Freudian analysis

Posted On: 
23rd November 2012

With the House of Lords set to debate the most radical changes to the welfare state in its history, Lord Freud explains why he’s ready to listen

The water temperature at the men’s bathing pond on Hampstead Heath was a bracing seven degrees centigrade on Monday morning. But the chilly November conditions didn’t stop Lord Freud taking his regular morning dip.

“I went swimming round the pond. I go all year-round there,” he says of a ritual which has served him well during a career which began in journalism, graduated to high finance, and has ended up as a Conservative Minister via a stint as a Labour adviser.

Now warmed up in his office at the Department for Work and Pensions, the Tory Peer is preparing for the launch of the Universal Credit, a radical reform of the benefits system which sees six of the main means-tested benefits and tax credits rolled into one. Full launch is less than a year away, pilot schemes begin within six months, and before Christmas the House of Lords will debate the regulations which underpin the new system.

And just as icy water requires a tentative toe-dipping entry rather than a big splash, the Minister bringing in the most radical welfare reforms since Beveridge is approaching his own work one step at a time.

“This is a huge, huge change. It’s the biggest change in our welfare system that it has ever seen. I’m not sure you could find very many other examples around the rest of the world. And we are determined to do it in a way that is very inclusive,” he stresses.

“So having set out the main outline structure, landing it safely with the input of a lot of people who understand this area is really important to us, we have spent a lot of time, much more time than you would find with most pieces of legislation, really getting to the bottom of people’s issues, understanding them and then often incorporating them.”

As the architect of the Universal Credit, his appetite for radicalism is unquenched, but he’s also very keen to take on board advice from those who have worked on the welfare front line a lot longer than he has.

Extra help is being devised for those who may struggle with a monthly rather than weekly payment (a version of a ‘jamjar’ bank account is likely). Certain groups such as the homeless, those with learning difficulties and mental health and addiction problems, will all get extra support. A new paper will be published in January setting out the help being offered.

As a former City financier, Freud is at home with management consultant jargon, referring to the “ecosystem” of the welfare state and the need to set up an “intermediary market” of support for benefit claimants. He even uses “pathfind” as a verb. The Universal Credit is not just a big welfare change, it’s an enormous IT challenge, delivering benefits through a real-time online system.

The Minister doesn’t just swim in the mornings. He also cycles to and from work every day, except when he puts his fold-up cycle into the ministerial car for the return journey to Hampstead after a late vote in the Lords.

And it is the Lords where he knows the battle for welfare reform is most challenging. Those who closely scrutinised the Welfare Reform Bill last year are now poised for the new set of regulations he’s publishing next month to give effect to the changes.

Although he insists there will be no change on the regulations, compromise is clearly not a dirty word at the DWP. Freud points out that he has already taken on board several suggestions made during the passage of the bill. Sometimes even though they weren’t accepted on the floor of the House, they were incorporated into draft regulations afterwards.

Freud refers to Baroness Drake’s call for 100% set-aside of pension contributions which he later adopted, as well as Lady Donaghy’s call for people on industrial injuries benefits to be exempted from the cap. “So even though we won the point on the floor and it wasn’t pressed, the argumentation was absorbed and we made the change subsequently. I’m not sure how usual that is…” He also points out he accepted Lord Best’s proposals for a longer ‘grace period’ for the cap.

Freud says that many of the recommendations of charities and others will be covered by guidance – which he will spell out ahead of the debates – rather than just the regulations. “In a lot of these issues they are actually controlled by guidance and we will be publishing guidance in time for peers and third sector groups to see what our guidance will be underneath the regulations. And we are keen to do it through guidance because that’s very flexible and we can change it.”

It’s clear that he also wants to keep open the option of further change. “A lot of it is an ongoing dialogue with those groups and we can make adjustments as circumstances change or if we don’t get something quite right, we can make rapid change to guidance.”

He says that the Social Security Advisory Committee (SSAC) has done “an extremely good job of corralling views of particularly third sector charitable groups and boiling them down and making recommendations to us”. “I’m not in a position to say what we’ve done with them at this stage but what I can say is they have been very, very valuable and we have looked at them very, very seriously.”

Freud’s desk is littered with the day’s newspapers, with the Sun and FT both spread carefully out before him. Among the coverage is a weekend interview with a tearful Sarah Teather, in which the former Education Minister complains about “a moral line” being crossed with the introduction of a benefits cap.

The minister is unmoved and counters with his own argument that the welfare system is “dangerous”. “The point about the benefit cap is it is making a statement about what are the limits of a welfare system… it’s saying that people should not get more by living on welfare than the average person in the country gets from earnings, so it’s a very basic statement around fairness,” he argues, adding: “The welfare system is there to support people back into independence; it is not there as a lifestyle choice.”

And, says Freud, a morality breakdown exists within the current welfare arrangements. “What we’ve got today is a welfare system that is so complicated, with so many odd, unexpected effects, and so difficult for individuals to predict what will happen if they change their circumstances in some way, that it is really dangerous. It’s dangerous because if you don’t know how the system will adjust when you change, go into work for instance, it freezes people in immobility. ”

Freud’s primary concern is with “all kinds of nooks and crannies in our benefits system” where people have settled on the “lifestyle choice” of staying on benefits.

“You know, the incapacity benefits, the lone parents, the people who are self-employed for year after year and only earn hundreds of pounds or a few thousand pounds, the people waiting for their work ability assessment then not going to it – all kinds of areas where people are able to have a lifestyle off benefits and actually off conditionality.”

He stresses repeatedly that the Universal Credit is about changing people’s lives by improving incentives to work. “We’ve got the circumstances now where... people who are poorer should be prepared to take the biggest risks, they’ve got least to lose. We have, through our welfare system, created a system which has made them reluctant to take risks so we need to turn that on its head and make the system predictable so that people will take those risks. I think we have a dreadful welfare system.”

Iain Duncan Smith is a big fan of Freud’s. And it’s clear his experience of Government is markedly different from his time advising Labour’s then Pensions Secretary James Purnell. His introduction to Whitehall back then was a “threatening” Gordon Brown “jabbing a stubby finger” at him during their first meeting.

Five years on from that bruising encounter, what does he make of Brown’s approach? “Well I thought it was quite funny,” Lord Freud states, though he had little to laugh about the time.

“I think that what Gordon was doing in that preliminary meeting, was he thought he could soften me up and then dump me in with his officials and I would just capitulate. Which I thought was a pretty demeaning thing for a Chancellor and Prime Minister-to-be, to think that was his role. And in practice a pretty foolish strategy when you’re up against someone who’s an investment banker, who gets yelled at every day of his life, if not three times, by chief executives, finance directors, and chairmen for one thing or another. So if he was wanting to get an outcome, it was a pretty poor strategy.”

And if Brown had given Purnell free reign, would the Freud reforms already be in place? “Probably”, he replies, after a pause, adding: “I’ve not talked to Gordon Brown since, but I speak occasionally to James Purnell.”

The delay in the introduction of the Freud reforms meant the passing of the Welfare Reform Act 2012 coincided with the 70th anniversary of the publication of William Beveridge’s original report.

Freud admits that he has only read the summary of Beveridge’s great tome (“I have to confess... I didn’t read it all, it’s so fat”), but suggests that his own reforms are true to Beveridge’s vision. “I’d be enormously pleased and gratified if my reforms were thought of in the same way as Beveridge. In a funny way it is almost back to Beveridge, some of this. If you like, Beveridge was coming out of a process of very patchy provision into a position where he was always emphasising personal responsibility, prevention of idleness and those things, so we’ve gone through that,” he argues.

But 70 years on, and much legislative tinkering later, the welfare state now sees people “basically living their whole lives on benefits, and their parents did and their grandparents did”. When asked to identify those whom he claims are making a “lifestyle choice” to stay on benefits, he points to figures showing an increase in households where no one has ever worked.

“We’re trying to put responsibility back on the individual in a way that Beveridge was rowing towards… funnily enough we’re meeting more in the middle from under provision to over provision.” In a nod to his Coalition partners, and a dig at his former Labour colleagues, Freud says: “It’s quite nice in a way that this Government, which has got a strong Liberal Democrat presence, is reflecting Beveridge’s own Liberal origins which is sometimes forgotten. He was not a Labour man, he was a Liberal.”

Freud knows his history, and with his shelves lined with literature on welfare, is in command of the welfare landscape in 2012. But what does he actually know of a life on benefits? How could he find out?

One way, perhaps, would be to take on a TV documentary in the same style as the famous World in Action show which featured Matthew Parris, then an MP, spending a week on the dole.

“I have thought of the issue,” Freud reveals. “The trouble is, it’s a stunt when someone like me does it because you do it for a week. That’s not the point. You’re living on these rates for a year. I think it’s a stunt. And I don’t have the time. So I haven’t seriously thought of it for that reason. If you want to be a television pundit, you do it.”

So what does Freud, a wealthy man, know of a life where £10 less to spend each week makes a difference? “We have a lot of information feedback and listen a lot, so I think we can absorb the information about what it takes and what’s required,” he says. “I think you don’t have to be the corpse to go to a funeral, which is the implied criticism there.”

Not living on benefits, but listening to those who do, Lord Freud is approaching his radical reform of the welfare state with due care. And like his swimming, he wants to be covered in all the right places.

“I don’t skinny dip, I always have my trunks on,” he insists, forever a Minister who won’t be exposed when he enters uncharted waters.