In Conversation with Iain Duncan Smith: Part 1

In this month's TOTAL POLITICS magazine I have an IN CONVERSATION interview with Work & Pensions Secretary, Iain Duncan Smith. We spent quite a time talking about welfare reform and his current cabinet job. Tomorrow, I'll post Part 2 of the interview which centres on his time as leader of the Conservative Party. This is a much extended version of what appears in the magazine.

When did David Cameron first talk to you about doing your current job.

I'll tell you when it was – it was the day he was announcing out the cabinet positions.

Because he announced at the conference last year you’d be taking on a senior role...

He announced that he wanted me to head up a committee, and I said to him at the time – fine, that's as far as I want to get. I didn't really want to commit at that stage, because Betsy wasn't well and I didn't really know where I'd be. I said look, I'm happy to help and assist in any way I can but you should understand that I'm not putting a pitch in for a job, I'm just simply saying that I don't really know so I'd rather not discuss anything further. He was quite happy with that, so we never really talked about anything until the day he rang me up, I said "Can I get back to you?"

What persuaded you to do it? It must have been quite a big decision?

It was actually, yes. Most people say "oh of course you'll have jumped to that and gone straight in" but I didn't actually, I'll be honest with you. I needed to figure out where we were with Betsy's treatment because that was a priority and still remains a priority, because she's still in recovery. So I needed to figure out whether I'd need to be with her as much as I had been and whether I could cope. She'd just finished the radiotherapy and was still pretty knackered. The energy levels are really appalling. She's had the chemo and the radiotherapy and the operations. So I wasn't sure about that, needed to balance that, needed to talk to her as priority number one. Two, I needed to balance in my mind whether I thought that what I was trying to do through the Centre for Social Justice (CSJ) was better served by me continuing to do it that way or whether being in government focused in one department, whether this was going to be a positive, or whether it was going to be a way of me disappearing into a department and not achieving very much. So I needed to balance that, which I duly did, and on balance I thought: well, first of all there are big things that I want to drive through on welfare reform, pensions reform, which we have talked about. That's one chunk of it. But because he also wanted me to chair the social justice cabinet committee, which was a new one, this would allow me to range a bit wider and to talk about the issue in other departments and encourage them onto the social justice agenda. That balanced off some of the other items.

So, with that combination I thought "well, probably the best thing is to do it rather than not do it." It does sound a bit mealy mouthed when I put it like that doesn't it? But it's not meant to be, but I did look at it as a sort of balance of decision.

Did you ask for any guarantees?

Well, that was the social justice committee really. Yes, the point that you're making is pretty much that and I asked him how determined he was to make reforms. Because I said that I'm not interested in coming in just to function. I said there are lots of people out there younger than me, keener than me to get on, to make their name, that's great, that's fine. But if you want someone to reform I'll do the reform, definitely, because that's what has to happen.

And was the key that reform has to be for the long term and not for short term political headlines?

What I want to do is succeed in this and wider. I don't just want to succeed in this, although this is big enough. The welfare reform stuff is enormous. But I also want make sure the government sets itself in the right direction from the word go, which is very important to me. So I'm engaged in a lot of discussions wider than this about other things that impact. You know, I've talked to Ken Clarke about his justice reforms, which I initiated via the CSJ. And I'm fully behind him and helping him as far as I can. I’m looking at drugs policy, alcohol policy, across health, home affairs and our area. Driving stuff, driving lots of change in the agenda to see if we can't help. Education's got stuff that the CSJ wanted, free schools is part of that, we're very keen to support early years – that’s really important to me and a number one priority.

How do you find dealing with other departments? Because Tony Blair went on about joined up government, and this is what you've got to achieve if the social justice agenda is to get anywhere, isn’t it?

That's what the new Social Justice Cabinet committee has to do. If it's going to be effective, it has to drive new ideas through government. We have to make sure that drugs and alcohol policy doesn't just become a criminal affair. That's actually it's hugely locked into health and rehab, and we make sure rehab and everything else is part of that. So at last we begin to square that up. And it's not going to be easy, because you know what departments are like. They'd love their secretary of state to say "Get away, this is my island and you only come here when I invite your ship in". We have to change that, and that's a culture that we're all engaged with trying to sort out.

Have you come across difficulties in that area so far, and how do you get over them?

I think the best way at this stage is character. I think you have to negotiate your way through so that people don't get the chance to stand on amour proper. We don't just take what the civil servants say to us about our status. That we become statusless, in the sense that we see ourselves not as secretaries of state, but as politicians trying to get a job done. And don't let the civil service package us off into silos. It's easier said than done. Some departments are past masters at capturing their ministers and their secretaries of state. I think most of my colleagues seem to be aware of the fact.

Interestingly, I was talking to a couple of civil servants and they said what's nice to see is that the cabinet committees are functioning again. The system pretty well died under the last government. It was so much sofa government that decisions were being made without going through proper procedure. And at last that's reignited. Hopefully we can drive through various cabinet committees, particularly mine.

What's been the reaction in your own department? I always think civil servants like the firm lead. There are some departments which have been given clear leads – Eric Pickles has really shaken up his department. When you went in is that something you were conscious of, that you needed to provide that firm lead?

Yes. It's about management and how you do it. The first thing is that I thought that I'd have a lot of resistance. In fact, I was astonished at that I had no resistance from all the key players. The first thing they said was "we know what you've been wanting to do, we've been watching it for ages, we agree completely with what you're trying to do, we here think this benefits system is broken, we're sick and tired of trying to pick up the pieces every day trying to make it work. Everybody knows that's it's got to be changed, what do you want?" So from the word go I was able to set down the parameters of where we were going to try and drive. What we needed was universal credit, which of course I hadn't got agreement for at that stage. We had to get that through, we had to work on the modelling work programme. We had to drive hard. So in other words we've pretty much had our foot to the floor and pressure on everybody to get from a to b. And the interesting thing about it has been that they've joined in with that. The vast majority of people in the department, as I said in my conference speech, I only have praise for. This is exactly how it should work. They've taken their political direction, they've taken – I hope - a sense of urgency and for the most part they've pretty well stuck to it. Obviously they've got little bits and pieces in there that aren't right. In terms of managing the department I feel it is much easier now because we have a sense of direction. Because I came and said "bang, this is where we're going over the next 8 or 9 years, here's the reform, here are the time schedules, all I want from you is yes – this is how we're going to do it, here are the problems and lets sort them out." And pretty much that's exactly what we did. And every one of them has done just that. And in the midst of that we've found savings. So I think that I haven't any problems at all with that. So strong leadership is right, but it needs to be strong leadership not because you're kicking them, it's strong leadership because you've given them a sense of direction and get them to sign up to that. That's the key.

Did you have any say in who your ministers were? Because I think you've got probably the strongest ministerial team in the whole government...

I agree with you. Interestingly I did, but I didn't have to say very much. There were a couple of potential adjustments but by and large these are the decisions that I would have made. If you'd asked me who I really wanted, I'd pretty much pick this team I think, particularly at minister of state level. On the one hand Steve Webb, on the other hand Chris Grayling. I think Steve coming in as a Liberal Democrat has been fantastic. They've all been great, but Steve because especially, because he's had the furthest to travel to join us.

He's always been traditionally seen as on the left of the Liberal Democrats, hasn't he? Are there any sort of creative tensions with some of the things you want to do?

None at all! The good thing about it is we just basically said "look, we're in here we've got to achieve some things. What do we want to achieve?" So we set out and discussed it. What do we want to achieve in pensions? Proper reforms, re-linking, changing the retirement age, looking at a proper pension reform which will knock people’s socks off when it comes out in a few weeks time. I'll say for Steve categorically, yes, people will always write that his reputation is that, but what I actually find is that he's said "look, how often is a Liberal Democrat ever going to get into government? I've been moaning and complaining about the pensions system, this is my one shot changing it with you”. I recognise we have to compromise to do that, and that's been great really. So I think you're right, I do have the strongest ministerial team.

How do you avoid becoming bogged down by the sheer complexity of the whole system, and the size of the challenge? Because it's sort of like a Schleswig-Holstein question, isn't it? Three people completely understand it and two of them are dead.

Yes. The answer is don't stand still. If you're running over soft ground, run over it, don't walk. You have to get to the other side. The point is that we just have to keep the pace going. Getting bogged down is when you lose sight of what the far horizon is about. You just get locked into the nitty-gritty. And I say to everybody, let's keep constantly knowing where that flag is on the horizon, that that's where we're steering to. We may meander a bit while we're getting there, but we need to make sure our goal is still there. If for one moment we think otherwise then we need to consider what we're doing right now. So in all of this we've set the flags out up ahead of this. Whether it's the work programme, pensions reform, or massive universal credit reform. This is where we have to be by the end of this parliament. Can we make it? That's all I want to know. The rest is detail. We have to get it right. But if we have a doubt about that we have to make that clear. Keeping the process moving along the right track is what I think I have to do.

How do you avoid being Frank Field Mark Two?

Well, I love Frank to bits and I think he's great. He's a good friend and he's a very good politician. The difference I think between us is that I set up a structure while I was out of power - the Centre for Social Justice - that then worked in detail on programmes, particularly on this universal credit. We built a model that modelled the benefits system and we it through. The DWP unbeknownst to me, was paralleling that work - unbeknownst to the government at the time as well - because they were convinced that this is the area they'd like to move on. So when I came in we knew how we’d achieve it: in other words we know what we've got to do. And the DWP have signed up to that straight away. So the real difference is that we've got a real, genuine structured work programme now. Frank hadn't quite reached that point, I think, because there was no sign-up at the highest level. I spent my first four months, as you may have read in some of the papers, getting sign-up. Now that process can be robust at times, but it is what I'm a politician for. I know what my bottom line is. I have to get myself to my bottom line through. And that does mean that some of these engagements will be reasonably robust. But we're all politicians and we know what the terms of the deal are, and that is that nobody respects somebody who doesn't know where their bottom line is. And I do. So with that, getting sign up early on, which is what we've succeeded in doing, means the rest then is the matter of how do we achieve what we've agreed to sign up to.

The problem I think for Frank was that although the Prime Minister said he was on-side, the PM, never squared Gordon Brown. Brown was never on-side. Frank then proceeded as through the PM would intervene, and he never intervened, and Gordon Brown won the day. So to be fair to Frank the deal was never on. For me, the deal has always been on from the word go and I've simply said: Number 1, we're not going to repeat this. There's the line, that's where you sign, once we've all signed on that, now we know, no questions, the rest is getting it done. And that seems to me the way we have to be. I don't say we won't get things wrong, I won't say there won't be problems – these are huge changes we've been going through. But as long as we have sign-up to the principles of what we're doing, and to a greater extent the overarching detail, then the rest is a case of managing the process.

The Treasury has always been a great block to reform on this kind of issue because they are always watching the bottom line on a year to year basis. How robust did the exchanges get?

We're all friends, let me just say that. We're all friends. It's what politics is about. If you look back to the old Thatcher cabinet, people always had engagements, and debates and rows and arguments. The trick is can you walk away from it afterwards and say "Let's go and have a drink." I think the difference between us and the last government is that they seemed to hate each-other personally. Strangely, they often agreed on political things, but hated each other personally. I think it's the other way around here - we all get on pretty well, we'll agree, disagree. But even the disagreements, and this is the important one, these disagreements are only about how to do things, they're not disagreements about the principles. For example the Chancellor signed up for reform, the Prime Minister signed up for reform, pretty much on the line of what we wanted. The question was how quickly can we deliver it, how much money does it take to deliver it? And if I was the Chancellor I'd have been in exactly the same place. I'd have asked the same two questions which he kept on asking me which is "Are you certain that this will work? Show me, prove to me, let me become a believer that this process works. Secondly, are we also certain in the course of this we will ultimately save money?" Those two questions are critical and I believe that we've got the answers to them. And because of that very exhaustive process, which is very good for me and very good for him, we'd both sign up for something which we'd be both believe we've actually gone to because we've been convinced by the arguments, rather than saying I have to do this because I've been bullied by somebody else. Not like that, we've actually agreed this.

Which of the two of you turned up the volume the most?

I would think it was at a collective calm and reasonable level really. What can I say? Amenable.

How much do your benefits reforms actually rely on there being jobs for people to go into in the end? Because you can have an economic recovery without a lot of extra jobs being created. George Osborne is pinning a lot on the fact that the private sector is going to create huge numbers of new jobs. What if that doesn't happen?

You can't always predict where the economy will go. Our general belief is from the IMF right through to the OBR to the OECD, they all believe that we're taking the right action. They all predict growth of between two and two and a half percent. Which is not startling, but for a developed economy at the moment is not bad, it's pretty good. That level of growth would deliver a big increase in private sector jobs. First of all I do actually believe we will see a greater level of jobs. People tend to just look at this period of the recession and say that it's all doom and gloom. Not it's not! First of all, there are millions of people still in work. They're still working, and their prospects are good. The second fact that we have is that we have even now the job-centres have significant number of jobs vacant. And they're not all skilled jobs. I think it's about 450,000 or 460,000. So straight away there are jobs available even in the height of the recession. And second of all we all know that there are lots of jobs that aren’t listed at the jobcentre and that are outside in the casual workforce. The last point is that even in the last quarter we saw the biggest jump in employment – 280,000 went back to work in one quarter. Which is the biggest jump since 1989 which is when these figures were first collated.

So the signs are... they're not great, but they're good. And they show there's activity. The important thing to know is that there is turn-around, there are jobs being created, there are people going in to work, yes it's not enough, we need more. But the point I make is that these reforms aren't just about there being more jobs. These reforms are about saying that throughout the growth of the last 10 years, we have parked about between 4 and 5 million people of working age, who didn't do any work at all. We had 20% of all of our households doing no work at all. So that's the bit that you have to break into, that's what our reforms are really aimed at. Breaking into that resistant, residual unemployed group.

Where you've had a family for two or three generations where nobody's worked, how do you get the work ethic back into people who are in that situation without being unacceptably brutal in cutting benefits?

There are two or three ways that you do it. The first is that we don't have to cut the unemployed benefits as they stand. The key thing is to get the juxtaposition between being in work and not being in work as positive in financial terms. The way I describe that is by saying look, if you're out of work in such a household it's no good a politician saying, as they always do, and even commentators, it's no use lecturing about moral purpose to a family that doesn't really have a lot of work or no work at all. The problem is that's fine for you and me and others who've been in work or who have come from families who work even if we haven't got work, you've sort of sensed that work is just bigger than the idea of earning money.

So, accepting that we get the finger wagging and lecturing out of the way, we have to look at the nature of the family that we're talking about and then say what are the things that stand in the way, why somebody wouldn't take a job? And that's really what this reform is all about. And there are two or three things.

The first is that when they look at getting back to work they recognise that on the margins they don't think it pays.

Even if you marginally say that it pays – then you take your travel to work costs. Quite a lot of these jobs will be a little way away from where they work, so then they assume that it's too expensive. The aim of universal credit is to make work pay. That's critical. Because that's the big bit that says actually I'm better off in work. So that starts the process that says "well I will look for this work, I will look for this job."

The second thing is dealing with the family that surrounds them. So how you deal with that is that you set out what we call this big work programme. What this does is that in private and local sector voluntary organisations you tie a work programme around people to change their culture. That is to say, you get them work ready, you work to get rid of their difficulties, their problems, their addictions, their misunderstandings. You stay with them and mentor them, so they stay in work 3, 6, 9 months, a year.

And the final bit is that you make sure that if they have particular disabilities you deal with that.

So those two go together. The work programme and the universal credit together actually allow you to knock out the things that stand in their way and allow them to progress natural to work. Once they've been in work for a while they get what I call the work habit. At that point they're always going to want to stay in work so they'll have that impetus, they'll understand the whole idea of "the purpose of my life." That becomes clear to them in terms of work. But the bit you have to fill in is the bit before that. And that's the bit that you're talking about when we want to break down these workless households. And many of them can't go home and say to mum and dad "I've got a problem at work, what do I do about it?" because their mums and dads have never worked – so what do they say? "Why do you bother?" So what do we do? We need to replace that person with a mentor. They can turn to them when they have difficult in the early period until they're settled. Once you start that flow of breaking those families down it allows you then to narrow and target in, and our early intervention work then follows in, which we're working with Michael Gove on, to then start targeting the difficult, difficult core families that we get after and that we start to break down on a much more structured basis.

Frank Field said he would rather see benefits cut for poorer families than see children’s centres suffer because he thinks that they are so crucial to the development of kids in the early years. What are you doing to ensure that kids at that age don't suffer from the inevitable cuts that there are going to be?

There are certain priorities that a government must remember, that we were about when we were elected. I think early intervention is one of those areas. Now it's not my area directly, but it's an area I wrote a book on, and it's an area incorporated into the social justice cabinet committee. I discuss it constantly with Michael Gove and Sarah Teather. I think we're all passionate about it and heading in the same direction. I know David Cameron shares that sense, as does Steve Hilton, that this is the big life changer for those difficult families – early intervention. So all of that tells me that we will do our level best to make sure that these key high priority issues such as dealing with troublesome, difficult families, kids from difficult backgrounds, are informed by intervention.

The child benefit announcement slightly dominated the party conference. How did that come about?

Well, these matters have been discussed. I confess I had had discussions with the Chancellor about this for weeks, actually probably months, going back to when we first got elected, so I know all about them and know all about the ramifications and permutations of where do you find money, how do you share the load. The two principles of this are 1) I am desperate that the changes taken from the start of the budget process to the end of the spending review are not seen as regressive but they are progressive. What does that mean? That means that we take a share of the burden so that it isn't all falling on the shoulders of those who are in the lowest economic deciles. That's very important. For me, it's an absolute matter of "doability." In other words, if we can't say that, we’ll have difficulty getting these measures through .That means basically you're looking to see how do you get people higher up on the income scale to make some contribution to this deficit reduction programme? So that's the principle that lies behind it. We have a major deficit, we have to take a share of the burden. On child benefit Labour says it's all about getting the middle class to buy into it, which is why you give them benefits. That is absurd. That is a complete nonsense which has been concocted by them to justify why they've done nothing to it. The real reason for universal benefits such as child benefit was that it was the only way in the early days of making sure poorer kids got the money, because they didn't have to make any claims for it in the sense that they didn't get means tested. So every family could legitimately claim and not worry about getting the money.

If the middle class have to buy into benefits by being part of the benefit system then this is an absurdity, and why stop there? Why don't we go everywhere with this? Which is what Labour, with their child tax credits, ended up giving money to people earning more than £50,000. So it is long overdue that we look at this and ask ourselves the question: what is child benefit really for? It's for supporting children, particularly children who come from difficult backgrounds where money is really really tight and where that little bit of extra money really makes a disproportionate difference to their lives. And to do that sometimes you need to take some tough decisions about that. And the answer for us if you want to reward people further up the income scale for working hard and for doing the right thing then that's where tax changes are relevant. That's what you do. What you don't do is take money off them, siphon it off two departments and pop a little bit back to them as though this is a little gift you're giving. It's not a gift to take large sums of money and take a little bit back. It's bribery really.

But what about the unfairness of the double income family on £80,000 getting it and a single income parent on £44,000 losing out? That smacks me as a policy that might be right in principle but actually in implementation wasn't thought through before it was announced.

The biggest problem we've got in the short-term is the nature of the tax system. For 13 years the Labour Party were in government, and I don't recall once they talked about reforming the tax system to make it less unfair. Right now the tax system does exactly that, to families that have a single earner, they get taxed at the higher rate, if they go above £43,000. It does not find that two earners who break £43,000 get to the higher rate. So, before we get too caught up with the child benefit being unfair, right now the tax system according to Ed Miliband is deeply unfair, but he never proposed to reform it. So he's happy to have unfairness in the system. What we're trying to do is use the tax system to do the child benefit so that inherent unfairness, that he calls it, is already in the system working it through. Now, I happen to believe there are ways that we will ameliorate that later on, and get rid of that unfairness, and those are matters that are matters for discussion further down the road. But my point is, right now, we have the system that we inherited. To make any changes, we have to use that system, and that's the point, so if Ed Miliband can quietly show me exactly which point in the last 10 years he campaigned to change the tax system so that we could take account of dual incomes and households, I'd be very happy to hear from him.

You say you have been having discussions over many months with George Osborne about the child benefit system, but I understand you didn't know until quite late in the day that this announcement was going to be made.

I, probably most of all, of all of the cabinet ministers knew all about this announcement. It's not an issue for me. I'm not going to pre-comment about what the others knew or didn't know at the time. But for me I've always been aware of this and I was prepared for it.

Isn't it strange that it wasn't discussed in cabinet before it was announced? It was a pretty major thing to do.

Yes. It's difficult to know with these things because we are running towards a spending review, and the spending review is quite complex, pretty detailed, each department pretty much knows where they are. Some departments like mine and me know where others are, because it's the nature of what I do, so I know where the treasury is, HMRC is, I know where I am, so all of that, so to that extent, it's difficult sometimes to get people completely lined up about these things.

It seemed to me that it was something that was announced that, just before the conference, well at the conference, for a political reason whereas actually wouldn't it have been better to announce it in the CSR, because it's really a part of it isn't it?

It could certainly be argued that, but politicians take decisions and stand by the decisions they take, and it was deemed that this was the right thing to do and so collegiately I think that's a good position. Collegiately, what am I talking about, that's a terrible word. God, I'm beginning to sound like New Labour. Sorry.

Do you think there's any argument for having regional variations of the minimum wage?

There is certainly a reasonable argument to be had for all of that, including collective pay bargaining. to what degree does it help parts of Britain outside London, and London itself? I can understand that a big debate is to be had about that. That's not something which is going to come through in the comprehensive spending review and over this spending review period that I'm aware of. But I know there are difficulties, I talked to a businessman about 3 months ago, who has a factory up in the north-east and he simply told me that he found difficulty getting people to work there, even though he had spare jobs. I was astonished. I said we've got a recession on, why's that, and he said, because I can't compete with the public sector, what they pay up here. I've got the minimum wage but I can't compete with what I put over the top of that because it's very difficult. So people wait for the public sector jobs in this area because they know they pay better, and they can wait. I can see that there are disparities and you know, we'll have to look at all that, but there isn't a policy from the government on that. There is certainly a legitimate debate and if people want to debate it they should press hard on it.

COMING TOMORROW: Part 2