HC 576 Progress towards the implementation of Universal Credit

Written evidence submitted by the Centre for Economic and Social Inclusion

 

Introduction

The Centre for Economic and Social Inclusion (Inclusion) is the leading not-for-profit organisation dedicated to tackling disadvantage and promoting social inclusion in the labour market.

We support the Government’s objectives in introducing Universal Credit, and believe that it has the potential to significantly simplify the design and delivery of the benefits system, improve returns from work and promote financial independence. However as the Committee identifies, there are a number of areas where the detailed design of Universal Credit could work against these goals. The system will remain complex for claimants, advisers and the wider public; there will be less choice in how benefits are claimed and managed; and it is not yet clear what support will be available locally, whether systems and processes will be ready for roll-out, and how Universal Credit will fit with other provision (from free school meals to localised Council Tax Benefit).

This response addresses in turn the eight specific areas identified by the committee. In addition, Inclusion’s response to the Social Security Advisory Committee’s recent call for evidence on the Universal Credit draft regulations is also attached.

Claims and payments and the provision of support and advice

Universal Credit presents a unique opportunity to address many of the factors that have undermined access to benefits in the past: complex claims systems, duplication of information requirements, and involvement of multiple agencies [1] . Therefore the creation of a single benefit has the potential to significantly improve access to benefits.

However, Universal Credit will also serve to reduce the channels through which individuals can claim benefit. As the draft regulations make clear, online claiming will be the only option available to claimants unless they fall "within a class of case for which the Secretary of State accepts telephone claims or where he is otherwise willing to do so." On the latest data just 19.6% of new JSA claims were made online [2] , while ONS figures show that almost a quarter of households have no internet access and that the rate of internet use decreases in line with income. [3]

The Department therefore needs to ensure that it has in place:

· A coherent strategy to ensure that those who can claim online do so;

· A digital inclusion strategy to ensure access to digital channels, and support to use them, for those who are currently excluded;

· The right support for disadvantaged claimants who may face barriers in claiming – we welcome the Government’s proposed pilots to test local approaches to providing face-to-face support [4] ; and

· In our view, the right for any claimant to opt in to claim by telephone – at least in the early stages.

The Government has not yet set out its plans for how labour market support will be delivered under Universal Credit. Currently, support for jobseekers is overwhelmingly face to face, and previous trials of moving to telephone-based and other systems have found that the negative impacts as a result of fewer people leaving benefit more than outweighed any positive impacts in reduced administrative costs [5] .

In our view, labour market support cannot be "digital by default" – it must be face to face, personalised, and delivered by high quality, professional advisers. We would therefore welcome a commitment from the Government that support for those in the full conditionality group will be underpinned by regular, face-to-face, professional adviser support.

Developing the IT systems to administer Universal Credit

Inclusion is not in a place to comment on the readiness of DWP and HMRC’s IT systems. However, we would make two observations.

First, we would reiterate that maladministration, delays and complexity can significantly undermine claimant confidence and ultimately the willingness to return to work. DWP research on the administration of Housing Benefit found that perceived maladministration acted as a barrier to claimants taking up work due to concerns around losing the "safety net" of rent support [1] . Universal Credit will smooth the transition between out-of-work and in-work support – but it will depend on the link between the HMRC "Real Time Information" system and DWP’s Universal Credit system. It is not clear that there are contingencies in place if that link is not ready or breaks down. This needs to be a top priority for the Department.

Secondly, it is imperative that DWP has learnt from previous major reforms to claims and payment systems. The 2004-6 Child Support Reforms were a case in point. While much of the blame for the failure of these reforms was placed on the procurement of the IT system, as the National Audit Office made clear there was a far greater catalogue of errors – including management failures, ineffective risk controls, and issues with staff readiness and culture [2] . The "agile" system being used for Universal Credit, although essentially untested, should serve to mitigate some of these risks but it will not mitigate all (in particular, risks around staff preparedness).

The "claimant commitment", sanctions and hardship payments

The claimant commitment and out-of-work conditionality

The proposals for a claimant commitment build largely on the current system of Jobseeker’s Agreements (for those on JSA) and action plans (for those on other benefits). There is limited information so far on how commitments will be drawn up. However the implication from the regulations is that this will be a commitment by the claimant to the adviser/ DWP, rather than an agreement between the two. The distinction is important – in our view, the claimant commitment should set out the actions that the claimant will take to prepare or look for work, and the support that they can expect in return.

This agreement should also be underpinned by a clear statement of the level of support that claimants can expect in different conditionality groups. This should learn from the "Service Guarantees" used in Australia, which set out claimant responsibilities but also service standards, including a commitment to receiving assistance with preparing a CV, advice on how to look for work, information on suitable job opportunities, advice on skills, and other suitable support. [1]

For those in the "full conditionality" group, the Government has stated that jobsearch should be a full-time activity (that is, that jobseekers should spend as many hours looking for work as their claimant commitment sets out that they can spend in work). As we set out in our SSAC submission, the evidence suggests that effective jobsearch and quality adviser support are what matters [2] . Evidencing 35 hours of jobsearch a week would likely be unworkable and arguably disproportionate. Indeed the Regulations themselves make provision for the Secretary of State to waive the requirement where he is satisfied that "all reasonable steps" have been taken.

In our view, the current proposals should be reframed around taking all reasonable steps to look for and prepare for work, as agreed in the claimant commitment.

In-work conditionality

As set out in our SSAC response, we recognise that claimants with low earnings and high Universal Credit awards should be expected to take appropriate steps to increase their earnings. However this will inherently introduce new complexity to the how the benefits system is designed and then applied.

In particular, we are concerned that the current proposals appear to put the emphasis for in-work conditionality on "obtaining paid work" – i.e. taking steps to look for other jobs and being available at short notice for interviews. This could have the unintended consequence of actually making employers less likely to employ claimants of Universal Credit – as those employees will be required to continue looking for work, to be available for interviews at 48 hours’ notice and to continue to report to Jobcentre Plus.

We consider that the approach needs to be far more flexible, personalised and targeted at providing support to those who are most at risk of remaining in low-paid, part-time work. In particular, we would recommend defining the objective of in-work conditionality around increasing earnings (which could come through higher pay or longer hours), rather than simply obtaining more work.

Conditionality and contracted provision

The Committee may also want to consider how this new conditionality regime will be applied within contracted employment programmes. Currently, for JSA claimants in the Work Programme, providers do not have a role in monitoring compliance with the Jobseeker’s Agreement. Instead jobseekers maintain their Agreement with Jobcentre Plus (including fortnightly signing) while separately agreeing an action plan with their Work Programme provider.

There are therefore two issues:

a) Will the claimant commitment, for those out of work in the "full conditionality" group, continue to be defined around full-time jobsearch?

b) And for those in work, will the commitment be defined around searching for additional work for those below the conditionality threshold?

If claimants face the same conditionality requirements on contracted provision as they do outside it, then this could create significant complexity for Jobcentre Plus, providers and claimants themselves.

In our view, claimants on contracted provision should be deemed to be taking "all reasonable steps" to look or prepare for work. In other words, their "claimant commitment" to Jobcentre Plus would be to take part in the programme, rather than to undertake a fixed number of hours of activity per week.

Sanctions

Sanctions are clearly important in providing a warning to claimants that failing to undertake agreed actions will have consequences. However that deterrent effect will only work where those consequences are understood, clearly communicated and fairly applied. The evidence [3] suggests that awareness of sanctions is low – even among those who have been sanctioned – and sanctions are more likely to be applied to already disadvantaged groups.

The Department therefore needs to ensure that under Universal Credit there is a greater focus on using the warning of sanctions to encourage compliance, with sanctions a last rather than first resort.

Where sanctions are applied, a comprehensive study for the Joseph Rowntree Foundation [4] found that while there appear to be generally positive short-term impacts on employment, these appear to be associated with lower-quality work, often negative impacts on earnings, and negative impacts on children and families. The increased level of Universal Credit sanctions, and the fact that in couple households effectively both claimants will be penalised when one is sanctioned, could serve to exacerbate these negative impacts.

Changes in the income entitlement of disabled people under Universal Credit

As the Committee will have noted, Universal Credit will significantly reduce support for some claimants and particularly for disabled people who:

· Would previously have qualified for the additional premia in the tax credits and benefits system or to higher premia for disabled children; and

· Have caring responsibilities – through the inability to claim both the Carers Element and Limited Capability for Work/ Work Related Activity element.

This has been set out particularly clearly in joint work by the Children’s Society, Citizens Advice Bureau and Disability Rights UK [1] . We like others would strongly support bringing these elements in line with the current system.

The impact of the changes on local authorities

As noted above, the Government has announced its "long list" of local authorities that will pilot approaches to providing additional support to claimants. However while this is welcome, the impact of Universal Credit on local authorities will be wide-ranging – affecting their structures, staffing, the services that they provide, their supply chains, and how they work with partners.

We understand that the Department is currently conducting a "business change impact analysis" to understand the full impact on local authorities [1] . This is welcome, and we would ask that this is conducted in an open and transparent way, and in particular that it engages the range of organisations (suppliers, stakeholders, voluntary and community sector partners) that local authorities currently work with to support delivery of benefits and welfare. It should also assess the impact on local partners as well as local authorities themselves.

In addition, we would recommend that the Department conducts an urgent analysis of the interdependencies between Universal Credit and other major welfare reforms affecting local authorities. In particular, this should focus on the links with:

· Localisation of Social Fund – as the Communities and Local Government Committee found [2] there are significant concerns that the level of funding to Local Authorities will not be sufficient to meet the costs of establishing new schemes, that social services functions will not be best placed to deliver local schemes, and that the lack of ring-fencing could lead to further reduced support. We are currently conducting research on local authorities’ plans for replacement schemes and have found a mixed picture. Getting the links right between local replacement schemes and Universal Credit will be critical, particularly given the move to monthly payments of benefit under Universal Credit.

· Localisation of Council Tax Benefit. We agree with the Institute for Fiscal Studies [3] that localisation of Council Tax Benefit will undermine the benefits simplification that Universal Credit will bring, and that it has "the potential to reintroduce some of the extremely weak work incentives that Universal Credit was supposed to eliminate." Timescales are also extremely tight, with local authorities required to adopt local schemes by January 2013. We would favour the integration of Council Tax Benefit in Universal Credit. But assuming localisation goes ahead, the Government needs urgently to assess the implications for claimants of Universal Credit in terms of simplicity, ease of administration and improving work incentives.

The level of the earnings disregards

We have set out in our SSAC response that we consider that earnings disregards should:

a) Enable those that may face additional costs in moving into work to keep more of their earnings (parents with care, disabled people); and

b) Provide a stronger cash incentive to move into work for particular groups (for example the longest-term unemployed or those furthest from work).

Therefore we are supportive of the Government’s proposals to set higher disregards for claimants with children and claimants with a disabled person in the household. However we would define disability as any work-limiting disability – not, as the Department proposes, only those assessed as having a Limited Capability for Work.

The Department is also proposing to set lower disregards for those that receive a housing award in Universal Credit. There are arguments for and against this approach. In particular, for claimants without a housing award but with a mortgage, a higher disregard would improve returns from work and could significantly boost income at low hours or earnings. However it also increases complexity, particularly for those who may be entitled to a small housing award but at low pay could find themselves worse off by claiming it.

The Department has not set out what the disregard levels will be under its current proposed approach nor any assessment of the impact on different groups of claimants. We would urge them to do so, and to set out the impacts of alternative approaches. On balance, we would favour the same level of disregard for those with and without a housing award, as long as impacts on work incentives and incomes for those without the housing element but with housing costs (i.e. mortgage holders) can be mitigated through higher disregards for children or disability.

Finally, we are concerned that the Department’s decision to abolish the In-Work Credit and Return to Work Credit will undermine financial incentives for those furthest from work. Research by Inclusion found that In Work Credit acted as a strong incentive for a small but significant group of lone parents: those who had spent long periods on benefit and had "patchy work histories" [1] . These findings are consistent with other studies of what works [2] . Removing In Work Credit and Return to Work Credit could weaken incentives for those who are furthest from work and have spent the longest periods on benefit.

We would therefore urge the government to introduce a higher disregard for those with caring responsibilities or disability and who have been out of work and on benefit for more than two years.

Eligibility for and operation of passported benefits

As SSAC have made clear in their comprehensive report [1] , there are no straightforward ways to replicate current passporting arrangements within Universal Credit – and the timescales are too short to fundamentally reform passported benefits. We agree with them that the Government should take this opportunity to take a longer-term look at the structure and operation of passported benefits.

In the short term however, we would support SSAC’s recommendation that the Government introduces a "run on" of up to a year for claimants that lose entitlement to free school meals.

Impact monitoring

We understand that the Department is developing a full evaluation strategy for Universal Credit, which is likely to include qualitative and quantitative research, economic impact assessment, and a review of its implementation. We would strongly support this approach. The phased rollout of Universal Credit also means that there should be scope within this evaluation to measure the additional impacts of Universal Credit – for example on movements into and out of work, earnings growth, debt/ financial security, housing choices.

As well as evaluating the impact of Universal Credit, the Department will also need to have sophisticated systems in place to monitor impacts in live running. This will need to include impacts on Local Authority services, housing providers (in particular social landlords’ receipts), providers of employment and skills support (for example Work Programme providers), employers, and claimants themselves.

21 August 2012


[1] See for example Finn, D.; Mason, D.; Rahim.; Casebourne, J. (2008) Delivering benefits, tax credit and employment services: problems for disadvantaged users and potential solutions , Joseph Rowntree Foundation

[2] DWP (2012) Proportion of new claims to Jobseeker’s Allowance submitted online http://www.dwp.gov.uk/docs/jsa-claims-online.pdf

[3] Office of National Statistics (2012) Internet Access Quarterly Update, 2012 Q1 , 16 May 2012

[4] http://www.dwp.gov.uk/newsroom/press-releases/2012/jul-2012/dwp082-12.shtml

[5] Middlemas J (2006) Jobseekers Allowance intervention pilots quantitative evaluation , Department for Work and Pensions Research Report 382

[1] Turley, C and Thomas, A (2006), Housing Benefit and Council Tax Benefit as in work benefits; claimants’ and advisors’ knowledge, attitudes and experiences , Department for Work and Pensions Research Report. No 383

[1]

[2] NAO (2006) Child Support Agency – Implementation of the Child Support Reforms : Report by the Comptroller and Auditor General

[1] See for example: http://www.deewr.gov.au/Employment/JSA/Resources/Documents/YourServiceGuaranteeStream1.pdf accessed 15 August 2012

[2] Hasluck C, Green A (2007) What works for whom? A review of evidence and meta-analysis for the Department for Work and Pensions , DWP Research Report 407

[3] Griggs J and Evans M (2010) A Review of benefit sanctions, Joseph Rowntree Foundation

[4] Ibid.

[1] Disability and Universal Credit , Children’s Society, Citizens Advice Bureau and Disability Rights UK ; July 2012

[1] “ Growing universal credit role for councils ”, Local Government Chronicle, 23 July 2012. Accessed 15 August 2012: http://www.lgcplus.com/topics/benefits/growing-universal-credit-role-for-councils/5047372.article

[2] Communities  and Local Government Committee Fifth Report : Localisation issues in welfare reform ; HC 1406; October 2011

[3] Adam S, Brown J (2012) Reforming Council Tax Benefit , IFS

[1] Sims L, Casebourne J, Bell L and Davies M (2010) Supporting lone parents’ journey off benefits and into work: a qualitative evaluation of the role of In Work Credit , DWP Research Report 712

[1] by Lorraine Sims, Jo Casebourne, Laurie Bell and Malen Davies

[2] See for example Hasluck C, Green A (2007) What works for whom? A review of evidence and meta-analysis for the Department for Work and Pensions , DWP Research Report 407

[1] “Universal Credit: the impact on passported benefits: Report by the Social Security Advisory Committee and response by the Secretary of State for Work and Pensions, March 2012

Prepared 7th September 2012