Evidence session on incomes under Universal Credit
The APPG on Universal Credit is a cross-party group, which was established in order for Members of Parliament of all parties to be able to come together to discuss the experiences of their own constituents, to receive advice and support from various agencies, to share best practice at supporting constituents and monitor this critical policy as it is rolled out.
The APPG accepts the core aims of Universal Credit (UC) in simplifying the benefits system and making it easier for people to move into work. The reality of UC, however, does not live up to these good intentions. We are seriously concerned that the design of UC does not sufficiently take into consideration the specific needs of the poorest working age people in the UK, and that in its current form, UC does not work in their best interest.
On 15 November 2017, the APPG held an evidence session on UC, hearing evidence from Child Poverty Action Group, Gingerbread, and Citizens Advice Bureau. The following concerns and recommendations were raised and made:
The APPG believes these are some of the key issues with Universal Credit that Government needs to fix in order to restore UC’s poverty-reducing potential and work incentives:
These no-cost or low-cost measures would vastly improve the performance of the UC system, reducing stress for claimants, unnecessary cost and bureaucracy in the system, and enabling claimants to concentrate on finding work:
- Passported Benefits: all households on Universal Credit should continue to be entitled to Free School Meals, free prescriptions and 15 hours childcare for 2 year olds.
- Information Gathering and Implicit Consent: needs to be offered to advisors of all UC claimants and information from legacy benefits should be transferred onto UC claims, subject to claimants confirming details are correct.
- Universal Credit for people with reduced Work Capability:
- Entitlement to work-related activity or support components of ESA should continue automatically into UC without a further WCA being required.
- ESA claimants who are incorrectly judged as fit for work by a Work Capability Assessment and transferred onto UC should have their ESA entitlement reinstated if the decision is overturned.
- Payments: Explore options for more flexible payments for those in most need, learning from flexibilities introduced in Scotland and Ireland:
- Offer 2 weekly payments for the first 3 months of a claim
- Enable split payments to be made at the request of either partner
- Make it easier for housing element to be paid direct to landlords
- Fluctuating Incomes:
- Claimants whose income fluctuates and may not be eligible for UC in one assessment period should be informed of their income threshold and told that they should notify DWP if their income falls below that in the following 6 months. All such claimants should have a quick re-claim system to simply confirm any change of circumstances when they re-apply.
- Non-monthly pay systems: claimants who are paid weekly or 4-weekly should be alerted to the interaction between their pay dates and assessment period so they can budget for reduced UC when extra pay packets are assessed in one month. As above, if they fall out of UC entitlement, they should be alerted and given a quick re-claim process.
- Interaction with the Benefit Cap: where a claimant’s payment method for a regular job means that their income falls below the level where the Benefit Cap is usually applied, the Cap should not be applied if the claimant is continuing in a job with the required minimum hours of work.
- Self Employed: Options around self-employed will be looked at in detail by a future meeting of the APPG but will include:
- Longer or more flexible assessment periods
- Extending the grace period before the Minimum Income Floor hits
- Redefining MIF to assess after pensions/NICs contributions, for example
- Better support and advice – low income self-employed often face the least support among workers; certainly single parents moving into self-employment can get caught between JCP priorities to get people into work vs. proper advice around sustainability of work and available support
- Improve information on the support and administration of the claim system
- Enable payments in advance, as are often needed to secure a childcare place
- Improve information on support while training and when entering or progressing in work
- Allow jobcentres to suspend job-seeking requirements for parents of three and four year olds, until affordable good quality childcare and flexible work is available locally.
- Raise the UC childcare ceiling so it’s not limited to two children and pays a higher rate for disabled children.
- Even with the JCP and the option to speak to a work coach, decisions still need to get signed-off by an unseen decision maker – transparency and simplicity are greatly needed.
- Work coaches and claimant commitments: Ensure flexibilities and claimant commitments are understood and reviewed collaboratively
- Review jobcentre provision quality to ensure claimants’ needs are recognised and entitlements clear
- While the ‘one port of call’ provided through UC is to be welcomed, there are still cases bounced between departments, and DWP and LA.
B: PREVENTING POVERTY AND IMPROVING WORK INCENTIVES
The following measures should be examined to improve work incentives and to prevent huge increases in poverty levels, especially for families with children and people with disabilities:
- Child Element should be uprated annually, ideally under Triple Lock: to prevent further child poverty.
- Restore the Severe Disability Premium: so that severely disabled people do not lose the £62.45pw severe disability and £15.90pw enhanced disability premiums.
- Work Allowances: need to be increased to maximise work incentives and minimise in-work poverty.
- Second earner work allowance for couples, equivalent to that for first earners, could keep up to 100,000 children from poverty.
- Taper Rate: Further reduction to 55% would keep up to 200,000 children from poverty.
- Two Child Limit: Lifting the limit would keep up to 200,000 children from poverty and remove the anomaly of the ‘Rape Clause’.
- Waiting Times and payment dates: Reduce the current six week wait for a first payment to two weeks and remove the 7 unpaid waiting days.
- CHILD POVERTY ACTION GROUP (CPAG)
CPAG works on behalf of the one in four children in the UK growing up in poverty. CPAG develop and campaign for policy solutions to end child poverty. They also provide accurate information, training and advice to the people who work with hard-up families, to make sure they get the financial support they need and carry out high profile legal work to establish and confirm families’ rights. Employment and support allowance (ESA) claimants incorrectly advised to claim universal credit
We see many ESA claimants who have their entitlement disallowed because they are judged well enough to work following a medical assessment.
These claimants challenge the ESA decision by making an appeal to the first-tier social security tribunal. In many cases the claimants are entitled to have their ESA entitlement reinstated, pending a final decision by a judge at the tribunal.
UC staff are regularly advising such claimants that their ESA entitlement cannot be reinstated despite acknowledging the appeal and insisting that the claimant has no option but to claim UC.
Other claimants are forced to claim UC because the DWP’s internal review process (known as a “mandatory reconsideration”), which must precede an appeal to the tribunal, takes so long to complete.
Claimants who fail to attend the medical assessment because they do not receive the invitation or their mental health precludes adequate engagement with the process cannot have their ESA reinstated pending an appeal, have no option other than to claim UC.
When the original decision to disallow ESA entitlement is corrected by the tribunal judge, arrears of ESA can only be paid to the date of the UC claim. Having made a UC claim, the claimant cannot return to receiving ESA and must remain on UC despite the judge’s decision that they have met the entitlement criteria for ESA all along.
Many claimants in this position have been paid severe disability and enhanced disability premiums (worth £62.45 and £15.90 per week) as part of their ESA entitlement because they receive particular rates of personal independence payment (PIP). These premiums do not exist in UC and therefore, despite having their entitlement to ESA confirmed by the tribunal judge, the claimants are dragged into the less generous UC system and lose substantial amounts.
Universal credit claims closed without explanation
UC claimants are often asked to attend meetings at the jobcentre to verify their identification and entitlement. They are also asked to sign a claimant commitment – setting out their responsibilities as a UC claimant and the consequences if they fail to meet these responsibilities.
Claimants who delay signing the claimant commitment (because they disagree with the demands placed on them or cannot get access to a computer) or miss meetings have seen their claim closed without explanation. There is no legal basis for simply closing claims.
Furthermore, when the claims are closed, the claimant loses access to their online UC journal meaning the normal manner in which claimants can challenge DWP decisions and communicate with DWP staff is shut down.
Claimants who are paid twice during an assessment period
Entitlement to UC is assessed with reference to income, including earnings received during a claimant’s month-long assessment period.
We have heard from many claimants who are occasionally paid early because their normal payday falls on a weekend or bank holiday. In such months their entitlement is calculated on the basis that they have earned twice as much as normal and are paid substantially reduced amounts of UC.
Work allowances (which have the effect of ignoring a portion of the claimant’s earnings and entitling them to increased amounts of means-tested UC, as a work incentive) are applied to the entitlement calculation once in an assessment period, although the claimant’s entitlement in calculated using two monthly wages.
Were the claimants wages assessed over a shorter assessment period or if the second wage payment was treated as paid in the subsequent assessment period, claimants would be entitled to substantially more UC. One adviser we spoke to said this scenario affected his client three time per year and she has lost £127 of UC entitlement on each occasion. (We have not verified this calculation.)
Claimants paid twice in one assessment period are often not paid at all in the subsequent month as their employers wage system ‘catches up’. In such cases we have seen this lead to claimants being benefit capped, contrary to the objectives of the policy as a whole which exempts people in work.
Claimants who are paid weekly, fortnightly, on the last Friday of the month or paid early for Christmas are subject to similar problems.
Missing universal credit elements
Claimants who have received work-related activity or support components in their employment and support allowance and who move on to UC are often entitled to receive the same amounts, paid as limited capability for work or limited capability for work related activity elements, in their UC.
We have however, heard from many claimants who have been told they cannot receive these elements in their UC until a new assessment of their health and capacity to work has been completed.
Many claimants housing costs element have not been included in their UC entitlement and have had to challenge entitlement decisions and wait months before the error is resolved, causing substantial rent arrears.
When arrear are paid they are entered onto the claimant’s UC journal in a way that makes it impossible to check how much has been paid in arrears and for what period.
Many clients who make new claims for UC are exempted from the seven-day period during which they are entitled to nothing, notably those who have received housing benefit and other benefits before their claim for UC. We have heard from advisers in Lambeth and Greenwich that some clients are not being exempted from the waiting days despite clearly meeting the relevant criteria.
National insurance numbers
We heard from the refugee father of a two-month old child who was refused UC as he was unable to supply a national insurance number despite the relevant regulation clearly stating that an application for the national insurance number is requirement rather than provision of an actual number. The family were unable to pay their rent, threatened with eviction and likely to become dependent on support from the social services department at the local authority.
Implicit consent and information gathering
Implicit consent is not offered by UC staff in full service areas. This is particularly problematic for the families and advisers of terminally ill clients and those with health problems or learning difficulties.
We have heard from one adviser who was told that their client would have to explain that they were terminally ill via their on-line UC journal, as the DWP had failed to process the GP’s DS1500 form, although the client was unaware that she was going to die.
The refusal to offer implicit consent means that workers at food banks and advice services have extensive difficulties resolving UC problems and their clients (who often suffer from severe mental health problems, anxiety on public transport or have mobility difficulties) are forced to make several visits to different offices to see their adviser and resolve their problems.
We have heard from a family with no computer, including a mother with no mobility, mental health problems and a severely disabled child, whose UC entitlement was delayed three months because UC staff from the visiting service failed to collect the right information during their visit.
Efforts to supply the information by local authority staff (who had gathered the information as part of social services and housing benefit assessments), and requests for budgeting support were rebuffed by UC staff.
Gingerbread is a leading national charity working with single parent families in England and Wales. Since 1918, Gingerbread has been at the forefront of shaping policy and services that support single parents.
Gingerbread has two main strands of work:
- To provide advice and training – employment advice, online support for single parents, training programmes, and a helpline.
- Uses campaigns, research, and policy work to help amplify the voices and concerns of single parent families to a wider audience
UC is a significant reform of the current welfare system. Nearly all of the UK’s 2 million single parents will be eligible to receive Universal Credit once fully rolled out. It is therefore vital the new benefit is fit for purpose.
Gingerbread’s work on UC is a mix of modelling, (because single parents are one of the last groups to see UC), and now that there are actual case studies as the roll-out proceeds, the evidence and lessons are worrying.
Getting the correct first payment
Single parents have faced significant waits for a first payment:
- Benefit advances are welcome, but single parents are not always informed about them.
- Some claimants are put on default three-month repayments of advances – this can be unaffordable and cause further financial issues.
- Some claimants are relying on interim legacy benefit payments (e.g. tax credits), which are then clawed back through automatic UC deductions as they are deemed ‘overpayments’
- Rent arrears and risk of eviction is another issue (less so in social housing)
Gingerbread has found that single parent families are experiencing significant financial hardship through errors as well. Through confusion and error in administration, and the structure of the system itself, single parents have been threatened with eviction and jobs have been put at risk:
- ‘Waiting days’ incorrectly applied.
- There have been errors in getting the calculations right (particularly housing/childcare elements), meaning a long wait to full entitlement.
- Fall-out is worrying – debts, rent arrears and risk of eviction. Gingerbread has been dealing with a specific case, where a single parent and their daughter were evicted from their home of 7 years
There are problems related to the delivery of UC.
- Work Coach relationship – this has been a key part of the redesign of Job Centre Plus (JPS) provision, but it is not clear whether it works as intended. Many single parents do not have a personalised work coach and have found that the quality of support varies hugely in quality.
- Claimant commitments are often unmanageable, or do not consider the flexibilities single parents require (e.g. around travel times, distance from childcare, working/job search hours, availability at short notice for interviews, etc.)
- The childcare offer – not just about availability of childcare/external issues, but delivery of childcare subsidy within UC.
- This was a key part of recent Conservative arguments in debates around UC. The Conservatives claimed that they have removed the 16 hour ‘threshold’ – this is purely down to eligibility for support with childcare costs; if this offer is not delivered properly, then they would have failed.
- The problem with childcare payments is exacerbated by the fundamental lack of knowledge around the UC childcare offer some work coaches are not aware of what it is or how it works.
- Gingerbread is now hearing cases where single parents are having to reduce hours or finding work unmanageable as a result.
- This is not simply about holding the Government to account regarding promises made about UC – there is a risk attached to getting this wrong, borne by single parents: some will be at risk of sanctions as a result (e.g. not keeping to claimant commitment or reducing/leaving work).
- Gingerbread is currently looking at sanctions, and has dealt with a case where a single parent was sanctioned for dropping from FT to PT due to childcare problems.
Adequacy of UC
There are fundamental concerns regarding the adequacy of UC payments after a range of significant cuts – with single parents the hardest hit household type.
- Even original Government impact assessment said that 32% of single parents would gain, while 41% would lose from UC.
- This was made worse by the summer budget cuts. The average UC work allowance cut is 4% (£800 on average) for working single parents, some over £2,000 a year.
- Combined reforms cut by more than 7% (£1,300/£1,400 overall/working), even after tax/pay changes taken into account.
- The Institute for Fiscal Studies (IFS) (2016) finds both non-working and working single parents lose in cash terms compared to the legacy benefits system (>£500/£1,000 respectively).
- Before the Summer Budget, Gingerbread’s analysis commissioned by Mike Brewer found that single parents (on average) would lose income and lose more than other family types.
- Overall, UC promise to ‘make work pay’ does not stand up for single parents. There are worse incentives to work for single parents under UC compared with the legacy system and modest/minimal improvements incentives to progress in work.
- There has been a lot of focus on removing
the 16-hour threshold, but evidence suggests there is a risk of single parents
mostly being incentivised to do ‘mini-jobs’.
- Many single parents turn to self-employment to avoid job-seeking conditions when there’s a lack of flexible work (as well as those making a positive/conscious choice to go self-employed).
- There are concern about treatment of fluctuating income – there is more evidence of late of these groups losing out vs. PAYE employees.
- There are concerns about the Minimum Income Floor – Gingerbread is in touch with a vocal group of single parents working as childminders who are concerned they will not reach this threshold in sufficient time.
- Council tax support – not part of UC and perhaps missing a trick – a lot of the gains for those groups facing improvements to incentives to progress is a result of moving away from withdrawal rates from multiple benefits to one (lower) withdrawal rate.
- Significant, as many single parents have struggled with council tax debt since the reforms took place; bringing council tax within UC would mean a unified system (less of a postcode lottery) and potentially a better approach to means-testing.
- Looking at additional impact on wider services, e.g. charities – Gingerbread has not received any grants, but is conscious of increasing level of support required on helpline; HMRC put in place a grant system recognising the complexity of support needed and shortfall in Government-provided advice – more can be done on this for UC.
- CITIZENS ADVICE
CAB aims to provide advice to people in need and improve the policies and practices that affect people’s lives. CAB provides free, independent, confidential and impartial advice to everyone on their rights and responsibilities.
UC is a massive reform and by the end of rollout 7.2 million households will be receiving it. This is not a marginal issue – more than half of that 7.2 million will be in work, more than half of all families with children will receive it and more than half of all families with a disabled adult will be on it.
It will cover families in huge variety of situations – those seeking work, those in low income work, those who are unable to work – UC has to work for all of them.
This means that the design and delivery of UC is just as important as the policy itself. Like others CAB agrees with the aims and principles – to simplify the system and increase financial work incentives in the system.
CAB sees the problems with the current benefit system better than most – with 1.9 million enquires about benefits and nearly 20 million visits to the benefits pages of CAB’s website in the last year. UC presents an unusual and massive opportunity to fix many of the problems that are well-known about in the legacy system. Benefits need to be designed and delivered in a way that works with people rather than against them.
People seeking help from the CAB are often already dealing with many challenges in their lives and are trying to get back on track – the benefit system shouldn’t present them with another one. People seeking help from the CAB are not simply there because they need help to claim TC, or ESA or even Universal Credit – they are in need of help because their relationships have broken down, or they have been made redundant, or they now have a health condition, or disability that stops them from working.
Delivering on UC is not easy – the system is huge and various. It includes IT, and needs to account for local nuances. It is crucial that this policy is delivered well.
CAB has now helped people with over 100,000 UC issues and their insight from this, plus additional research that the CAB carries out suggests that there are many aspects of design and implementation that need rethinking.
- The majority of people who come
to us about UC need help with their initial claim.
- 30% of people the CAB helped have made 10 or more calls to
the helpline to sort out their claim.
- The Government’s own data shows
that 1 in 5 claimants are receiving their first full payment late – 1 in
10 of the people the CAB helps were waiting longer than 10 weeks.
- 57% of survey respondents in full service areas reported finding the Verify Process difficult. Other problems about evidence requirements have been reported as well.
CAB’s clients are more likely than others to need support with this system:
- Nearly half of them don’t have access to or can’t use the internet
- Around half of CAB’s UC clients are paid weekly or
Adaptations to help people who cannot
use the designed system but often CAB’s clients do not know about them:
- 8% knew about the option to receive fortnightly payments – 60% said they would have used this.
- 30% knew about payment directly to a landlord but a further 30% would have used this.
- Universal Support designed to help people adapt to digital claims and monthly budgeting is patchy and inconsistent and doesn’t help people with the challenge of completing a claim or with debt.
This combination of both design and delivery issues is having a
severe impact on many people.
- Over half of the people the CAB has helped who receive Universal Credit were forced to borrow money while waiting for their first payment.
- CAB has established from its own data that those coming to them about UC are more likely than those coming to them about legacy benefits to need help with debt too.
- 25% of CAB’s clients given advice on UC were also advised on debt, compared to 18% of those given advice on legacy benefits
CAB’s evidence shows (from their broader work with people in debt), that those who have UC as an income were more likely to have priority debts – such as rent or utilities, and less likely to have any money to repay these.
- 2 in 5 people on UC receiving help
from Citizens Advice to manage their debts have had no money available to pay
Fundamentally, bills including rent do not stop whilst people wait for their UC – and for many families who are just about keeping their heads above water – the delay for first payment can take them significantly off course.
The good news is that the Government are now listening and are making changes – with availability of advance payments and the helpline being free – these are hugely welcome improvements.
Were all the cuts to UC reversed, up to 1 million children could be kept out of poverty, who would otherwise experience poverty under the current design.