Good morning and welcome to this evidence session with the officials from the Department for Work and Pensions. It is my pleasure to welcome Sir Peter Schofield, who is the permanent secretary, and Neil Couling. Neil, remind us of your job title; it is so long.

I am director general for fraud, disability and health. I am also the senior responsible owner for the universal credit programme until the end of March.

Thank you. We also welcome Catherine Vaughan. Catherine, you are director general of finance. Is that right?

Finance. That is correct.

A very warm welcome to you. I think this is your first time at the Committee.

The second time.

The second time. A very warm welcome to you as well. We received the letter in response to the letter the Committee sent at the end of November, following the session that the Secretary of State and you attended, Sir Peter. We are a little disappointed, I have to say, about the timing—just before today’s session, at a quarter to 7 last night. That did not really give Members an opportunity to review it. I will ask specific questions on the transitional protections for severely disabled people a little bit later on. We will also be talking about where we are with the fraud and error Bill. However, I want to particularly pick up the other aspect, around the defined-benefit pension scheme. In the letter, you said that the new Pensions Minister will be responding shortly to our report. It is a report of an inquiry that the Select Committee undertook, and which we published last March. We received a reply that there were some issues that were still being grappled with and that that was the delay in the Department responding. However, given the Chancellor’s speech on pensions reform and how it can drive growth has been received, hopefully that means that these problems have now been grappled with. In particular, we are concerned because a number of very important recommendations were made in the report on issues that are affecting thousands of people’s lives, including those affected by non-indexation of the pre-1997 benefits. I will quote from the report because it is very important, given that so many of the people affected by this are now in their later years and have endured extreme hardship. It is very important that this recommendation is looked at and responded to promptly. The report says: “Given the age of many FAS members, the Government should legislate as a matter of urgency to provide indexation on FAS compensation for pre-1997 rights” and that this should be “funded by the taxpayer.” The Pension Protection Fund was in agreement with, and very supportive of, the report and this particular recommendation. Can I have more from you than that the new Minister will be responding promptly, please?

First, Chair, can I apologise for the late arrival of the letter. I am glad it arrived before today, but I am sorry that, as you say, it did not give sufficient notice. The nature of the indexation of pre-1997 obligations is a big issue—a big topic. I fear that I will disappoint the Committee by not being able to say much more than was said in the letter by the Secretary of State yesterday. This is a policy matter and, as you say, it has fiscal implications as well, so it is right that the new Pensions Minister leads off on this, rather than me. I am afraid that there is nothing more I can say about how we would address this, but I acknowledge the importance of the point and the significance of the recommendation by the Committee in the report last March. I can assure you that the Minister will be coming forward shortly with a response to that.

Let us move on, then, to fraud and error. We have the fraud and error Bill, which will be in Parliament for Second Reading on Monday. In the 2022-23 annual accounts, the Department said it expected fraud and error to return to pre-pandemic levels by 2027. Yet, in the 2023-24 accounts, DWP now says that it cannot commit to substantially reducing the level of fraud and error, based on current plans. When can we expect the levels of fraud and error to return to pre-pandemic levels?

There are further developments because, of course, since the annual report and accounts from 2023-24, we have had the Budget on 30 October, and there were new measures announced by the Chancellor to help us tackle fraud and error. The OBR have used those new measures and done their forecast. The latest OBR forecast shows fraud and error from universal credit falling back to pre-pandemic levels by 2029-30. Thanks to the measures that we have in place now, we should be on a more positive trajectory. For the new Committee, it is worth talking a little about fraud and error and the overall trajectory that we have seen in fraud and error in DWP over the years. Fraud and error rose significantly through the pandemic, and there are two reasons for that. One was the nature of what we were seeing right then in the pandemic with the social distancing controls, which meant that we could not do many of the face-to-face controls on identity and other things that we would have done before. Also, in the first two or three months of the pandemic, we saw an additional 2.4 million claims to universal credit during that period. There were some days where we had 100,000 people claiming in one day. We took a decision that it was a priority for the Department to pay people and get people into payment, which we were very successful at doing, but the result was that we saw fraud and error come into the system. We did this in a controlled way. We documented all of the easements that we were making, and we were able to put those back into place as soon as possible as the social distancing rules relaxed and other things enabled us to do that, but fraud and error was already in the system by then. There has been a huge amount of work to get that out through targeted case reviews and other retro-action that we have been taking. We have seen that as one factor. The other factor that we have seen, which I think was almost masked by the effect of the pandemic, is the propensity in society in general in terms of fraud and fraud tolerance. That has made a difference in terms of the headwinds that we are running into, and some of those trends have been affecting us. As a result of all of that—we have reported on this in regular annual reports and accounts, as you will be aware, Chair—we have been taking lots of action. This year alone we are targeted to take £1.7 billion of savings out of fraud and error. But that is against headwinds, and that has required us to take even further action, as you have seen through the announcements in the Budget on 30 October. The positive news, to answer your question, Chair, is that we will be seeing, on the current forecasts, fraud and error falling back down below pre-pandemic levels over the current forecasting period.

The Public Accounts Committee has just published their report on this, and it differs quite considerably on the response that you have given about the prevalence of fraud in society, which I think you hinted at there. How does DWP respond to an increased prevalence of fraud in society compared to other countries, and indeed in the private sector?

We set this out in a lot of detail in the annual report and accounts. If you turn to page 97 of the annual report and accounts, there is a lot of detail about how we have worked through this.

How does it compare, for example, with the fact that fraud is decreasing in banks and building societies? Neil Couling The overall level of fraud in the reporting period in society as a whole was estimated to be up 11% year on year.

In the DWP’s report?

No, this is fraud in society more generally. Fraud in benefits was flat in that period, so we did pretty well, considering that the drive was up. If I might quote the NAO, the latest view from the NAO is that, “Social attitudes in the UK on fraud indicate the difficult context that government departments are operating in to reduce fraud and error.” Those are the NAO’s words, not mine. I think the attitude that the PAC originally expressed on our arguments about propensity has taken some shift as the PAC have seen the data from the banks and the insurance industry in terms of shoplifting. A lot that the PAC asked for, we set out in the annual report and accounts. As I say, fraud is up 11% year on year for the last two years in society generally; in social security benefits, it has been flat across that period.

If you look at page 99 of the annual report and accounts, it shows fraud offences reported by Cifas over the period looking back since 2013-14, and you will see the general trend upwards. The point we are making is that we are operating against those headwinds. We do a lot of work to measure the effectiveness of our measures, and we know the effectiveness and we have our target. But, at the same time, we are seeing levels of fraud in the benefits system that we sample on the upward trend that we discussed.

Are you saying—I am certainly not saying—that the UK has a more fraudulent society than other OECD countries, which have a much lower level of fraud?

We measure fraud to an extent that some other nations do not, so it is hard to make a factual statement about that. Our contacts in Europe would say that everybody is facing this rising fraud trend. But what we are saying a bit back to politicians collectively is that this looks like a societal challenge. If the banks were here, and the insurance companies that I meet regularly about these issues, they would say they are really worried in their sectors about what is going on there too.

They have already brought their levels down to pre-pandemic levels—I have figures here. Going forward, you are saying that the NAO—

Cifas say that human beings—citizens—were 8% likely to commit a fraud. So it is an 8% fraud rate in the country. That leapt in the year in question—the last year they measured—to 12%. You might find a sector that can say, “Yes, we have had some success here,” but the general trend in society—and the University of Portsmouth has tracked this across a whole series of interactions between citizens and different institutions—is up everywhere across a period from 2011. It is up the most in the benefits system.

We report on the Cifas data, policing data and British social attitudes as well. We have brought all of this together into analysis, responding to the wishes of the predecessor Committee and the PAC to be more transparent about this in the annual report and accounts. We have a number of pages setting out the basis for this. The point I want to get across is that this is not where we want to be, which is why we are taking all this action. I would love to talk more about the action that we are taking to get this down. As I say, the OBR forecast is now that fraud and error will come down, despite making assumptions of a 5% year-on-year increase in the underlying level of fraud and error in the economy. Despite that, we will see fraud and error coming down as a result of the really tough action that we are taking as a Department.

Going forward, you mentioned the NAO. Are you supporting the NAO recommendations on setting targets for individual benefits and targets for longer-term horizons?

Yes. We have said in the past that the reason we have not been able to do that is that we saw this uncertainty about what was going on with underlying fraud and error in the system. We wanted to set a target that we had confidence we were setting against a stable baseline. We will see the next set of fraud statistics this coming May, and in the light of that I am hoping that we will be able to go further on the targets that we set and the longevity. Up until now, we have been confident about setting targets for one year at a time. We set a target for the year before last of £1.3 billion, which as the NAO set out we overachieved—we achieved £1.35 billion. In the current year, we have set a target of £1.7 billion, so we are going further. I am confident about our achievement of that, but we will report back on that at the next annual report and accounts, in the summer.

Thank you. As I said, we have the Second Reading of the Bill on Monday. The feature that grabbed headlines recently was the new powers that will be part of that Bill to take away someone’s driving licence in an attempt to reduce fraud and error. What is the basis behind that? Can I check whether the Caldicott guardian and Caldicott principles were considered when proposing this?

Yes, I can give you that assurance. Basically, this is about creating incentives that encourage people to pay what they are due to pay. We have looked at this in other contexts before. We have the ability to do that in child maintenance, for example. We do not end up suspending people’s driving licences very often, because the threat of that encourages people in those cases—parents who should be paying, who have the money to pay and who are refusing to pay—to come forward and pay, because they do not want to lose their licence and the opportunities that come with that. It is just another addition to our armour. Basically, this is about the people who owe money, who have committed fraud and who we know can pay but are refusing to pay. Maybe that is because we cannot use other routes in, and this gives us another tool to enable us to recover money due to the taxpayer.

How will you ensure that people you decide to take down that route are real fraudsters? What protections will you have against any inadvertent consequences of a decision to remove somebody’s driving licence?

The Bill sets out quite a number of safeguards—in fact, across all of the powers that we have. Neil, do you want to come in with some detail?

It might help if I set out that these are people who have accepted that there has been fraud. They accept that they have a debt to pay back to the taxpayer, and they are not paying it back. The Bill provides for the various powers you mentioned, such as driving licences or being able to go to somebody’s bank account, which HMRC can do now for tax debts where people are not paying their tax debts. We give the opportunity for people to pay this money back. It is not like we go straight to these powers. It is almost stepping through, and these are conversations. I might be told, “Well, Mr Couling, you owe us this money. You have the ability to pay it back. We could take this money direct from your bank account. Would you like to pay us?” The whole process—this is the point of the powers—is designed to encourage people to pay what they owe. It is not that we say, “You are a fraudster. Right, we are going straight to your bank account.” It does not work in that way.

I will hand over to Damien Egan, who has recently visited a jobcentre.

I have been twice to my local jobcentre in the last few weeks. The first time was a general visit, but I went back a second time because the work coaches were keen for me to come in. They were talking about fraud—I was speaking to women who had been working at the jobcentre, one for 45 years and one for 41 years—and saying that they had never seen it so bad. They said, “We used to be pretty tight on this”. Among the things they talked about, which I am sure you will be aware of, was the need for better working across the Home Office to track when people move, and with airlines. They talked about working better with councils to make sure they are checking identities of people and where they live. They also talked about health claims, and I was surprised to hear that people were getting money for health benefits, even when it might just say, “No can work”. Then it would take months and months and months before work capability kicked in. They said that there is a repeat pattern, with people being found fit for work and then coming back into the system with something else, but it was not being checked. Another one was self-employed people and the expenses they can get. One of the work coaches claimed to me that people can up their benefits by up to £10,000 a year from various expenses and that the system is not checking it. So it is too easy for people to do that. I said to these women, “You must see prosecutions. Are there more prosecutions, more investigations?” They said that, as fraud has been going up, the number of investigations and prosecutions has been going down. So it has created this perfect storm, and criminal gangs are exploiting the system as well. I would like to understand your thoughts on that. Another point is whether you, at your level, get the opportunity to go into our jobcentres and talk to work coaches. I am sure that people in all our jobcentres will have those stories and practical ways to help.

I am in jobcentres most weeks. Last Thursday, it was the opportunity of Canning Town to have the permanent secretary, which hopefully they enjoyed but it was great to see.

It must be a blessing.

A blessing. A number of things come out of that. As you say, Mr Egan, one is the passion that our people have for delivering a great service to customers and for getting people into work. The other is absolutely to make sure that taxpayers’ money is effectively spent. They are part of the frontline in helping us to know what is going on and where. Often, it is the relationship between the work coach and the customer that enables us to identify something that is not right. They then have the opportunity to escalate that to our enhanced review team, who are able to take action. Often the frontline folk do not see the action that is taken, because it is taken in the background, and brought together with other measures—Neil might want to say more about how we are working with other agencies to do that. However, they are an important part of our frontline protection, as well as making sure that we provide the support to get people into work. Alongside all of this—this is enshrined in the Bill as well—is the Public Sector Fraud Authority has been set up on a statutory basis and given more powers. That has an ability to share data across the different agencies in different parts of the public sector. Neil, do you want to say more about what we are doing?

I am conscious of time, because we are still on the first part.

Very briefly, on the Home Office point, yes, data is the key to tackling fraud. I do not think it is AI; it is access to data. That is why the Bill asks for more powers to get data. We are already working with the Home Office on using their border records to check whether people are coming in and out of the country and so forth in breach of their rules around benefits. On the self-employed, if HMRC were here they would tell you how difficult it is to administer self-employed tax affairs too. The answer there is Making Tax Digital in HMRC where they will gather a lot more data and we will get access to that data, subject to making agreements with them that will help us tackle those sorts of issues. It is the same thing with councils; it is about data exchanges. On prosecutions, I would just make the point that the fraud is such a big volume that you cannot prosecute your way out of this problem. We are reserving our prosecutions for the most egregious, big, organised cases. For individualised frauds, we apply a series of administrative penalties, rather than go to the courts, because the courts themselves are very busy with their own backlogs of prosecutions that they are trying to work through. There is not a prosecutions route to solving this problem. In the big frauds, like the big identity fraud case where it was £54 million, people will get jail sentences and the like.

The final point from me—it does not require a response from the panel—is on the NAO report. The crime survey for England and Wales estimated that there was a reduction in fraud incidents of 10% between 2023 and 2024. The police recorded a 7% increase in fraud in the same period. This trend may represent increased awareness of fraud, rather than an increase in fraud incidents. I think we need to be very careful before we make statements about this as a societal trend. It is a very serious accusation to put on the population that we are becoming increasingly fraudulent.

I think that is what the evidence shows. That is the difficulty.

We have evidence here, but let’s leave it now. We will have to agree to disagree. We will have the discussion on this as politicians in the Chamber on Monday.

Can I suggest that, in our next annual report and accounts, we pick up on that latest set of statistics as well? I want our annual report and accounts to be open and to reflect everything. We should draw on that set of statistics as well and put it all in a complete picture, because that is all we want to do: we want to be open and transparent with the Committee.

This question is to Neil particularly. Last January, you told us that DWP no longer suspended benefit payments when the claimant has co-operated with the fraud review process, but we understand that the enhanced review team might still suspend payments. Can you explain what safeguards you have in place to ensure that vulnerable claimants do not have their benefits suspended?

Our general policy now is not to suspend without contact with the claimant. So we assess their vulnerability and why they might not be co-operating. Some people do not co-operate because of their vulnerabilities, and we know that. There will be situations where we have a suspicion and it is not possible to contact the claimant—they are abroad, for example, and they are avoiding contact with us. In those sorts of cases, we would suspend the case and invite them to contact us about that issue. But, in general, just on first failure to engage with us, we do not now suspend claims.

How do you know that they are abroad, as opposed to a vulnerable claimant who is not able to engage?

We might have other intelligence, which I do not want to go into in open session. We receive information from various places in the course of investigations.

My question is about AI. Other than humans making the final decision, what safeguards do you have against the Department’s AI tools leading to biased decision making?

AI is an umbrella term, isn’t it? In this case we have only one machine-learning system model in live running at the moment, and that is for universal credit advances. We are working on other machine-learning tools in the background on other areas of loss, such as undeclared living together, self-employment and capital. The one area where we are using this in live running is universal credit advances so we can identify risky transactions before they get paid. The point about the way we use it is that this is a tool to guide our humans, to guide our colleagues, to guide people to work to identify the cases that need further investigation. We would never do anything to switch off a benefit or not make a payment off the back of just a machine alone. The machine is there to guide people and to guide the way that we work. We make sure that everything we do is lawful, proportionate and ethical, and our use of data and technology follows all of those processes. We have safeguards in place, but the most important safeguard, as I say, is that we do not use machine learning to make any decisions. It is a tool that guides our people to focus in on the cases that have the most risk.

If it influences a decision, is that not helping to make a decision ultimately?

It is not influencing a decision; it is helping you identify the cases to look at. We get the model to put in false positives as well, so that the agent does not think that, just because this is being flagged, there must be an issue. We put false positives through, so that the agent is always alert. If you think about the sheer number of cases that we look at all the time, it is a way of focusing our efforts to basically tease out the ones that are more likely to be of interest and need further investigation.

I have one follow-up on that. Are you able to explain the specific risks in publishing any metrics on delays or bias caused by AI tools that you think outweigh the public interest in transparency?

That is such a good point. We have tried to be more transparent in the past. In the annual report and accounts, we have set out a bit more detail about our fairness tests. We conduct robust fairness tests on the way that our machine-learning models work, to give us assurance. Obviously, what you do not want to do is publish something that gives away the nature of the controls, which then allows people to get around them to use that. One of the things that we are doing—Neil is leading on it and might want to say a bit more—is trying to work out how we can do these fairness tests in a way that is robust and independent, but that enables us to write them up without being redacted. That can give more transparency, so that we can put more in our annual report and accounts and publish more generally.

I have read all of the analyses, and I think it is possible to write the analyses without putting in the information that would aid fraudsters and still give Parliament reassurance. We agree with you that we do not want the tools to create unfairness. In fact, redactions are working against being able to demonstrate that to you, because they use words like “bias”, but we do not mean bias as in prejudice; we mean bias in statistical analysis, which basically means “difference”—if you have not done any statistical analysis, although you may have done. In the media that looks like, “They have found bias. That is a bad thing.” Bias is what you would expect; it is bias to finding fraud. But that has all been redacted before the thing is published. What we are going to do is set some standards independent of the teams running this. Then we are going to get our analytical teams—teams not running the system—to oversee the analyses. We are going to produce analyses that can be published. We are going to reference all of that in next year’s annual report and accounts, and publish the actual analyses themselves, so that Parliament can see for itself that there is nothing to worry about here. There may be some things to worry about, because we run these analyses, and the machines learn and they develop, and the fraudsters develop as well, so the machines learn in response to some of that. We will keep updating those so you can see, on a continuing basis, whether we have found something that we need to address, and we will be open about that, or whether we are still confident that the tools are not creating unfair outcomes for people.

Moving on to a slightly different topic, the Department calculates a saving of £15.71 for every £1 spent on investigating alerts about carer’s allowance overpayments. Why have you only allocated enough people to investigate half of those alerts?

It was part of a business case that we made to the Treasury to get additional funding. That was the nature of the funding that we got, and we prioritised things in that way. The good news is that, in the light of the NAO report and other reviews, the Government has provided additional funding. Over the course of the next financial year, we will work our way through the entire stock of VEP alerts in carer’s allowance, because we want to get through that. The key thing to bear in mind, though—and this came out in the NAO report—is that it is not like the real-time data we get from HMRC on universal credit, where you can automatically work out someone’s entitlement to universal credit based on their earnings data from HMRC. In the case of carer’s allowance, it is a much more complex benefit. It is an old benefit; it is a complex benefit based on legacy IT. Crucially, in terms of what you can do when you look at the earnings limit, you are allowed, as a claimant, to net off relevant expenses—for example, the costs of respite care, costs associated with pension contributions or costs associated with workplace costs. Carers welcome those deductions, and they are important, but what that does mean is you cannot just take the VEP alert that says that someone has earned more than the current limit of £151 a week, and say, “Well, they are not therefore entitled,” because they could well have relevant deductions. What we found, having gone through the VEP alerts, is they do take a lot of time to go through. Ultimately—I think this statistic is in the NAO report—only about 25% of those VEP alerts lead to us identifying an overpayment. There is a huge amount of human work that needs to go into this, and one of the things we need to look at is, are there ways of doing more automation that enables us to do more of these. In the meantime, what we are doing is bringing in more people—we have the funding to do that—so we will get through the entire stock of VEP alerts. Even going through the VEP alerts that we have done, as the NAO report set out, we have reduced the number of large overpayments that we have identified, because we got to overpayments earlier in the process, before claimants have run up larger balances. It has made a difference, but the key point I want to get across is that it is hard manual work, and a lot of work needs to be done around the VEP alert. They are not the answer in themselves, but they are part of the answer.

On the previous topic, we spoke about the use of machine learning to identify which cases should be investigated, but you are speaking now about how much manual effort it is. I assume that going through these is simply a manual task, but how does the Department decide which alerts from that batch to investigate?

It is based on our understanding of those payments that are likely to be the highest overpayments. What we want to try to do is get in early to avoid people risking significant overpayments. What we try to do is prioritise those where the overpayment is higher, so that we can get in and stop that early. As I say, the NAO report suggests that, as a result, we are successful in reducing the number of large overpayments that we end up identifying later down the track. The crucial thing is you cannot do machine learning without the data, and the data is data that we do not have. We do not have data in terms of respite care costs, and quite understandably. Why would we know? We have to ask for that from the claimant. That is the issue. Where you have an entitlement that relates to data that DWP just will not have—and probably should not have—we need to ask for that from the claimant. With that, you bring in the more manual process—the need to go to the customer and ask for data, and to be able to address that and respond. That is the nature of that, but there are a number of other things we have done as well. We have been testing SMS alerts. Where we think we have an alert, we are able to text customers to encourage them to look at their own situation. Ultimately, the main message to customers is: “If something has changed in your situation, please let us know straight away.” There are ways of doing that online, as well as phoning us up. One other, final measure that has been announced by the Government in the Budget is that the earnings limit will be raised to be equivalent to 16 hours’ work at the national living wage, and it will be pegged to that. This is very important, because what you do not want is someone where nothing has really changed in their circumstances, but because of a pay rise—maybe they are on the national living wage and that has gone up—they have found themselves inadvertently earning more than the earnings limit, but they do not think that that is a trigger necessarily for them to contact us. Pegging this to 16 hours not only raises the limit immediately from £151 to £196, as of April, but gives confidence that it will keep up with the growth in the national living wage in future years. That is a major step in terms of making this an easier benefit for customers to administer themselves.

Thank you. I am going to hand over to Jo Baxter. If we could have more succinct responses, I would be very grateful. Thank you.

Turning to benefit underpayments, I think we were all quite shocked at the extent of underpayments identified by the NAO. Those underpayment rates were highest for those with disability or incapacity benefits. What is your understanding of why people do not report a worsening of their health conditions, and what are you doing to encourage them to do so?

That is a really important point. As you say, that is the reason why we see underpayments and why what we are calling unfulfilled eligibility is highest in DLA and PIP, in particular. What is going on—as you imply, Ms Baxter, in your question—is that people’s health circumstances have sadly deteriorated and they might now be eligible for a higher premium, maybe in PIP, or whatever, but they have not come forward and told us. We are trying to do a number of things. One is to make it easy for people to come forward and let us know of a change in circumstance related to a deterioration in health. For example, in PIP, we escalate those requests for reassessment up the queue so we get to them quickly. There are things we can do around that to make it easier for people to contact us, and for us to do those reassessments and prioritise that. One of the points I made when I gave evidence to the Public Accounts Committee in December—the Chair was there—was about one of the things I am really conscious of. I remember meeting a customer at a food bank in Wandsworth a couple of years ago who had been through an assessment, and the worry and concern that she felt in going through the process and the uncertainty about what would come out of it. Her GP had encouraged her to come forward for reassessment because her health condition had deteriorated, but she was really unsure whether to do that, because she was worried about losing the money that she currently had. So I do think that a real part of the process is about improving trust in the system. The PIP health assessment process is an intrusive process; it has to be, given the nature of the benefit. It is a complex, difficult and subjective one. So there is a lot of work that we are doing around reforming PIP in the context of a programme called the Health Transformation Programme. We have talked about that a little in predecessor Committees here and obviously also in the Public Accounts Committee. I will not go into detail on that, but one of the big things that we are trying here—which I think could be really important for trust—is identifying a case manager early on who will get in touch with the claimant as they go through the process and say, “Hello. I’m Peter from the Department for Work and Pensions. I’m going to be looking at your claim. Let me just explain a little about PIP and what it involves. This is the process. Crucially, this is the evidence that we will be asking you to provide. Just think through the right evidence to provide, so that we can give the right decision.” Then, at the end of the process when a decision is made—particularly if the decision is not what the customer was looking for—they can explain that decision and put it in the context of the evidence that was provided. They can also check whether there is anything missing. At the moment, I think you move from one bit of a process to another. You go to a health assessor. You then come back to DWP. There is no one owning the process from your point of view. That has the risk of undermining trust in the situation, and I am keen that we should address that. Managing your expectations, I should say that the Health Transformation Programme is a long journey. It will be a number of years before we are through this, but we are trying this out, and we can keep the Committee up to date on progress and how that is going.

That is a great set of questions. I will fire through those as quickly as I can. On the state pension correction exercise, we have basically finished that. We have been through over 800,000 records. We have ended up paying over £700 million over a three-year period. I praise the professionalism of the team, because this is real detective work that they have gone through, but they have got there, and they have got money to people. I am really pleased, and I apologise through this Committee to customers for these historic underpayments. It was vital that we restored confidence in the system, and one of the ways that we did that was by doing more work through our survey data on getting to grips with any other historic errors that there might have been. In doing so, we unearthed the HRP issue that you also raised in your question, Mr McNally. On that specifically, HMRC have been leading the way, because this relates to the national insurance record and linking that to child benefit claims prior to 2000—these are quite historic claims. HMRC have put details on their website—I think there have been almost 500,000 hits to their website. They have written over 300,000 letters to affected people. They are now seeing cases coming through the door—at quite a slow rate, I should say. Those are then addressed in terms of correcting the national insurance record. That then enables us to change the state pension entitlement and, if someone is already in receipt of state pension, to then pay any arrears. We have got through around 11,000 of those that have come through. Around 19,000 have been handed over to DWP, and we have got through around 11,000 of those, so we are making good progress on that. However, at the heart of your question is, how do we stop this happening again? A number of things are happening. As you say, one is the work that we are doing jointly with HMRC. We brought our internal audit teams together. Catherine might want to say a little more about the work coming out of that in a second. There are other aspects to this as well. The state pension itself—the old state pension—is hugely complex. The reforms that were made on the introduction of the new state pension in 2016 have simplified it and made it easier to operate. Then, crucially, we have also been moving state pension records on to a new, modern platform—the Get your State Pension platform—which initially was for new claims since 2016, but we are now starting to move some of the older claims over. Being on a modern platform enables us to have the facility to scan and analyse the caseload much more effectively to see if we can pick up cases. Up until now, the main way of picking up cases has been through the normal sampling we do on fraud and error each year, which is obviously a limited sample. However, on modern platforms, we will be able to do more of a scan. Catherine, do you want to say more about how we are working with HMRC?

Thank you. Yes, there are a couple of things to mention. We set up a joint oversight board directly in response to the PAC and NAO recommendations back in July 2023. That was across both Departments. As Peter has already explained, we commissioned some joint internal audit work across both Departments to look at controls and areas for improvement. One example is that, in April last year, there was the launch of a new service to enable people under state pension age to check their voluntary NI contributions without needing to contact DWP or HMRC, which gives a further opportunity for people to have confidence in the accuracy of the system. That oversight board is ongoing.

Yes. As we identify underpayments as we go through, the crucial thing—I think this comes out in the work of the NAO as well—is how you turn that into something that is part of the feedback loop that enables us to identify where the problems are, to put them right, to address them and to improve the controls going forward. We work with the NAO a lot in thinking about how we apply this feedback loop process to get data from underpayments, and indeed overpayments, and work out how we address controls and processes to improve things going forward. We are seeing that in quite a lot of our measures—not just the ones we are talking about, such as the state pension underpayment exercise, but even in things like the targeted case review that we are doing on universal credit. That is mainly there to identify overpayments but, as we do that, we also identify underpayments and what we learn from that. It is a continuous process of gathering data when we can, learning as we go along and improving the way we do our processes. At the heart of this—this is something for the Committee to think about in the context of policy change in the future—is thinking about the value of going for a more simplified benefits system, as we have seen with the new state pension or with universal credit. You reduce the risk of human error as part of the process, and you make it easier to automate processes and get money to people more quickly. With the new state pension and the Get your State Pension platform—with the two together—we can pay in an automatic way the vast majority of people who apply, with no need for human hands, because we can draw on data on national insurance records and we can get money into people’s bank accounts quickly. That speeds the process and makes it less likely to fall victim to human error. That is all part of this. I just want to give the Committee a real sense of the continuous improvement here, which is backed by reform of the policy at the start, improving the systems. Then, we are learning as we are going along, through continuous improvement and quality feedback.

Thank you. On that, perhaps you could let us know when you think you will have completed your final audit. How many outstanding cases are there to review?

On the state pension underpayment exercise?

Yes.

Very, very few. The ones that are left are just a few thousand, where we are waiting for information from the customer. I can write to you when that is finished or, if we are still waiting for the last few, the annual report and accounts will set out exactly where we are.

Thank you for that. We are going to move on. I am going to ask some questions around the ombudsman’s report. We had the ombudsman to the Committee last week. We were struck by the evidence that has been provided. First of all, the Department thought it should write to 1950s women to inform them about changes to the state pension age, but delayed doing so. The Department acknowledges that they failed, and there was a 20-month gap. However, now you think that writing would not have made any difference, so I am trying to understand what the change in position is and why.

As you say, the ombudsman found maladministration because of the delay in writing those letters between August 2005 and, I think, December 2007. I know it was a 28-month period. We have apologised for that, and that was maladministration, as you say. The Secretary of State obviously went through this in some detail on 17 December. There was also a Westminster Hall debate with the Pensions Minister a couple of weeks ago.

It is our first opportunity to speak with you, Sir Peter. So—

That is all good. I am just putting the context. What we found—this was a study that we talked about—was around the propensity of people, when they receive a letter they are not expecting, to remember opening it and to remember reading it. Around a quarter of people in that study remembered that.

What lessons have you learned from that? Just to rule out writing to—

No. I think there is much more to it than that. It is a much more sophisticated question. It is about a number of things. Obviously, one is to make the letters that you write clear. I have talked a lot to this Committee in the past about how you make DWP letters clear, so that people understand what they are reading and what they need to understand from it, and whether there is any action that they need to take. On carer’s allowance, for example, we are now crystal clear: “If you are a penny over the earning’s limit, you will not be entitled to the benefit. That is why you need to let us know.” We have made it really, really clear. So one of the things is clarity. The second is about making sure that you do not just drop letters in from nowhere and that people see the context and are ready for them. For me, that then links to where a letter strategy works alongside other methods of communication. For example, more recently, we have written letters to well over 12 million people who are on the state pension to let them know about the means-testing of the winter fuel payment. You might say, “Well, why are you writing those letters?” It is in the context of a much wider awareness exercise that we are doing. We are doing a marketing process, an advertising campaign called “Credit where credit’s due”. My point is that alerting people to the fact that a letter will come, and ensuring that people, when they get the letter, are aware of the wider context, is a really important part of making that letter more effective as a means of communication.

You are not saying, then, that writing would not have made any difference? You are just talking about the type of writing and any information on the envelope that people might have received—things like, “Please open. This will affect your state pension. This is a letter about your state pension.” You are acknowledging that that would be a more appropriate response. You have adapted how you are going to contact people, rather than saying that it would not make any difference at all?

I am not seeking to comment on the specific case, because the Secretary of State has gone through that in some detail. Obviously, what the Secretary of State was talking about was the fact that there was already quite wide awareness of the change among that group of their state pension age. I should say that we have started work preparing for an action plan together with the ombudsman in the light of this. One of the things I would be keen to work with them on is how you set the context so that communications are received by customers going forward.

That moves me on to my second question. That is very important, and I am pleased that you will be working with the ombudsman on that. We heard from them last week, as I mentioned, and it would be helpful to hear more detail from the Department about its assessment of different compensation schemes and their feasibility. Although the ombudsman came up with a proposal, they were quite clear that it was up to the Government, in association with the Department, to look at options around that and their feasibility. What options for other compensation schemes did the Department consider? Did you consider them too difficult? In relation to that, obviously six cases out of the 600 were looked at in the ombudsman’s decision. If they apply for compensation, what will you be considering in relation to compensation for those individuals?

Those six were identified by the ombudsman as being representative of the wider group. We have no plans to pay compensation to those six, alongside the decisions that were made by the Government not to pay compensation to the wider cohort. Obviously, a whole series of options for a compensation scheme have been floated and looked at. As you say, there was the one floated by the ombudsman of a flat rate of between £1,000 and just under £3,000, reflecting level 4 compensation by the ombudsman’s control framework. There was an approach suggested by this Committee’s predecessor of a flexible payment set according to the age of the customer. There have been other suggestions about writing—

What did the Department think? Did you get to consider any compensation schemes?

The problem with the first is that it is flat rate, and you end up compensating people who would have known, because most people knew about changes in their circumstances. The problem with the second is that it has the risk of reflecting the impact of the policy, but this was not about the policy; this was about people’s knowledge of whether the system was going to change and what their opportunity was to make different decisions. So it does not actually meet the objective identified by the ombudsman. The problem with self-assessment made by the customer is that it is obviously relying on people looking back over 20 years, and the Department have no way of verifying that. So there seemed to be difficulties with all of those different routes. That is why the Government, in the context of, “Yes, it was maladministration,” disagreed in terms of injustice, on the basis of the effectiveness of letters and the fact that most people knew about the change to their situation. Then there was a whole set of other issues raised by the Government at the time in terms of fairness and the ability to use taxpayers’ money effectively, which all led to the conclusions that the Secretary of State set out on 17 December.

For fairness, I think many women would disagree that they did know, but I am going to hand over on this to John Milne.

Thank you, Chair. Following up on some of those points, as you know the suggestion that the letters would not have worked anyway was a major part of the Secretary of State’s reasoning in not offering compensation. It is a remarkable claim, because letters, as a form of communication, were used—and are still used—by every area of Government all the time. Is there any special reason to think they would be less effective in pensions? Has that reason ever been given in any other example to explain or to justify not paying compensation or other action?

I think this is in the context of the number of people who knew that their state pension was going up anyway at that time. That study was done of the proportion who could remember receiving and reading a letter that they had not expected—that is the crucial point, as I said in my answer to the Chair. All of that adds to the question of whether, if we had written those letters 28 months earlier, would it have made a significant enough difference for this to count as injustice and to take you into the context of talking about remedy. In that context, the Government’s view was that it did not, as the Secretary of State set out. For me, the question is, going forward with this, what do we do and how? It is crucial for us that we alert customers to changes that they need to know about in the right way. That is the point of the action plan that we want to enter into with the ombudsman. As I say, for me, the question is about addressing this point about letters that people are not expecting. When you contact customers, how do you make sure that they are aware that this is from the Government, and this is legitimate? We are seeing this in a different context, in answer to Mr McNally’s question about the HRP process, where HMRC are asking customers to come forward with information about their child benefit records from before 2000, because that might have an impact on their national insurance. The rate of people coming forward has been very low compared to what we projected. The work that we have done has suggested that a lot of people get a message from HMRC, and they do not believe it is from HMRC. So, for me, the question is, how do we make sure our communication lands?

If the case is that the letter would not have worked anyway but a better letter would have done, then is the Department not still responsible, because the onus was on the Department to do more effective communication, which was perfectly possible?

I think the ombudsman talks about the very effective communication that went on through a lot of this process, up until 2004, with letters and other things that were sent out. The focus of the ombudsman’s inquiry is on that 28-month delay, and that is the question that we are looking at in this context. In terms of what we do going forward, absolutely, we need to make sure our letters are more effective, but that is not the only channel of communication. Increasingly, if you want to know about your state pension age, you should not be relying on letters. You should go on the Check your State Pension website, where you can identify in a personalised way what your own state pension age is, where you are in terms of your national insurance records and where you need to be. That is the way forward—enabling online channels that enable people to self-serve and to get the information that they need.

With regard to the various forms of compensation that you were talking about, the choice of the scheme had quite a bearing on whether or not compensation would be paid at all. Obviously, some had higher cost implications than others. Did you actively engage with the Secretary of State over the various options, to perhaps look for one that was more practical from a financial point of view? The one that was eventually put forward was, as you said, blanket compensation for everyone, which was high cost.

Did we work with the Secretary of State, or did we work with the ombudsman, sorry?

Yes, did you actively discuss with the Secretary of State, “Okay, these are the various ways we could do it. Maybe pick this one,” or, “Would you accept this one, because it has a £2 billion cost, rather than this one, because it has a £10 billion cost?”?

The basic thing that I should say is that I would not go into detail with this Committee on the nature of the advice that we give to Ministers, but I assure you that we gave full advice on the full range of options in this context. That would have included many of the things that you said, but I do not want to go into a lot of detail about that, because it is not my practice to do that in this public forum.

It just seems strange that we ended up with one being recommended that was never going to get approved.

That is why I wondered whether you meant that it was the ombudsman that recommended a—

Yes, sorry—that the discussions would have taken place.

In terms of the discussions with the ombudsman—I thought you might be asking that question—I meet the ombudsman every six months or so. In the run-up to the publication of his report—he published the report just before he retired at the end of March, so it was still a “him”, Sir Rob Behrens—we did not use our meetings to talk about this. There was a lot of formality going on, because, as you may recall, the ombudsman himself had been judicially reviewed by the WASPI campaign. At that stage, he was looking to get his report out, I think. However, there was quite a lot of correspondence as we shared work together. I reported back on some of that correspondence when I was at the Committee on 22 May last year, when I was asked that question. There was quite a lot of correspondence, and quite a lot of conversation, over that format. We did not particularly talk about that. When Rob and I talked, we tended to talk about complaints and other more business-as-usual matters.

Thank you so much, John. I will suspend the hearing now for five minutes. Sitting suspended. On resuming—

We are resuming our hearing with DWP officials, and I will hand over to Jo Baxter.

Thank you. In December, you wrote to the Public Accounts Committee about pension credit processing, saying that you “expect to see throughput improve further through the next quarter”. Can you tell us how you are speeding up the process and what your target waiting time is for new claims to be processed?

Yes. In the light of the Chancellor’s announcement on 29 July linking the means-testing of the winter fuel payment to the entitlement to pension credit, we saw a big surge in pension credit claims. We report regularly. The next set of statistics is on 27 February, but the latest set of statistics showed that in the 16 weeks after 29 July, we had a 145% increase in claims to pension credit. That is the context. What have we done about it? We have obviously wanted to build capacity in pension credit processing. I have to say that this is not an immediate thing. We started with 320 people on processing. We brought an additional 500 people in, and we had those people in place as of the end of December. We are recruiting a further 60 over the course of January as well. But that does not have an immediate impact, because pension credit is a complex benefit to administer. We have to train folk up. They will be great people, but they will need to be trained up. In order to train people up, you often have to take some of the experts off the processing to do the training. So it has taken a bit of time to get through the number of claims that have come in. Over that 16-week period, we have seen a 51% increase in throughput of claims, so we have not quite kept up with the growth in the claims coming in. What we set out to do is process those claims that came in ahead of the qualifying date in September. We said that we want to get those processed by Christmastime, and we have been able to do that by and large—there are just a few thousand left that we were unable to do because we are still waiting for information from the customer. We are now working our way effectively through those cases that came in in the run-up to 21 December, which was the cut-off date. You can backdate entitlement to pension credit three months, so you would still be entitled to the winter fuel payment. Our focus has been on trying to make sure that everyone who is entitled to the winter fuel payment gets that money in the winter period and has the assurance to be able to put their heating on and respond as a result. We are now making good progress working our way through the claims that came in up until 21 December. Claim numbers have now dropped considerably since 21 December, so we are rapidly catching up. We will publish the latest data, as I say, on 27 February. I think that will show the head of work coming right down over that period. In terms of time to process, our target is 50 working days. To give you an idea, last year we did that 77.7% of the time. As to where we are now, you can only measure that on a cohort basis, just because of the risk. In any one week, what you will see is clearance times affected by what might be a load of late claims that are coming through and that are processed more rapidly or more slowly. It did creep up a fair bit into the 60 and 70 days through the back end of last year, but it is coming down now. I suspect that it will have come right down by the time we publish statistics on 27 February. At the heart of this is making sure that people get paid winter fuel payment in the winter to enable them to have the confidence to put their heating on and to feel able to be warm over the winter.

The Committee recently heard about the complexity of pension credit claims preventing some people from applying. What is the Department doing to try to simplify the claims process—in particular through automation, for example—to try to help those who are entitled to take up assistance?

There are a number of steps to that question. The first is, how do we make it easy for people to work with the form? It is well documented that the form has over 200 questions, although if you look through the form around 50 of them relate to having a child on the claim, which would be relatively rare. Another 50 of them relate to having a second child on the claim. You can quickly knock through, and you do not have to answer anything like that number of questions in a typical claim. What we have been doing is encouraging people to use the online service. Indeed, the take-up of the online service, and through the telephony channel as well, is about 90%. The online channel only takes you to answer the questions that are relevant to you. If you do not have any children to record on the claim or you do not have a disability, you miss out whole sections of the questions, and it takes you through in a more streamlined way. By and large, the surveys we do do not suggest that the difficulty of the claim itself and the form is a big reason for people not claiming, but we know we can do more on that. You are talking then about what automation can do to make the process easier. The problem with pension credit is that it is a benefit that relies on quite a lot of information. With the state pension, we know you are entitled to the state pension if we have your national insurance record—we know what that is through HMRC—and your age and your residency, by and large. We know all that information and we can automatically pay you your state pension. With pension credit, we need to know a lot more about you, including whether you have savings, for example, or health conditions or disabilities, or children to record, which we just will not know, so we have to ask the claimant for that. One of the things that we are doing right now is looking at how we can use data that we have on people’s housing benefit claims to enable us to identify people who might also be entitled to pension credit. The first point of that is we have written to 120,000 people of pension age who are on housing benefit but not receiving pension credit, and where, on the basis of the information we have had from the local authority, we think they might be entitled to pension credit. We have written to them to encourage them to claim. We are then putting that into business as usual. Now, every time we get an upload from local authorities, month by month, we are able to contact people and say, “We think that you might be entitled to pension credit. Please claim.” We will go further than that. It has been announced that we are looking at how we can bring together pension credit and housing benefit for pensioners into a single entity, so that when you apply for one you can automatically be assessed for the other as well. That will take time to develop. There is a lot of technology that has to go behind that, as well as data feeds and suchlike, but we are going to be starting work on a discovery on that over the course of the next year or so. We can report back on progress.

What are the timescales around that, Sir Peter?

We have some funding to do a little bit of work in 2025-26, with a view to then seeing where we are. I think that, by 2026, we will have a view about where we have got to on that.

That is a long lead-in time. Okay, thank you.

More broadly, on final point, I think I have heard some of your witnesses in the past asking why we do not just automatically pay. But at the heart of that is the fact that we just do not know the information that you would need to be able to populate someone’s claim automatically.

Lovely. Thank you very much.

I have a couple of questions on staffing and resourcing, and then I will go on to your major programmes. The first is around consultancy services. Last year, I think you spent just shy of £20 million on external consultancy services, which was a significant increase on the previous year. I wondered what your take was on whether the Department has the right skills internally to deliver your various programmes.

I will bring Catherine in in one second for a bit more detail. The point I would make is that it is a very small proportion of our total staffing costs of £3.9 billion. We bring in consultants and temporary staff to fill specialist skills gaps that we cannot fill or where there is an immediate need to build capacity. We are always looking to build our capacity in-house, to grow our own skilled workforce and to fill temporary staff roles and consultancy staff roles with permanent staff whenever we can. Catherine has been leading a lot of work on that. Do you want to say more?

Thank you. I think that that spend figure on consultancy includes both the core Department and our arm’s length bodies. For the core Department, the spend did increase in 2023-24, but from quite a low base. In total, I think it is 0.1% of our total expenditure. We will continue to see an increase in this area—the expenditure we are incurring is on behalf of four Government Departments as part of the synergy programme to implement our new ERP systems. We are incurring it on behalf of the Home Office, DEFRA and the Ministry of Justice, but all those costs come through DWP’s annual report and accounts. That is the biggest reason and the explanation for the increase in the core spend.

My question was not necessarily a critique; it was just to understand the model that you are pursuing—whether you want to have the internal expertise within the Department, or whether you are using a co-source arrangement or experts outside, which may be the right course of action if you want to do that.

There are times when bringing in consultancy support is incredibly valuable—for example, when we have one-off complex projects where we would not normally expect to have a permanent resource. We will also bring in temporary resource—contingent labour—at times when we have skills shortages in particular areas. Ninety per cent of our contingent labour resource is in digital skills. Last week, in the “State of Digital Government” review, the Government set out some of the challenges we face in digital skills. The Department does have a good track record of recruiting people into our digital services, and we did include some information on this in our annual report and accounts last year. Our digital recruitment hires increased by 26% last year, and we have built some fantastic partnerships with universities, with the British Computer Society and with Women in Data. It is a difficult environment in which to recruit digital skills into Government, but we are doing some excellent work to make it attractive to join DWP.

In terms of fixed-term contracts, I note that the figure in 2021 was 22%—that is the figure I have here. You have gone right down to single-figure percentages now for your fixed-term contracts and those on permanent contracts.

Yes.

Does that still give the Department sufficient agility to adapt to the needs of projects or various initiatives?

There was a significant increase in the use of the fixed-term contracts during covid, when we needed to bring in short-term resource very quickly. The Department then converted quite a lot of those fixed-term contracts into permanent resources, and that is part of the explanation for the shift. We will always review our model as to whether we bring in people permanently or on shorter-term contracts, depending on what we think the needs will be at any one time. It is an important part of the blend of resources that we choose to bring into the Department.

We doubled the number of work coaches during the pandemic, and many of those folk were brought in on fixed-term contracts. The other important dimension is that, since I have been permanent secretary, we have insourced quite a lot of capability that was previously outsourced, to give us more control. On digital, we outsourced so much of the delivery of our digital services to suppliers, but we brought that in-house so that we have more control. The same is true on estates. Up until 2018, we had a PFI contract, which meant that we had no real oversight on the state of our assets. Since 2018, we have brought that in-house. We built our own in-house estates team, and it has given us the opportunity to regularly assess the condition of our estate and to be on top of that and lifecycle investment. It also enables us to think about estate that we want to divest of because it is of the wrong quality for what we need going forward. That is just an example of how we use insourcing.

Can I quickly bring in Jo Baxter? It is about the PCS dispute and any information about that.

It was just to ask what steps you have taken to resolve the dispute with the Public and Commercial Services Union.

Which particular dispute do you mean?

I understood there was a dispute with DWP in some areas.

I think that it is a dispute with G4S.

Yes.

Oh, sorry, it is the G4S dispute.

PCS is not in dispute with us.

Obviously, G4S provide services to DWP.

You are right, G4S provide guarding services to us, which is very important. That is a dispute that PCS have had with G4S, who are our contractor. We have wanted them to work together to find resolution. I think they have made good progress on that, but, fundamentally, it is a matter between PCS and G4S to resolve.

It will impact on the Department, though, if it is not, so I am just wondering if there is anything else the Department can do to try to facilitate a resolution.

You can imagine that there is work we are doing behind the scenes to encourage the two parties to get together and resolve their differences. It matters for us intensely, but we are not a party to the dispute. I hope you do not mind, but I do not want to go into the detail of that in public. That is for them to resolve.

Perhaps you would like to write to us on that. Back to Peter.

Turning to the major programmes, we have seen uncertainty about the expected costs and benefits of a number of your major programmes. Are you satisfied that they are going to be delivering the money for value that they should be?

Yes. They are all in a different position. universal credit is well in advance; we are in the final phase.

Weeks.

Final weeks. This Committee and the PAC have regularly reviewed progress on universal credit costs and benefits. We can get into more detail in terms of the assessment of the economic benefits if you like, but that is an area where we think that there have been very significant benefits from an economic point of view, and the administrative savings are huge coming out of that. That has overachieved in many ways. The other programmes are at different phases of development. You have the health transformation programme that I talked about before. They have made good progress, particularly in the year just gone, where they signed contracts for the new provision of the functional assessment service. That was a big moment for them. I can go into more detail on that if you like.

Some of the programmes I am interested in are the service modernisation programme, which is an 11-year programme, and the workplace transformation programme, which is a 10-year programme. To me, coming from the private sector, that seems a massive timeframe for those programmes, when you have FTSE 100 companies and large banks doing massive transformation programmes in probably half that time. I just wondered what your take was in terms of delivering the benefits of those programmes. Clearly, 10 and 11 years is a long time.

Yes, but you have to look at the scale of what we are doing and where we start from in terms of, in many cases, legacy benefits. In some cases, such as universal credit, the start of the programme involved legislation and policy design. Then, at the end of the process, you are moving many hundreds of thousands of customers across, often from one system to another. Universal credit would be an example of how long this process takes. It started in 2011, and we are due to finish in 2026, by which point we will have gone from six benefits into one. We will have changed the nature of the financial incentive through the system to give a financial incentive to work at every stage in the earnings stage. We will have ended up moving something like 8 million people from one set of benefits to another, in a way that avoids anyone falling between the cracks. The difference between us and many commercial entities—I will not speak for every commercial entity—is that we are the safety net. We are there for people. What I cannot do is rush something through, with the risk that someone misses out on benefits because we lose them in the process. For example, as part of the reform of the state pension at the moment, we are moving 12 million people from an old legacy system that was built in the 1980s into the Get your State Pension system that we talked about earlier in the hearing. I could just rush it; I could just, overnight, move everyone over, but I do not want to do that. I want to do this carefully, trying it step by step to make sure I do not make any mistakes.

Finally, another programme is the synergy programme. The public finances are in a very challenging state, and identifying those synergies and working with the other Departments to deliver more immediate reforms and changes should be a real priority. Could you elaborate further on that and when we will start to see the benefits?

Yes. For colleagues who do not know, that is a process where we are working jointly with three other big Government Departments—the Home Office, the Ministry of Justice and DEFRA. This is putting in place back-office services to run our payroll, our HR systems, our financial reporting systems and our procurement systems, and bringing them all together. There is a lot that goes into that. It is in part a technology programme. We went through the business case approval in August. We have just procured together a technology partner, also in August, and we are now in the process of trying to procure a provider of the shared services business support alongside that as well. As of this month, we have brought new leadership in to run the programme and to take us through to the next stage. There is a lot to be done, and it is complex. The other thing I was going to say is that, as well as being a technology programme, it is also a programme—picking up on your point about wider efficiencies—about trying to drive standardisation of processes. That is really important. How do we get more interoperability between Government Departments so that we have more flexibility and can drive out savings? I am the lead accounting officer for that, and, in a way, that is one of the things that I think is most important but most difficult. You are saying to people, “Report on HR in a standard way,” but they say, “No, no, we have been reporting this way for ever,” to which the reply is, “No, no, to get the benefits, you have to change the way you do it.” Catherine could talk about the finance side of things, which is equally complex. Do you want to say anything about standardisation of finance? Well, we probably do not have time. Anyway, what I would encourage the Committee to do is to hold me to account on synergy, among other things. It is not just about these milestones in programme delivery—we are on track on that at the moment; it is also around how you drive and get the real benefits of this from standardisation and changes in the way that we work, cutting through Whitehall silos, so that we get the benefits of interoperability across all four Departments. That is probably the point I would draw out.

Thank you. My questions now are to Mr Couling in relation to managed migration—you look delighted there, Sir Peter.

I can sit back and watch.

As you have just said, we are literally on the last few weeks in the managed migration and transfer of people from legacy benefits on to universal credit, focusing now on the most vulnerable group. What are you doing to ensure that those people on IB, ESA and other incapacity benefits are encouraged and supported to transfer to universal credit?

We have been at this for a little while now. We started in September calling people to claim universal credit through the migration notice. They have about three months then in which to make an application.

Is that by writing or other means?

It is by writing, because it is the only way in the legacy system that we have for contacting people. When they make contact with us and they make a universal credit claim, then they are on the new, modernised service. It might surprise the Committee, but we already have about 100,000—just a tad over.

Out of how many?

Out of 900,000 ESA people. We have got them on to universal credit. I looked last night, and there are 9,660 people still on income support—many of those have vulnerabilities—about 3,000 on jobseeker’s allowance and about 27,000 or 28,000 left on tax credits. Those are down from highs of 4.5 million on tax credits. When we started this process, there was a peak of about 1.5 million people on income support. You can see that the numbers have come down. As you have reiterated in my many appearances before this Committee, Chair, the importance of vulnerability. We have an enhanced support journey. If people do not respond to our migration notice and they are on ESA, we do not switch off their entitlement to employment and support allowance without attempting further contact. We send text messages, where we have phone numbers. We contact other parties—social services and others—who may be in contact with the claimant. We check our old records to see if we have any routes in. If none of that works, we then offer a visit, and we try to visit the claimant. We developed that with the stakeholder groups. They worked with us on all that, and they are very happy with that approach. We also try to learn from the experience. One of the things we were finding in some cases was that people were making the initial application, but they then did not have the confidence to follow through. You apply for universal credit, you then have to verify certain of your circumstances and then there is your first payment. We are looking now at how we support people in that initial assessment period to make sure that they do not drop out, having made a claim, terminated their ESA and then not gone through to make a claim to universal credit.

What is the attrition rate? Consider people on JSA as compared, for example, to IB, ESA and IS.

The attrition rates are basically zero if your concern was people who were not claiming. About 96% of people do claim, but you have a natural rate of termination of that—

How does that compare, then? In terms of the transferring group, how does that fall-out—that attrition—compare to normal? As you say, people will leave for various reasons.

That is the normal rate. We are basically getting people over on to universal credit, with the exception of tax credits, which we have spoken about before, I think, at previous hearings. For ESA, it is almost complete; I do not want to say it is absolute, but it is within a tolerable limit. Of course, we have the failsafe, or fall-back, in the service, which is that you still have a month after termination to make a claim to universal credit and you will qualify still for transitional protection should you make a claim. We really work to support people through this process. It does require the claimant to make applications and to come on to the service, so there is a need to support them in that. We are seeing a much higher rate of telephony claims than we would see in the normal caseload. Normally, telephony claims run at 2% to 3%. We are seeing 15% and 16% for ESA, but we would expect that. We are set up to handle that, because you have lower rates of digital capability and awareness.

All right. You mentioned transitional protections and so on. This was one of the questions I asked in November to the Secretary of State, the response to which we had last night. I have to say that there are lots of questions that I have on this. I will ask a couple, and then perhaps we will write to you for further information. There are lots of questions from that letter about how the most severely disabled people are going to be protected, although I appreciate what you have just said about what you have put in place. How many people are you expecting to transfer to UC who have severe disability premium?

We assume in our forecasts that everybody who was on ESA, subject to the normal turnover, makes it on to universal credit.

What number is that then?

About 900,000 ESA cases remained back in the summer of 2024.

How many of those 900,000 have so far asked? You have to apply, so how many have applied for transitional protections?

Nobody has to apply for transitional protection.

The letter said that it is not automatic and you do have to apply.

You have to apply for universal credit, but transitional protection is then calculated as part of your claim. You do not have to make a separate claim for transitional protection.

I will re-check the wording. Obviously, I have had only a short time between receiving the letter last night and being able to speak with you today. I was going to ask about the eligibility. People go on to your website and look at what transitional protection is, and the eligibility and so on. How do you establish eligibility?

Essentially, transitional protection works by looking at your previous total benefit income under the legacy scheme and comparing it to your entitlement under UC. If there is a difference, we top your UC up to that level.

How long does the process take, and what does it involve? People apply online or on the phone for transfer to universal credit. How long will their transitional protections take to be confirmed?

At the moment, we are paying in full within a month about 95% of people who claim for universal credit. If we cannot calculate their transitional protections, we make a part-payment to people, so they are not left without money. There is also a two-week linking payment from their employment and support allowance that is paid during the period in which you have claimed universal credit.

In terms of the value of that part-payment, it is the most severely disabled who have significant additional costs, so how much of that part-payment reflects—

I think about 51% or 55% of people are better off on universal credit who were on ESA. The typology of case that is not better off, as you said, Chair, is people who were formerly in receipt of severe disability premium. That can be worth, say, £100 a month of transitional protection to people. It varies by case type, so it is hard to say that there is a typical amount. It is a seriously important thing to get the transitional protection calculation right and done on time. As I say, in 95% of cases we are managing to do that. That is better than the new claims performance at the moment. The teams working on this are doing an exceptional job in pulling people across safely into the new service, which I would say is why you, as MPs, probably have not heard lots about this—it will probably come as a surprise to you that I have done 100,000 already or that 1 million tax credit cases have processed through the service.

You will remember that you told our predecessor Committee that the pension dashboard available point, which is when the public can access their dashboards, was “perhaps not so very far away”. How far away would you say it is now?

The Minister gave a statement in October setting out the latest stage. The history is that we put the programme into reset at the beginning of 2023 in order to review the progress of the programme, to bring in new leadership and to replan. The result of that was the announcements that the Minister then subsequently made to the House of Commons. Where we are now is that we have the final connection date set out—31 October 2026. With the revised delivery plan, we are starting the process of connections in the here and now, starting in earnest this coming April. This is all about building the wiring and the plumbing that enables the pension dashboard to work in practice. Between April this year and October next year, we will see that plumbing put in place so that all the schemes, by and large, will be connected up to the pension dashboard by that point. The question that we are all asking as consumers is when there will be the ability to use the infrastructure to have a pension dashboard that we can operate. What the Money and Pensions Service is doing is prioritising delivering its own MoneyHelper pension dashboard as soon as it can. We are not setting a date yet for readiness for that. I am sure the Money and Pensions Service will keep the Committee up to date with progress, and I would be happy to do so as well. The idea is that we have a service that is operated by the MoneyHelper system first, and subsequently we will allow commercial entities to set up commercial dashboards off the back of that.

Why have the Government decided to prioritise launching the MoneyHelper first, as opposed to connecting the commercial dashboards?

Because we want to make sure we have got it right. We are connecting all the pension systems up. I think we all want to get a service up and running as quickly as possible, and it was felt that the best way to do that would be to have the one run by the Money and Pensions Service up and running first. We can test whether it works, whether it is delivering what we want it to do and that the underlying infrastructure works. Then we can be ready to open it up more widely. The idea is to get a service up and running with the Money and Pensions Service as soon as we can.

It is the way we run projects in Government now. I have been on a one-person mission at times to get people to use test and learn. It was great to hear the Chancellor of the Duchy of Lancaster recently making a speech about reform and talking about test and learn at the core of it. The key learning from universal credit is that you go slow, slow, slow, and then you go faster at the end of the project. The pensions dashboard is in this process of learning, keeping it small, spotting errors and debugging, and then, when you have done that, you can expand.

You would not consider doing something like getting people accessing it by age—oldest first—as a way to, as you say—

You have a system, and you have a connection challenge and then you have a user challenge. I think you would probably do both. I do not want to pre-empt anything that the Money and Pensions Service wants to do, or the way it wants to do it, but my advice, if they asked me, would be to stage the take-on of users and the take-on of schemes. In that way, you find out the problems when they are small enough. I did not just start with universal credit at volume. I spent two years probably frustrating Ministers and others by going slowly, from their perspective, but it was all about learning and debugging, so that when I did go big, like we are now, it is going well. That is what I have commended to any projects working within the DWP and beyond, into Government. It is the way to do things.

Which brings me to a really important point. You might ask me a question about what we have learned from the process of the pension dashboard and going through reset. One of the things we have done through the reset is put a bit of oversight over the pension dashboard into the change portfolio board within DWP so that we can bring our own expertise into this, and that gives me independent scrutiny. One of the problems in the early days of the pension dashboard was that it was being delivered by an arm’s length body. We were holding the arm’s length body to account, but we probably did not have enough of an assurance that it had the skills and capability to be delivering. With this programme being overseen by the change portfolio board—which up until recently Neil chaired—we have the opportunity to bring DWP oversight, as well as the opportunity to bring DWP colleagues’ capability in, particularly digital. My previous director general for digital, when he stepped down from the Department, stepped in to lead the work within MaPS on the pension dashboard to give us a lot of comfort that that was being run effectively. You might want to get into learnings for the Department in terms of how we oversee projects delivered by arm’s length bodies, and that would be one of them.

I might, but we do not have time. Finally, to really have an impact, the dashboards will need to link to the money platforms that people already use. What tests will need to be met before you can allow commercial dashboards to connect?

It gets on to your earlier question. We want to know that it works in a managed way, which is why the Money and Pensions Service will be using their MoneyHelper service to operate. They will want to know that it is working for different schemes and different users in an effective way, and that the plumbing holds together. I think they will want to have comfort that it works and can be made to work before bringing others in and putting much more volume down the plumbing. You need to test that the plumbing is working effectively. It is complex, if you think about the number of schemes that we are connecting together. It is a novel process. I think it will be absolutely brilliant when we have got it to work, and it will help to link people to lost pension pots and give people much more comfort and ownership of their pension savings, but we need to get it right so that we can give confidence to customers when it finally is opened up.

That is a good point. It goes back to what I was saying in my answer to Ms Baxter earlier. This is at the heart of what we are trying to do—trying to improve the experience of customers. As I said earlier, the programme hit some major milestones last year with the signing of the new contracts for the functional health assessments. As we go into this year, we are seeing more work as we roll out new ways of working to different parts of the country. We have these two health transformation areas, where we have been trying new ways of delivering the service. I have talked about case management as one example of that, but there is also having the health assessor sitting alongside the case manager in the one building, so we are able to learn as we go along, and questions are addressed in the here and now. With the health transformation programme, as with everything else that we do in transformation, the user journey is incredibly important. We work with user communities—not just stakeholders but customers—to help us as we do this in a very small, controlled way. We try something. On case management, when is the right time for a case manager to get involved in a case? The earlier the case manager gets involved, the more expensive the service is to offer, but maybe that is just helping to create that sense of trust that customers wanted—to get that call early on as you make the application, as opposed to later on down the track. That is an example of different things that are being tried in different ways. As we do it, as we test, so we see what the customer reaction to that is and whether that is something worth pursuing and rolling out, or whether it is something that we will not want to take forward. Neil might want to say more.

The thing is that you have hypotheses—“I will construct the system like this”—but you then bring the user in, the customer, and you see what their understanding is and how they behave with it. They often do not behave in the way you hypothesised. This is what we found over and over again with universal credit. For example, I rejected a recommendation from the PAC, which is a big thing to do and gets Peter and I in hot water. I rejected it because the users had already said, “That’s not what we want. We won’t understand that.” It was not the PAC’s fault, and I am not critical of them; it was a well-intentioned recommendation. It is things like that where you have to get into the detail with people to see how they experience the service, and then you have to be open enough to adapt it. “Your first thoughts are probably wrong” is pretty much a rough rule of thumb that I have with many of these big transformation programmes. Again, that is why you take time, use small numbers, and test and learn. If I do anything after my 10 years running universal credit, it is to say to everybody, “Please test and learn.” It is the way to avoid big mistakes and harms to our citizens, which is not what we are about.

It is very soon. I am sorry it has not come now, but it is imminent—as soon as we have the approval to publish it. We will do that very shortly, and hopefully within days.

He said “days”.

Days.

I was going to say something civil service—in the spring or something, but that is never—

He really means days.

Okay. It may be a matter of weeks, rather than days.

I know. Yes, but certainly before Easter. I would hope that it would be much before that. I am sorry that it has not been published already. It is pretty much ready to go.

We all know about the increase in the number of people on health-related benefits, and that is projected to increase further. The House of Lords Economic Affairs Committee did a short study, and as part of that there is a UK household longitudinal survey. That says that although health benefits have gone up, there is not an increase in the number of people who are ill and sick in the general population. I would be interested to know what your thoughts are on that and on what is causing this drive.

I think there are a number of things going on there, and I read the study with interest. It is difficult to see whether there is a link or whether there isn’t a link. I think they are saying that they are not seeing the same increase in certain aspects of interface with the health system, but we are certainly seeing those numbers coming in through into PIP and ESA. We have seen a 58% increase in claims to PIP, and it is pretty static in the proportion of those who are assessed as being eligible for the benefit. We are seeing people coming through the door who are eligible for PIP and that support, so the connection to the health service is a difficult one, and it is something we need to keep looking at. What it does bring in is a question about whether we are delivering health and disability benefits in a way that has the right impact in terms of supporting those who most need it, but also encourages people out of economic inactivity and into work. How do we encourage people to stay in work when they develop a health condition? How do we encourage people as they navigate the benefits system not to talk about what they cannot do but to talk about what they can do? How does the benefits system to encourage that? That leads me to how we respond to the House of Lords report and other things that are going on. We have a Green Paper that the Government will be launching on health and disability this side of the end of March, so before the next OBR forecast, which is 26 March. At the end of March, we will see our Green Paper being launched. That will set out the Government’s proposals for how we could reform the system going forward. Alongside that, we had the launch of the Keep Britain Working review group, led by Sir Charlie Mayfield, last week, which is looking at how employers can work with us to help people through adjustments to stay in work when they develop health conditions. What we are really looking at here is how we support economic growth by reducing the number of people in our country who are economically inactive and bringing them closer to the labour market. Related to that is a lot of work we are doing with local areas to connect employment support provision with other support so that we work in a tailored way around people’s needs. All of that is intended to address the fact that we are seeing this continuing rise in people claiming health-related benefits and this persistently large number of people who are economically inactive, to a large extent because of a health condition, which has a detrimental impact on their lives and their prospects, as well as more broadly on economic growth.

Can I ask about the PIP assessments? My understanding is that, before covid, they were face to face but are now overwhelmingly virtual. I think that in October 2024 just 2% were done face to face. Is that having an impact?

It is something we keep under review. When we last did a study on this in about 2022, it suggested that there was no real difference. In order to restart health assessments as we came out of the pandemic with social distancing in place, telephony appointments were the best way we could do that, because face to face was more difficult in those early months coming out of the pandemic. Testing that suggested that it was no less effective, but it is something we need to keep under review, because we clearly need to make sure that the support goes to the people who most need it. That is something we continue to do.

I will move on to a question about the “Get Britain Working” White Paper. What can we expect to see by this time next year, particularly in terms of what a customer can expect to change?

There is activity going on on many fronts. We were successful in receiving £240 million in the Budget, in the spending review for this coming year, that we are using in a number of different ways to motor things forward, on top of a further £115 million for the Connect to Work employment scheme. What are we seeing? This is a year of getting things moving, both nationally and locally. Nationally, there is £55 million being spent on the jobs and careers service. What the jobs and careers service is all about is taking the jobcentre service but operating in a different way to enable us to be working, as well as for people who are actively looking for work, for people who are economically inactive or people who are long-term unemployed, and providing support in a variety of settings. We are seeing some of that in action now. Before going to Canning Town jobcentre, I had the privilege of going to the Aberfeldy Village community centre in Poplar in east London. It was amazing to see. In that new community centre, run by Poplar HARCA, the local housing association, we had jobcentre work coaches, who are based out of that building, bringing their caseload with them—people who are long-term unemployed. Upstairs in the same building, you had a digital skills course. You had English as a second language—ESOL—courses. You had a connection with the housing association for housing issues. You had life skills like learning to cook on a budget. Then, across the way, there was the primary care service, the GP surgery. We had a DWP disability employment adviser in there, and we had someone in the reception. When someone came in for a fit note, we were able to talk to them about whether they could be supported into work. That is an example of the jobs and careers service that we want to roll out everywhere operating in practice already, and that is not the only thing you will see. That is one thing: the jobs and careers service working differently. The second thing is youth trailblazers, which is £45 million, in eight different places. That is about working with local areas, building on the success of youth hubs in some of those places, and with mayoral combined authorities, to develop new ways of integrating training, employment and skills for young people to help them to avoid falling out of employment and training and into the NEET category. We will be seeing plans worked up in those local areas. We have £125 million for Get Britain Working, trailblazers, and tackling inactivity in another eight places. Three of those are linked to NHS accelerators. Alongside that, we have the Connect to Work programme, which is employment support, helping people who find it difficult to sustain employment. The crucial thing is we are doing a lot of this work in partnership with local areas. We are reaching out to people who are economically inactive, rather than just people in the intensive work search and universal credit. Over the next period—hopefully, by this time next year, or whenever I am back next—we will be able to talk about many of those locally led plans out there being delivered and about young people or people who are economically inactive benefiting from that. Hopefully, we will be able to talk about some people whose lives have been changed through that money operating in a new and different way. It is early days, but this is a process of trying things out and learning what works in different areas, recognising that different local economic areas have different needs and different opportunities.

Thank you. Before we sign off today, I want to ask if you might write to me about how you use epidemiological data—Damien mentioned one particular report—in terms of, for example, the flatlining life expectancy, or declining life expectancy, in areas like mine, how that is also reflected in healthy life expectancy, and how that affects what you do and your plans. I think that is very important.

Yes, it is very interesting.

It is important that we should have strong evidence driving our policy frameworks. I will bring these proceedings to a close. I am very grateful to you all for coming and providing evidence to the Committee.