to impact outcomes? Bridget Phillipson is working in education here in the UK Government, but we will have a Welsh Government equivalent and there will be the same in Scotland. How will that look?

An important part of the work of the child poverty taskforce is to make sure that we take action in every part of the United Kingdom, including in partnership with the Welsh Government and the Scottish Government. We have had meetings about this topic with all the key players, including voluntary sector organisations. It is not only about what the state can do, but about what voluntary and other community groups can do. From the DWP’s perspective, I was talking about the importance of helping everybody who can work to get into work, and we have a “Get Britain Working” trailblazer—there is £10 million, I think, in Wales—which is trying to get more people into work and keep them in work, which is critical to tackling child poverty. There are obviously the Barnett consequentials for the Welsh Government from some of the other action that we have taken. You are providing free school meals already, but that support that would have been available is obviously going to be devolved. I think there is a lot more we can do to learn from the successes that Wales is having, but critical to me are the very early years and working with the local NHS, in particular, to help parents during the early years of a child’s life. Also critical is creating good-quality jobs in every part of the country, because that is the best route out of poverty in the long term.

Will there be continued discussions with the Cabinet Secretaries in the devolved Administrations?

Yes, absolutely.

You have mentioned health and education. It is crucial to have joint working so that there is replication of what is happening in this place.

Absolutely, and we are already doing that. It will continue until and beyond when the strategy is published, but particularly, as I have said, on the employment support side, we have a big manifesto commitment to devolve more, so that we get it right in Wales. We are working closely with the Welsh Government on that. But all my counterparts want to make sure, in every part of Government, that we have that close working and that we deliver, whether through the NHS, local government or employment support, because the truth is that only when we do that together will we get the best results for children everywhere.

Let’s hope we can see those figures coming down.

They will.

That is my greatest wish. Thank you.

I want to move on to another area: housing. This is a very important issue nationally and in my constituency of Horsham, where, as it happens, I will attend a local housing summit on affordability tomorrow, so I am hoping to pick up a couple of tips and some advice from you today. The temporary accommodation subsidy allows local authorities to reclaim from the DWP up to 90% of LHA rates, from 2011, after exercising their homelessness duties. There are two questions from that. Why can only 90% be reclaimed, and what is so special about 2011?

As you say, Mr Milne, it is a long-standing situation—since 2011. The reason why the figure is 90% is that the policy has always been to encourage local authorities—as you say, a subsidy is paid up to a certain amount—to look at the cost of temporary accommodation and for them to have an incentive to seek to reduce that, in terms of reducing both the number of people who rely on temporary accommodation and the cost of the temporary accommodation that is in place. It was set at 2011 levels and it has not moved since then. There is some advantage in that, in the sense that in 2011 the local housing allowance was set at the 50th percentile; it was subsequently reduced to the 30th percentile. But obviously, over time, as the cost of temporary accommodation has gone up, so the so-called subsidy gap has increased. Ultimately, there is a fiscal decision to be made about how to manage the spend that is made on housing. At the end of the day, when it comes to housing, there is a conversation to be had about both the demand side, which this is a focus on, and the supply side. Successive Governments—well, particularly this Government, as we have seen in the spending review, have seen the key thing here. What really makes the difference is building more social and affordable homes. Decisions can be made about where you put Government funding, but ultimately what makes the biggest difference is increasing the stock of housing. You will have seen in the spending review the commitment to £39 billion of additional investment in social and affordable housing over the next 10 years. Obviously, by doing that, you reduce the pressure on temporary accommodation, because you have more long-term housing available for people. That reduces the pressure on rents, reduces the cost and will have downward pressure on the so-called subsidy gap. But I do understand—I hear it from local authorities all the time—exactly the point you have made. There are choices to be made about where to put the money and how to make the investment, but, as I say, the Government’s priority is increasing house building. That ultimately is the solution for the housing challenges that we face.

I just want to emphasise that point. Housing is a massive issue in my constituency, in Leicester. It is the single biggest issue for my constituents. I am only too aware of the pressures on local authorities, but, ultimately, we have to start shifting the focus on to precisely what the permanent secretary said, which is building more social and affordable housing. That £39 billion over this spending review is the biggest ever investment in building those homes, and I think the Deputy Prime Minister set a target for 60% of those homes to be social housing. I do not want anybody in temporary accommodation. I would just link that to our previous discussion about child poverty; we have 166,000 children in temporary accommodation. I met a mum of two very small kids in Leicester West a few months ago, in one of the early years settings, who was asking how she can bring her kids up there. What is the future for them? They keep having to move around. They have not got anywhere decent to be on their own. When they get to school, how are they going to do their homework? How long will it take them to get there? And the state of that accommodation! The long-term decision for the Government is, therefore, how to solve that problem. I know about the immediate pressures on the council, believe you me. I face that every day. But we are faced with those choices, and our choice is to shift the focus on to tackling the long-term problem, which is that we do not have enough decent housing in this country—affordable, social housing. That is how we want to get ourselves out of this bind. Think of the amount of money that we are spending on housing benefit, often for poor-quality housing that we do not want. We have also introduced the Renters’ Rights Bill on private rented accommodation. If we do not take the long-term decisions facing the country—there are immediate problems, but we cannot duck those decisions; I think they have been ducked for too long. So that is our approach. I am very aware of these issues and I will keep them under constant review, and I know that the Deputy Prime Minister is also very focused on them, but we have taken some big, long-term decisions that we need, and we really now have to deliver.

I completely agree with the long-term ambitions and on the necessity. However, the short-term problems are considerable. The neighbouring constituency of Crawley, for instance, is suffering very greatly from temporary accommodation issues. But I will move on—

One thing I would say is that, if you have a discussion in Horsham about these problems, we genuinely want to hear from local experience about what might make a difference. If you are having a housing summit and some of these issues are discussed, feed it into us—feed it into Angela Rayner’s Department—because we want to deliver in every part of the country, no matter which party is represented there. Our job is to deliver for everyone. So do let us know, and we will do everything we can to support you.

I am happy to do that.

Can I build on that? As accounting officer, I am responsible for the money that we spend on housing benefit and support to housing through universal credit, which is tens of billions of pounds a year. As the Secretary of State says, a good chunk of that goes into poor-quality accommodation in the private rented sector, which I feel particularly strongly about as the accounting officer, when thinking about the value for money of that. So absolutely, if your—or those of other colleagues on the Committee—councils, local housing associations or other housing providers have ideas about how we can use that money differently, we would be up for that, because we want an innovative approach to get the best value for this money.

I shall pass that on tomorrow. The Government have also said that they intend to merge discretionary housing payments and the household support fund into a new crisis and resilience fund. How do you think that might work in practice? For example, will any funding for needs such as housing be ringfenced within that?

This has been a really big, important thing for me since coming in as Secretary of State. We have now secured the first ever three-year funding settlement for what is currently the household support fund, but we want to turn that into a crisis and resilience fund. That now includes discretionary housing payments. That will be a huge step forward. I know from my own council that having them just every six months does not enable them to plan properly. We had a big event yesterday with 600 different stakeholders—local authorities, voluntary groups and others—about how we could use that money. Yes, we can still use it for emergency payments, because that will be required, but we can also begin to shift it towards helping to tackle some of the root causes of those emergency problems and build resilience in families and communities. Again, I have been influenced by my own city, where we have looked at, for example, getting volunteers in our food banks to start signposting people—as many are already doing—to debt and welfare advice and maybe to employment support or particularly mental health support. We did a big project in Leicester with Food Bank Plus where we found just how many people who rely on our food banks have mental health problems—which is stating the obvious as you will know that if you are involved with your food banks locally. How do we join that up more? How do we support voluntary organisations, which can be the glue that helps bring people together, but whose funding has been decimated over the last 14 years, to better link people with support? That will remain, and the discretionary housing payments are part of that. Also, the holiday hunger programme, which is for support during half-terms and other things, will remain. But we want to allow local areas to decide how best to shift that support. We are moving away, as everyone will be, from food banks to more food pantries and social supermarkets, so that those become more sustainable. People pay a little for the food, but might also be able to get employment, training or childcare advice. We want to shift that funding into more of the resilience and preventive measures, which we know can make such a difference. I know from my constituency that having that three-year security of funding will help people plan and build up capacity. I was not able to be at the event yesterday, but it is important that we understand what more local communities want from that sort of funding. I think it will make a big difference.

And on the specific question of ringfencing?

I am less in favour of ringfencing because local authorities often know best how they can support things locally. We will want some clear objectives and outcomes, but in terms of how that money is best spent—to come back to Horsham—they will know best locally what they want to spend it on. I am not into the business of telling people exactly what to do. We want clear outcomes and objectives, but I am much more in favour of giving more local freedom where that works.

One of the things we need to make sure we can do is bring upper and lower tier authorities together to come up with the best solution in their areas. Obviously, discretionary housing payments were generally paid to lower tier because they are responsible for housing as well as unitaries.

They are coming together in a rather big way in a couple of years.

Exactly—in Sussex and Surrey—and it will be clearer in that respect. It is a great opportunity, as the Secretary of State says, for the different parts of local government to come together around what matters in their areas. We have events about food banks—as the Secretary of State mentioned—about housing, about crisis and emergency, but also as the Secretary of State said, about resilience and long-term planning. I am keen to hear the views of stakeholders on all four of those elements of the plan.

As I mentioned earlier, one of the things we found that particularly plunged families into poverty in Leicester was white goods going wrong, so as part of our local poverty strategy we are trying to set something up where people can get decent white goods as a replacement instead of getting another one on loan, with more debt. Obviously, the root cause of poverty is not enough people being able to have good enough jobs and the costs being too high, but there are other things we can do locally. That was right for us in Leicester; it might not be right in Horsham. There are a lot more practical things we can do to support people, and I hope that this huge investment over the next three years will really make a difference.

It sounds like quite a substantial change in the purpose of the existing funds. What I hear you saying is that you are going to shift the funding from grants to households to grants to social infrastructure of various sorts. I appreciate that you are leaving the discretion to local authorities, but that might, in practice, be what happens. Is that correct?

It is both. I know that in my own city we will still need some of those emergency food vouchers and the emergency payments for people who would otherwise be evicted and at risk of becoming homeless.

I get the argument, and I am sorry to interrupt—

It is not a directive. It is enabling local authorities.

But in practice, what might happen is that the budget that is currently available for households in an emergency will decrease, and there will instead be investment in local social infrastructure.

Both will remain available. This is about enabling local authorities. I have to be honest: many of them have already begun to do that. The reason why I am very interested in this is that in my own city we have begun to shift some of that funding within existing rules. We are enabling that, because if local areas believe that that is a better way of preventing that emergency demand on money, that is a better thing.

I would like to come on to the issue of fraud and error, which we talked about when you came in November. We highlighted evidence that the DWP was making efforts, and since then the Public Authorities (Fraud, Error and Recovery) Bill has passed through the House, which is welcome. We also highlighted evidence that, in terms of the bounce-back post covid, the DWP’s performance on dealing with fraud was lagging behind that of the private sector. Since we last spoke, what steps have you taken to remedy that and push forward with practical measures to bring down fraud and error?

Since we last met, we have published the latest fraud and error statistics for 2024-25 in May, and on Thursday we published the annual report and accounts, with a very long section on fraud and error, which I am sure we will talk about at a subsequent hearing. You will have seen that fraud and error in the benefit system has come down since the year before, from 3.6% to 3.3%. In universal credit, it came down from 12.4% to 9.7%. It is still a little bit above where we were pre-pandemic, when it was 9.4% for universal credit and 3.1% for the benefit system as a whole, but we have made promising steps forward and we have our full fraud and error strategy, of which key parts are being taken forward through the Bill, as you say. The annual report and accounts goes through all the things that we are currently doing and the progress that we have made. We set ourselves a target for last year of making savings of £1.7 billion, and I am glad to say we overachieved: we achieved savings of £2 billion. We have tended to focus quite a lot on detection in the statistics and the work we talked about, which is when the fraud has already happened. You are then chasing the fraud down and trying to get it back, which obviously has a downside in the sense that the money has already gone out the door. You also end up with claimants with overpayments that you then have to get back, which may be difficult for a variety of reasons. So there is an increasing focus on prevention. In the annual report and accounts this year, for the second year in a row, we have published some indicative statistics we have been producing that look at the overall effort of the Department in tackling and preventing fraud as a whole, through all the different controls we have in place, as well as new things we are bringing in, such as the eligibility verification measure in the Bill, the periodic re-declaration we are asking people to do on a regular basis and the UC verification work on things like capital and self-employed income. A variety of things are being done in addition, but there are also intrinsic controls already. I have the table in front of me, which is on page 99. It shows that we prevented or detected fraud of £24.9 billion last year, which is up from £21.9 billion a year before. When you look at the scale of fraud that happened—fraud and overpayments of £9.5 billion—a much greater amount than that was detected and prevented in the first place or detected after the event and clawed back. There is a sense of trying to give a bit of weight to what I really want us to do as a Department, which is to get ahead of the problem: to stop it happening in the first place, rather than detecting it and clawing money back after the event. Publishing this in a regular format will be helpful for the Committee in holding us to account for that.

That was a brilliant “Blue Peter”, “Here’s one I made earlier” moment; it was very good. The other part of that, which you are picking up, is increased automation: using a lot more AI and predictive tools to try to stop problems before they begin, for both fraud and error. We do not want people being underpaid or making a perfectly legitimate claim with no fraudulent intent and then being overpaid and put through hardship when it has to be recovered. The big challenge for the Department has always been the data infrastructure and the skills and IT to successfully use it. Do you have the right data infrastructure and capabilities to drive automation forward?

That is a good question. One of the reasons for the powers in the Bill is to get more access to data to enable us to do that, but in a fair and appropriate way that is transparent and understandable to Parliament and to our customers. At the moment, we use only one machine learning tool in a scaled-up version, and that is for universal credit advances. We carried out a fairness test of that, which we will publish shortly to give you a sense of it. It makes a difference. It enables us to automatically identify universal credit advances applications that look fraudulent or suspicious. It filters them off for us to look at manually and test. It delays the payment by about a day, but we think it gives us three times more certainty in terms of being able to tackle fraud and error. That is the one that we are using at the moment. As I say, we will publish the fairness test on that shortly, so you will be able to look at it. We want to be able to go further. These steps are easy to say and more difficult to deliver, but it is definitely the area that we want to get into. At the moment, we have many thousands of colleagues in DWP. They are excellent colleagues—they are very expert—but a big part of the workforce of DWP is working to both detect and prevent fraud and error. We could be more effective and support those colleagues to do their job even more effectively with better use of technology, and particularly with things like machine learning, but we need to get it right. We need to put it through all the governance tests that you would expect, and to be able to present why we think it is fair and is not delivering perverse outcomes. We are committed. We will publish the first of the fairness tests shortly. I think we intend it to be before the summer recess—you do not hear me say that very often. We are keen to hear your views about whether this is giving you the transparency that you need to hold us to account.

We look forward to that. You have a couple of days left.

Overall, it is essential that people have confidence that every pound being spent goes to those who really need it and have the right to that support. I do not think it is acceptable that we inherited a situation of £7.4 billion of benefit fraud specifically a year. I am really proud that, through the fraud and error Bill, we have updated our powers for the first time in 14 years, but there is much more that we can do. Our challenge is that technological advances are proceeding at an unbelievable rate. We want to make the best use of those, so that we can prevent fraud and error from happening in the first place. We have a lot of brilliant staff working on that. There is more that we could do automatically, but we have to have the right framework, accountability and governance in place. That is a challenge for the Government as a whole. We are working very closely with Peter Kyle and DSIT to make sure that we use the opportunities but deal with the problems. People want to have confidence. I see two things. I see organised criminals getting away with huge scams on the benefits system, and I see the problems we have had on carer’s allowance, with overpayments and people being chased for them. I am really pleased that we now have funding for automatic alerts to go direct to carers to say, “You have gone over where you should be—have a look at the system.” They are busy caring and working. We have to use all the technologies we can, to make sure those errors do not happen, up front, but we have to get the balance right. This is not job done. There will be lots that we can learn about what the private sector is doing to tackle fraud, error and scams, but we are a Government Department that often deals with very vulnerable people. It is an ongoing challenge for the Government, on which I am absolutely sure the Committee will hold us to account.

That is very helpful. I want to come back to one thing you said, permanent secretary. I think I am right in saying that UC accounts for roughly 24% of benefits paid, but 76% of all fraud and error. I think you said that the fraud rate had come down from 12% to 9%, but that is still almost £1 in £10. Is there anything extra that we are doing specifically for UC? That feels like the nub of the problem.

It is a contrast between universal credit, at 9.7%, and the state pension, which is a fraction of that. The challenge you have is around the nature of the benefit and the entitlement, as well as the nature of the claimants and what happens in their lives. To be eligible for the state pension, you need to have a national insurance contribution record and you need to be over the state pension age; there is a residency requirement as well. Apart from that, you get the state pension, and then it is constant throughout the rest of your life. With universal credit, on the other hand, there are any number of different requirements. Obviously there is income; the fraud and error rate on earnings from employed income is virtually zero, because we get the feed from HMRC. But on something like living together, you do not have that data, and people’s lives change. On things like capital, people’s lives change. There are also things like the number of children, the age of children and childcare costs. There is a whole range of different elements that you need more information to be able to assess, and people’s lives change regularly. We compare the performance of universal credit with the performance of the legacy benefits that it was based on, because with working-age benefits, by their very nature, there is more risk. We see an improvement in that over time. We saw a big increase in fraud and error in universal credit through the pandemic, but that was because we had millions of extra people coming into universal credit in a matter of months. We had to suspend some of the face-to-face checks that we normally do, because we thought that the priority was to get money to people who were entitled to it and to get money out the door, which I think we did successfully. That is why we saw the peak, which we are coming down from. We are committed to reducing fraud and error in universal credit and other benefits to below the pre-pandemic level. The annual report and accounts—this is another advert for the document—sets out our forecast for how we will bring down fraud and error, both for universal credit and for the wider benefit system, over the course of the next few years.

That concludes our session this morning. Thank you so much, Secretary of State and permanent secretary.

It was a pleasure, as always.