HC 576 Progress towards the implementation of Universal Credit

Written evidence submitted by Citizens Advice

Summary

   

1. Citizens Advice has long stressed the need or the social security system to be more simple for the claimant and we have welcomed the objectives of universal credit to simplify the system and to make work pay.

2. We have however identified some clear risks that the Government will have to tackle if they are to meet their own objectives and we have made some recommendations on how best we think they can be tackled.

3. Over four years around eight million households will be transferred onto universal credit during which time there will be effectively three parallel systems in place ( existing and new claimants and those with transitional protection). This could lead to the potential for people to not get the support they are entitled to and DWP, local councils and MPs constituency offices being flooded with people seeking help.

4. The Government needs to commit extra resources to Citizens Advice and the wider independent advice sector and to train advisors on the new system so that people get the right information and advice every time.

5. The new universal credit system will be ‘digital by default’ which risks causing difficulties to the 8.5 million people who have never used the internet and a further 14.5 million who have virtually no ICT skills [1] .

6. This is a bold move using a brand new system, pushing people to use internet when they may not feel comfortable, secure or equipped to do so. Our bureaux network will need support to give the help and reassurance people will need to deal with this change. The Government will also need to extend provisions for face to face support so that those with pronounced needs are not defined by narrow criteria such as those already in contact with adult social care.

7. Citizens Advice has conducted detailed economic modelling which demonstrates that disabled people are more likely to lose significant amounts under universal credits than any other group.

8. Severely disabled adults with no carer will lose up to £58 a week (over £3,000 a year), disabled adults who are fit for work but are unable to earn enough to support themselves fully will lose significant amounts with many losing around £40 a week and families with disabled children will lose £29 a week (around £1,500 a year). If the Government wants to protect the most vulnerable disabled people they need to either demonstrate clearly that they have investigated the impact of these changes and are satisfied that these people will not be adversely affected by this reduction in financial support or change these aspects of UC to protect them from the worst impact of the cuts.

9. Sanctions will not work if DWP do not take account of a claimants situation and the claimant does not understand what is required of them.

10. Claimants need to be fully involved in discussions with DWP to agree their claimant commitment. This will help ensure that work search requirements fully reflect their experience, skills, and any barriers and make it clear to both parties what they need to do to avoid any sanctions and what support is available to them. DWP also need to proactively seek to find out if there is a good reason why a claimant had failed in any part of their commitment before sanctions are imposed rather than leave it up to a vulnerable client to explain their situation.

11. The Government’s proposals to simplify the policy on earnings disregards have actually made it much more complex for some claimants to ensure that getting more work will actually pay, particularly low income home owners, parents of large families and some groups of disabled people.

12. DWP need to rethink their changes to maximum and minimum disregards so that it will be clear to claimants that they will earn more by taking on more work.

13. An uncoordinated approach across departments to passported benefits is likely to mean that universal credit will fail to deliver on the Government’s aim that work should always pay.

14. DWP need to take the lead across government departments to ensure that passported benefits such as free school meals support the objective of making work pay as well as meeting each department’s own objectives such as for example, ensuring the poorest children get a healthy school meal. They need to make the universal credit system is flexible enough to adapt to ensure that their aims are met.

15. The Secretary of State has described the introduction of universal credit and the accompanying reforms to the social security system as the biggest shake-up of the welfare system since the 1940s. With these massive challenges facing the policy we are firmly of the view that these changes need to be implemented properly, given time to work and their impact assessed before any further reductions in entitlement to means tested benefits are considered.

Introduction

16. Citizens Advice welcomes the opportunity to submit comments to the Work and Pensions Select Committee’s inquiry into Universal Credit.

17. The Citizens Advice service provides advice from over 3,500 outlets throughout England and Wales. We provide advice from a range of outlets, including GPs’ surgeries, hospitals, community centres, county courts and magistrates courts, and mobile services both in rural areas and to serve particular dispersed groups.

18. The service has two equal aims:

§ to provide the advice people need for the problems they face

§ to improve the policies and practices that affect people’s lives

19. In 2011/12     the Citizens Advice service helped over 2m clients with 7m enquiries including 2.3m benefits enquiries. In the last year we provided advice to 700,000 individual clients regarding a benefits query. Ninety per cent of these were of working age and therefore will be affected by the forthcoming changes to the benefits system following the Welfare Reform Act

20. Benefits is now our main enquiry area, replacing debt advice for the first time in many years. A third of all our advice given is about benefits.

21. As well as giving advice, the majority of Citizens Advice Bureaux deliver financial education initiatives to their community. In 2011/12 there were 280 Citizens Advice Bureaux that delivered financial capability services. Collaborating with other agencies through the network of financial capability forums, bureaux and forum members deliver initiatives that benefit a quarter of a million people a year.

22. Our work with benefits claimants makes a difference – a snapshot of our client records in February 2011 found bureaux had helped 142,000 clients to claim £748 million in benefits they were entitled to in 2010/11 but could otherwise have missed out on, either because they did not know what they were entitled to or could not navigate the system.

Specific comments

The proposed arrangements for claims and payments and the provision of support and advice for claimants, including the presumption of a predominantly online, self-service claims process; monthly payment to one person in the household; and arrangements for providing telephone and face-to-face support and independent advice for claimants who need it.

23. As the Secretary of State has said the changes introduced under the Welfare Reform Act 2012 represent the biggest shake-up of the welfare system since the 1940s. As by far the largest provider of independent advice on welfare we are expecting a massive increase in the demands for our service as 12 million people are moved onto the new universal credit system. We are conducting a fundamental review of how we are going to cope with the increased demand and the need to retrain advisors throughout the country so that they can ensure that they are giving the correct advice.

24. In the long run universal credit will have the potential to be simpler for both clients and advisors but up until 2017, but there will be four years over which migration will take place. It is vital that during this transition period when there will be three parallel systems ( existing and new claimants and those with transitional protection) in place, that DWP work with us to ensure that the advice sector have the right resources to rise to this challenge.

25. This demand has to be set within the context of the Citizens Advice Bureaux facing funding cuts of 21.2% in the last two years and more cuts expected in the coming years.

We have identified a number of key risks which we believe DWP need to consider in this

area:

· Many claimants will feel a high level of stress and anxiety moving onto a new system. Clients will make ‘so-called’ unnecessary contacts with the  DWP service worried about the process and the changes, causing increased demand and unnecessary costs

26. Citizens Advice will be able to help negate this problem if clients are able to make contact with our service to help them understand the impact of any changes and to see that work can pay for them.

· There is significant potential for error and confusion in the transfer period for both claimants and front line workers dealing with a number of different systems. This could lead to people missing out on what they are entitled to and major difficulties for DWP advisers.

27. Citizens Advice will need to have adequate resources to ensure that throughout our network we are ready to deal with the new system from the start of the complex change over period including ensuring our advisors are properly trained.

· A change from several payments at different intervals in a month to different partners in a couple, to one monthly payment to one person in the household carries with it huge risks. Clients who are dealing with tight budgets with little experience of monthly pay packets risk getting into debt with and there is potential for abuse in situations such as for those in domestic violence situations.

28. DWP said that they wanted to introduce monthly payments as it would prepare people for the world of work. While it is true that most employees in professional positions are paid monthly, according to DWP’s own figures around half of all low earners do not receive monthly pay packets [1] .

29. DWP have already agreed that there will be exemptions for people who will have difficulty caused by the payment system and we welcome steps by them to set out when payments should be made more frequently or directly to a landlord. However, it makes no sense to wait for someone to get into financial difficulty before DWP decide to make them an exception. The assessment process needs to proactively assess whether a different payment system would be more suitable in order to prevent debt and financial hardship.

· There are fundamental issues in delivery by an online process – i.e. low levels of literacy, numeracy and digital skills, along with issues such as learning difficulties and mental health. There are 8.5 million people who have never used the internet and a further 14.5 million who have virtually no ICT skills [2] .

30. While the system may be digital by default, DWP need to make significant provisions for people for whom a purely online access system will prove to be unworkable. The system cannot assume that everyone is going to have constant access to a computer when there are 5.7 million households without internet access [3] . Even if someone is able to access a public computer to fill in an online form they are unlikely to be able to receive emails to let them know how their applications are being processed or if they need to do anything else.

31. The support required by those who cannot access or use online systems is a complex area. The Government Digital Services team recognises that these needs can only ever be addressed by partnership working - as no one organisation can cover everyone’s needs. There will be a high number of people who will need permanent support in using or accessing online Government services, especially universal credit. That means factoring in support needs for the longer/permanent term as well as the transition period.

32. DWP have said in meetings with the advice sector that arrangements for face to face support is going to be based on those with pronounced need, for example, who already have contact with adult social care. This is too narrow and excludes those who may have chosen not to engage with adult social care as well as others whose vulnerability is not defined by access to social care.

Progress with developing the necessary IT systems to administer Universal Credit, including the real-time information (RTI) system for PAYE taxation being developed by HM Revenue & Customs.

Making sure the IT system does not stop people being able to access advice

33. Access to the universal credit system will be via the online channel whether the client self serves, phones DWP for them to input to the online system or gets face to face help to complete online. Clients will have to pass through identity assurance processes to access the universal credit system. This is likely to be through first logging into their bank or utility company account.

34. It is not yet clear how intermediaries such as advisers in a bureaux will be able to access the universal credit system on behalf of clients without having to first pass through the clients personal security information. It is vital that a secure access route is available for advisers from day one.

35. When contacting DWP on behalf of a client now (via telephone), using implicit consent, an adviser is able to get information about a client’s claim on their behalf. When contacting HMRC a bureaux can set up authority for them to represent a client through the use of a form of authority that is then set up on the system so they can call on a claimant’s behalf.

36. DWP must urgently work with the advice sector to design an alternative method of access to ensure that Citizens Advice Bureaux and other advice and representative organisations can give clients the support that they vitally need.

Making sure IT works, is user friendly reliable and interactive.

37. Getting the IT right is unquestionably vital. It is unthinkable that there could be a repeat of the introduction of the tax credits system – IT errors led to calculation errors, duplicate payments or payments stopping without warning or explanation. In the first eighteen months of operation HMRC made 21,000 compensation payments.

38. Award notices lacked information sufficient to enable a claimant to understand their entitlement or how any overpayment has arisen or how it was being recovered and what changes of circumstances they were required to report when.

39. The IT design approach meant that faults once spotted could not be corrected, or improvements implemented for many months.

40. Lessons must be learned to ensure IT failure does not cause huge administrative problems; information on award notices – printed as well as online must be clear with access to further information about entitlement accessible.

41. We therefore welcome the DWP’s use of agile design for universal credit. We hope that user testing at the design stages should ensure that it is accessible at the start but the agile approach should clearly make it easier to correct or adapt processes as necessary.

42. One of the key benefits of universal credit is the fact that claimants will not need to report changes of circumstances several times to several different Government departments – and specifically will not need to report earnings at all because HMRC will pass this data to DWP through the RTI system. For self-employed claimants it is not yet clear how this will work.

43. IT must be user-friendly – particularly for claimants who will for the first time have to report childcare costs every month regardless of whether they have changed since the previous month – far more frequently than they currently have to report. DWP must consider ways to prompt claimants through text as well as email alerts.

The proposed arrangements for the "claimant commitment", sanctions and hardship payments. The proposed arrangements for the "claimant commitment", sanctions and hardship payments.

· The claimant commitments must be drawn up with the claimant, ensuring skills, experience and any relevant circumstances are recorded. Enabling DWP to provide the right support to the claimant and preventing inappropriate sanctions.

· A claimant charter is needed to set out minimum standards of support and treatment for claimants.

· Safeguards must be put in place to prevent inappropriate hardship and debt.

· The impact of sanctions on well-being and labour market activity needs to be monitored. Monitoring and evaluation of claimants’ work and earnings progression should separately identify the impact of sanctions and support.

The claimant commitment

44. The claimant commitment could be a really useful tool in increasing understanding of both claimant and DWP of responsibilities and requirements. The Citizens Advice service deal with over 8000 JSA sanctions and hardship enquiries every year. Commonly clients express that they did not know why they had been sanctioned and had little or no warning in advance of it being applied. Many clients are vulnerable, with health problems, disabilities or literacy needs, were unable to comply with the requirements and appear to have had little support to find work.

45. For those in-work and receiving universal credit, we hope that the claimant commitment will improve understanding that leaving work or reducing hours below the conditionality threshold will result in a sanction. The commitment also requires claimants to provide accurate information and report changes of circumstances in a timely fashion.

46. The Welfare Reform Bill provides that the Claimant commitment be completed by the Secretary of State and updated as he sees fit. We believe that this should be a two-way process with the claimant fully involved in discussions with DWP to ensure that the work search requirement fully reflected their experience, skills, and any barriers to work. This would increase the likelihood of a claimant finding work and getting any appropriate support required. We would like to see clear guarantees that there will be a significant change from how things operate now.

Effectiveness of sanctions

47. If a sanction is to be fair and effective, the claimant must understand what is required of them and they must be able to meet that requirement. Once referred for a sanction the claimant must also understand why, in order to be able to prevent it from happening again.

48. Research has found little evidence to support the effectiveness of sanctions in moving claimants closer to the labour market. JRF review of sanctions research found claimants who have been sanctioned are more likely to experience low wages and high job churning [4] New Deal claimants who had been sanctioned and experienced hardship were much less likely to be in employment than those who had not been sanctioned and those who had been sanctioned but had not experienced hardship [5] .

49. We are concerned that the effectiveness of a sanction may be limited by the fact that it will remain in place even when a claimant finds work. Plans to make hardship payments recoverable also mean that the impact of the failure to comply will last for many months – three for the first low level sanction and then several months after for the recovery of the hardship payment. Whilst the plan to suspend and potentially write off the recovery of hardship payments for claimants who have found sustained work is welcome, this is just a small step in the right direction.

50. Evidence from our CAB advisers question the effectiveness of sanctions in increasing the motivation and commitment to jobsearch.

An East Midlands bureau recently helped a man in his early twenties who was struggling to meet his financial commitments due to sanctions for ostensibly not showing enough commitment to work. The bureau believed that despite a few failures to comply with requirements he was genuinely looking for work and that the sanctions had only served to interrupt his jobseeking as he was frequently thrown into crisis situations and having to focus on trying to reinstate his benefits and manage a growing debt problem. The approach appeared to be punitive rather than supportive and in the bureau’s view completely counterproductive.

He left a job in April 2011 and applied for JSA but was sanctioned for six months for not having a good enough reason for leaving work. Before his sanction had expired he was given a second six month sanction for failing to apply for one of the jobs identified for him. During this time the client was placed on an Employment programme but though he attended all subsequent sessions, he failed to attend the first one and was sanctioned again. He had been told that his housing benefit and council tax benefit w ould stop unless he provide d details of his benefit income, which he couldn’t do whilst appealing. He had significant rent arrears and utilities debts and his energy supplier was threatening to fit a pre-payment meters for his fuel.

Protecting vulnerable claimants from hardship

51. The system for sanctions as it is currently proposed will make it very hard to protect the most vulnerable from serious hardships. Sanctions can mean a claimant losing out on all the adult rate of their universal credit for three months for the first failure, six months for the second and three years for the third

52. The Government has said it will consider good cause or good reasons for non-compliance prior to sanction. They will however only visit those with limited work-search requirements if there is a good cause or reason for their non-compliance. This needs to be extended to other groups if they are to prevent the vulnerable from unnecessarily suffering hardship by relying on them to provide evidence un-prompted. As the most vulnerable are likely to find it hard to express good cause you can’t assume that just because a claimant has not given a good reason that there is not one.

53. Citizens Advice evidence shows that the most common reason for sanctions was a claimant’s failure to apply for specified jobs. Evidence from advisors show that most claimants in this situation have not understood that it was a ‘direction’ rather than a suggestion. So when there was a good reason why they didn’t apply – for example finding on receipt of more details for example that they did not have the necessary qualifications or experience, they did not tell their jobs seekers office and were hit by a heavy sanction.

54. Currently regulations do not require that the claimant commitments should note any relevant health condition or disability that would affect a claimants ability to comply with specific work-related requirements. This has meant that many claimants have had benefits taken away from them because they did not apply for a job which would have been unsuitable for them because of their situation. Cases below illustrate:

A bureau in the South West recently saw a man who was sanctioned with no notice for failing to apply for a 40 hour a week job. This is despite the fact that his Jobseeker’s Agreement gave discretion for him to limit his hours to 24 as he was a full time carer for his disabled partner and their six children, two of whom were seriously disabled.

A Yorkshire client went to sign on and was told that he had not been doing enough to seek work. The client had been using job points and looking for jobs in the local paper. He is also doing an ESOL course which includes working towards writing a CV. His Jobcentre Plus adviser told him that this was not enough but did not tell him what else he should be doing. The letter refers him to a form to apply for a hardship payment but the form was not given to him and hardship was not discussed with him. He lost his JSA, HB and CTB for two weeks. He had no heating or water and was getting food from his local church.

In the South of England a vulnerable young client who suffered from depression, and a speech impediment that made it difficult for him to communicate over the phone turned to his local Citizens Advice Bureaux for help. He had been sanctioned for failing to attend a n anger management course that he couldn’t get to by public transport and struggled to phone to explain – he was sanctioned again for failing to attend a job interview when facing a crisis at home.

Changes in the income entitlement of disabled people under Universal Credit, including those who may receive less income under Universal Credit than at present.

55. Support for disabled people is being restructured under universal credit. Citizens Advice, The Children’s Society and Disability Rights UK have recently published a report, Disability and Universal Credit which uses a series of scenarios, to unpick some of the complexity of who will lose or gain. It is available on our website and goes into to more detail than is possible here [6] .

56. The Government has said that any savings from the reductions outlined below will be used to increase the means-tested addition for claimants in the Employment and Support Allowance support group [7] . However, we do not believe the current proposals meet their objective of supporting those with the greatest needs and explain why below.

57. Whilst couples with someone in the support group will gain from this restructuring, those in the support group who live on their own and do not have a carer will be worse off under universal credit.

58. DWP has not presented any evidence that disabled people in the support group who live on their own will be able to cope with the significant cuts they are going to face. We have therefore made recommendations to help this group which we believe could fit easily within the universal credit structure and would also meet the Government’s other objectives of simplifying the system and improving work incentives – we think that with these in place the support component could then be increased when money allows.

59. There are three changes which are likely to lead to significant losses for some groups of disabled people:

· There is to be no equivalent of the severe disability premium (SDP) in universal credit. Under the current means tested system severely disabled adults for whom no one claims carers allowance and who live on their own, live only with dependent children, or with another disabled adult, are eligible for the SDP worth £58. This recognises that they are likely to have extra costs (such as needing help with small household jobs) which someone with the same level of impairment but who has a partner or carer, won’t face. They are eligible for this premium whether they are in or out of work. For disabled lone parents, receiving the premium can help reduce the pressure on their children, often of school age, to care for them. Under universal credit households with an adult carer will be eligible for the carers addition (£33) even if they are working fulltime. We recommend that either the SDP is retained or if this is not possible, a ‘self-care addition’ be paid at the same rate as a carer’s addition for severely disabled adults who have no-one in receipt of the carer’s addition.

· No equivalent of the disability element of working tax credit (WTC) for those found ‘fit for work’. The regulations make clear that the only extra means-tested support disabled adults will receive in universal credit will be through the work capability assessment (WCA). Many people who have extra costs in work and would be eligible for the disability element of WTC would be found fit for work under the WCA and so will receive no more financial support in universal credit than someone without a disability. Yet, they will have extra costs in work which will not be covered by "access to work" (such as needing to pay a cleaner because their condition means they haven’t energy for both work and chores). We recommend that the WCA has an extra stage whereby someone who is found fit for work but still has a significant level of functional impairment, would be eligible for the disability earnings disregard (worth an extra £18 for someone in work).

· Reduced disabled child additions. At present, families with a disabled child may be entitled to receive support through the disability element of child tax credit, currently worth £57 a week. Under universal credit, families with a disabled child will see this extra support reduced to £28 per week unless the child is receiving the higher rate of the care component of disability living allowance (DLA) or is registered blind. There are two key groups who will be most affected by this reduction in support:

o Families where no-one can work because of their caring responsibilities. We recommend that the disability additions for children remain at their current rate.

o For those who can work, the picture is much more complicated, but many of these households are also likely to be particularly adversely affected by the cuts to support for childcare for those on a low income and living in rented accommodation [8] . Parents of disabled children are more likely to have to use formal childcare, the childcare is frequently more expensive and is often needed for more years than for a non disabled child. We recommend that 80% of the childcare costs for disabled children be paid rather than the 70% of childcare costs which is to be paid for other children.

The impact of the changes on local authorities, including budgets, staff and support for claimants. The changes include those to housing benefit; the introduction of the benefit cap; and localisation of council tax support.

60. Local authorities are grappling with future resource requirements coming out of welfare reform in order to deliver the flexibility needed to manage peak demand and mitigate the impact on quality and levels of service delivered to claimants. Advice services provide a way of extending local authority capacity around welfare benefit advice and support through existing specialist expertise found within the community. Offering a cost effective, resilient and more sustainable solution that taps into local civic resources, trained volunteers are able to bolster the local authority’s own welfare benefit support.

61. Citizens Advice Bureaux as existing partners to most local authorities across England and Wales are well placed to help develop effective, client-centred responses to the following challenges for local authorities:

· delivery of the new localised support for council tax

· supporting people in need from a new localised welfare assistance budget (replacing crisis loans and community care grants).

· the introduction of both a housing benefit and overall benefits cap

· supporting people forced to move from accommodation that is no longer affordable

· administering benefits for displaced families in receiving councils

· increases in rent and council tax arrears (prevention and early interventions)

· providing advice and support to help people understand and deal with the new processes surrounding welfare application, support and payment arrangements.

· working to address perceived unfairness of variations in localised support for council tax

62. Many bureaux are already working with their respective local authorities on the aforementioned issues, to develop new ways of working that respond to the local challenges that come with welfare reforms.

The level of the earnings disregards

63. The Government have recently made two ‘simplifications’ to their policies on earnings disregards which will in fact make it much more complex for a claimant to know whether work will pay and how much.

Maximum and minimum disregards for housing costs

64. Everybody has a maximum amount of universal credit they are eligible for depending on their circumstances. The essential requirements for understanding whether work will pay is knowing what that maximum level of universal credit is and how much money you can earn before you start losing any of your maximum amount of universal credit (your earnings disregard).

65. The original proposal by DWP was to have a maximum disregard for someone who has no housing costs included in their maximum universal credit and then to taper the disregard depending on the amount of housing costs until a minimum level for the disregard was reached. This produced a very fair system as it meant that those with low or no housing costs received the same level of help with their personal costs at someone else with housing costs at the same level of earnings. [9] This made it slightly complex to work out your personal disregard level but once given that by DWP, it would be possible to work out for any change in earnings, what your net income would be.

66. The Government are now planning to take this taper away and instead apply a lower disregard for a household who has any housing costs included in their universal credit award. This makes it superficially simpler but actually introduces significant new levels of complexity.

67. Under the new proposal at low levels of earnings, a claimant would be better off having their housing costs included in their maximum universal credit. However, for those with low housing costs, once their earnings become higher, they will be better off by not having their housing costs included because they would be pushed onto the lower earnings disregard.

68. However, it will be very difficult for a claimant to know whether they would be better off with a higher disregard and no housing costs included, or the lower disregard with their housing costs included. This will be an ongoing problem. As their earnings fluctuate there will be a change in the rate of gain for different levels of earnings – and a point at which they should request their housing costs to be included or excluded - a much more complex series of calculations to work out .

69. We believe the Government need to reinstate their original proposals to have a maximum and minimum disregard floor and gradually taper the maximum level to a minimum level by 150% of the amount of housing costs.

Number of children

70. The other ‘simplification’ from the original proposals, was to set the same earnings disregard for all families, regardless of the number of children in a household. This will make it more difficult for larger families to make work pay, as the impact of losing free school meals at a particular income point will be greater. They are also likely to face higher childcare costs and therefore need a higher earnings disregard in order to make work pay. As it becomes less certain whether work will pay then better off calculations become more necessary and more complex. Under the current system, households with more children get a higher earnings disregard in the housing and council tax benefit rules – as child benefit is in effect disregarded twice [10] .

71. We believe that under universal credit, higher disregards for larger families remain necessary to support the principle that work should always pay.

Eligibility for and operation of passported benefits

72. DWP need to take a proactive lead working with other Government departments to ensure that entitlement to different passported benefits does not undermine the aims of making work pay and protecting the most vulnerable.

73. If it proves impossible for other departments to design their passported benefit schemes in ways that do not undermine DWP’s objectives for universal credit, DWP must commit themselves to reassess aspects of universal credit regulations to ensure that work will still pay and the incomes of the most vulnerable are protected.

74. Passported benefits such as free school meals are an important financial benefit for families on low incomes. How entitlement to these benefits are set will have a huge impact in determining whether the universal credit system will succeed or fail in providing work incentives.

75. With universal credit available to families in an out of work, the Department of Education is most likely to set it’s criteria for free school meals at an income or earnings threshold. However, this would have a massive impact on work incentives and family budgets around this threshold. If a family with two children increased their earnings to just one pound over the threshold, they could find themselves losing around £20 a week in free school meals. A point highlighted by the NAO in their recent report on means-tested benefits. [11]

76. This will make work incentives worse under universal credit than the current system. Families currently lose entitlement to free school meals with moving into work and claiming working tax credits. Whilst this considerably reduces the gains from working, most families are still better off in work because of the working tax credits that become available a this point.

77. DWP has currently asked all departments to consider the impact on work incentives when setting their entitlement criteria for their passported benefits. However, with the current financial restraints and without any adaptations within the universal credit system, this is likely to prove impossible. It is therefore crucial that DWP take a more proactive role in co-ordinating and work more closely with other Departments and not just leave how work incentives are considered up to them.

78. As free school meals are one of the most significant passported benefits, we believe one possible solution would be for all families on universal credit to qualify for free school meals. The Government could recover some of the extra costs of this policy by reducing earning disregards for families.

79. Whilst setting criteria for benefit entitlement remains the responsibility of different Government departments, DWP must keep an abreast of the impact of their criteria on work incentives. If necessary tapers and disregards should be amended to ensure that incentives to work are maintained.

80. Several passported benefits such as partial help with dental or optical treatment require a claimant to give full details of their financial circumstances to a different department in order to access this help. Under universal credit, all these financial details will already be held and have been checked by DWP – it therefore makes sense for DWP to pass on to other departments details of which claimants will be eligible for these benefits. As well as simplifying the system for claimants, DWP taking the lead also offers the chance of making significant administrative savings for the Government.

Impact monitoring: what the DWP’s priorities should be for monitoring the impact of the transition to Universal Credit.

81. When changes to the welfare system go wrong, Citizens Advice see the impact straight away as people come to CAB offices looking for help. We therefore understand the importance of DWP having a robust system to monitor the transition to universal credit.

82. The most important group that DWP needs to consider is the two million who would be worse off under the new system, particularly as those in the bottom two income quartiles are the most likely to lose out. They especially need to consider the 200,000 who lose more than £50  a week . The transitional protection will help but DWP need to monitor how this has an impact on behaviour as people try to avoid changing their circumstances in case they face a sudden loss and the added complexity to the system.

83. In particular we believe DWP should monitor:

· Overall better off/worse off picture. DWP should look at impacts as a whole. i.e. consider overall gains and losses for households including free school meals.

· Increased/reduced earnings and hours of universal credit recipients from the point of transition  i.e. does universal credit create work incentives?

· Debt – monitor numbers/proportion of households who have faced debt or money problems within the first six months of transition to universal credit.

· Quality of communications – what do people understand about the changes and how they impact them?

· The simplicity test – ask people what they understand in terms of reporting requirements and what factors impact their entitlement.

· Impact on advice services – what do people seek advice about – is it needing help to claim, to understand entitlement, or has something gone wrong?

· Ability of claimants to manage their claims online

· All monitoring should break down by those who win/stay the same against those who will have lower benefit entitlements under universal credit.

· Are there a significant number of "missing claimants" who have been cut out by the on line system?

84. Citizens Advice can support DWP with their impact assessment. We record information on every enquiry across England and Wales by specific enquiry type and personal profile, regional breakdowns etc. We are able to provide a massive amount of quantative and qualitative data to help DWP with monitoring of impact of the introduction of universal credit and we are very keen to work with them to help them achieve the aims of making work pay and protecting those who need support the most.