HC 576 Progress towards the implementation of Universal Credit

Written evidence submitted by the Law Centre Northern Ireland

Law Centre NI is pleased to respond to the Work and Pension Select Committee inquiry of progress towards implementation of Universal Credit. This response addresses some UK-wide matters arising from the introduction of universal credit and also focuses on specific Northern Ireland issues.

About the Law Centre NI

Law Centre (NI) is a public interest law non-governmental organisation. We work to promote social justice and provide specialist legal services to advice organisations and disadvantaged individuals through our advice line and our casework services from our two regional offices in Northern Ireland. It provides a specialist legal service (advice, representation, training, information and policy comment) in five areas of law: social security, mental health, immigration, community care and employment. Law Centre services are provided to over 400 member agencies in Northern Ireland.

Our ability to respond to this consultation is severely limited by considerable gaps in the comprehensiveness of the information provided within the draft Universal Credit regulations. We look forward to the publication of additional information to further inform the secondary legislation of the Welfare Reform Act 2012. We remain concerned that the level of benefit has yet to be confirmed, nevertheless, the base levels must be viewed in tandem with the £18 billion of reductions already announced from 2010 and the intention to making further substantial savings from 2015/2016 onwards.

Northern Ireland Circumstances

As Northern Ireland is not referred to in the Terms of Reference, it seems fair to assume that that the circumstances in Northern Ireland have not informed this inquiry. Northern Ireland presents particular circumstances with regards to welfare and arrangements to move people into employment. In Northern Ireland, the approach to social security, training and employment programmes is divided into two government departments: the Department for Social Development (DSD) is responsible for social security benefits including benefit sanctions whereas the Department for Employment and Learning (DEL) is responsible for training and employment programmes. This is in contrast to GB, where both areas are handled through the Department for Work and Pensions (DWP).

A recent report by the Institute of Fiscal Studies found that, after London, Northern Ireland, will be the hardest hit by the tax and benefit cuts announced and to be implemented under the Bill between January 2011 and April 2014/15. [1] This is for two reasons: the high numbers of those in receipt of Disability Living Allowance (DLA), especially for mental health disorders, and the greater proportion of larger families who will be adversely affected by cuts to social security. [2]

Northern Ireland is the only part of the United Kingdom that has a land border with another European member state. As a result, the co-ordination of social security systems for cross border workers is imperative and classification of Universal Credit for European Law purposes is particularly important. The proposal to treat Universal Credit as a whole as social security assistance goes against the grain of European Law cases and will have significant implications for people on low pay living in Northern Ireland, but working in the Republic of Ireland.

Delivery Issues

It is of particular concern to the Law Centre NI that the Universal Credit payment for child related costs may not go to the main carer of the children due to single payments for joint applications. It is likely that the nominated person will be the man for most claiming families. This will limit the economic independence of women and could have a negative impact on children as money going into a family via the mother is more likely to be spent on the children Evidence suggests that the payment of support for the costs of children to the main carer can help to ensure that the payment of such support is more likely to ensure the support is used for the children. [3] A possible solution would be to allow split payments between joint claimants so that payments for children could go to the main carer, usually the mother, and payments for housing costs to the person principally responsible for the rent. Another option would be to pay childcare costs to the main carer.

Making a claim

Law Centre NI has reservations about the over reliance on on-line claiming. Whilst the new system aims to increase simplicity, a single benefit with one claiming route which continues as someone enters work and then tapers off this too can present problems. Claimant’s personal circumstances are not always simple which will require added complexity to be incorporated into Universal Credit to reflect this. The IT system underpinning payment will be new and if it does not function efficiently from the start will result in families relying on benefit experiencing hardship as it is smoothed out.

Much reliance is to be placed on the real time data system for employees but there is no provision in the regulations or guidance for situations where the system breaks down. We fear that the effect of an IT malfunction, as has happened in the past, will be exacerbated by the amalgamation of payments for adults, children and housing. In addition, proof of delivery will be crucial in disputes about claims and notifications.

We remain unconvinced about the Government’s assumption that the vast majority of claimants will be able to claim and manage their claims online. We welcome assurance from the Department that there will be alternative means of face to face communication. We would welcome further clarification about eligibility for this channel of claiming.

‘Claimant Commitment’,

The regulations state that the claimant commitment needs to be signed by both members of a joint couple claim otherwise there will be a ‘cooling off period’ after which the couple will not be entitled to Universal Credit. We are unconvinced as to the practicality of this condition where there is for example, a relationship breakdown, short of the couple splitting thus jeopardizing benefit entitlement for the entire family. We would welcome assurance from the government that there will be an alternative procedure, recognizing relationship breakdowns and situations where one partner does not wish to commit, to enable payment to the member that does sign. The alternative process could, for example, allow the partner committing to receive the single rate of Universal Credit plus appropriate additions. The claimant commitment is personal to the claimant and those partners (and children) of a joint claim that commit should not be unduly punished for the actions of others that do not.

Monthly Payments

Law Centre NI supports the principle of encouraging and developing financial capability. We are concerned however, that the move to monthly payments will result in claimants experiencing difficulties budgeting. We note the government’s rationale for the move to monthly payment to reflect the typical payment periods of earnings for a substantial number of working households. This, however, is not the case for most families on lower incomes who are often paid weekly or fortnightly. Stretching low income budgets over four weeks could exacerbate budgeting problems and potentially lead to increased debt levels amongst those who are financially vulnerable.

Furthermore, monthly payments could also disempower many women and remove safeguards that payments for children and housing costs are used for purpose, where one partner in a couple acts irresponsibly. We would welcome more detailed provision in the regulations for variance from default monthly payments to the household, rather than reliance wholly on the discretion of decision-makers.

The Consumer Council for Northern Ireland published a study in 2007 which reported that people in Northern Ireland have lower levels of financial capability than consumers elsewhere in the UK. [4] Yet, currently there is no financial inclusion and capability strategy in Northern Ireland which will require commitment from the Northern Ireland Executive in order to resource initiatives which aim to raise financial capability levels in the region.

Awards

It appears that a lone parent under 25 will receive the same standard allowance as a single claimant without children. Currently lone parents aged 18 or over receive the same personal allowance as single claimants without children aged 25 or over. This appears to be a retrograde step and will constitute a significant cut in income for young lone parents and their children.

Introduction of a capital limit for in work claimants

Despite combining both the Tax Credit and Income Support systems, Universal Credit will use the capital rules for Income Support, meaning that households with savings in excess of £16,000 will lose all entitlement to support. This will render it difficult for many working families to save, e.g. for a deposit for a house. The capital rules will also penalise savers who are currently entitled to substantial tax credit awards, such as working parents with substantial childcare costs. It is likely that older working age claimants are most likely to be affected by this change and that it runs counter to the government’s desire to encourage saving for retirement.

The level of earnings disregards

Improving work incentives is predicated on the 65% taper rate, enhanced earnings disregards and stricter conditionality and sanctions. The unified taper rate represents little change for many existing claimants, and there is little evidence that it will significantly influence the behaviour of claimants, compared with labour market factors such as the local availability of jobs, rates of pay and the availability and cost of child care. In this respect the continuation of the cut in maximum child care support from 80% to 70% into Universal Credit could be particularly detrimental to work incentives. The more generous earnings disregards are welcomed but we do not understand the logic for reduced disregards for claimants getting Universal Credit housing costs.

Having minimum and maximum disregards will only add complexity to the calculation of Universal Credit despite the aim of simplification. Lower disregards for those with the housing element will act as disincentive for those claimants to work. Furthermore, will a claimant’s earnings disregards be upgraded during a dispute about eligibility for housing costs and will a recoverable overpayment arise if housing costs are restored? We believe further clarification is needed in this regard.

Conditionality & Sanctions

Evidence to support the effectiveness of sanctions in moving claimants closer to the labour market is far from conclusive. A recent review of the evidence by the Joseph Rowntree Foundation found that current research was limited and while there were cost savings to be made from people exiting the benefit system, amongst this group there was an increased likelihood of low wages and job churning. [5] The report also highlighted that research into the New Deal claimants found that those 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 has been sanctioned and not experienced hardship. [6]

We are concerned that the regulations do not specify how many days an individual has available to them to show good cause. Currently an individual has a period of 5 days in which to do so before losing benefit entitlement. We believe that as the sanctions are being increased to 3 months, 6 months and 3 years respectively that so too should the time period allowed for showing good cause , for example in the case of bereavement, sickness or a claimant with a mental health and learning disability.

The Welfare Reform Act 2012 reduces the point at which single parents will be required to seek work still further to when their youngest child reaches their fifth birthday. We are very concerned that compelling single parents to seek and take up any job, as soon as their child enters school, will actually limit their long-term career prospects and ability to increase their income through work; in particular because the opportunities for skills development once on Jobseekers Allowance are quite restricted.

Northern Ireland lacks developed childcare infrastructure in place to facilitate the large-scale movement to work as envisaged by DWP. The significant progress made over the past fifteen years in Britain has not been mirrored in Northern Ireland. Unlike in England Wales, where the Child Care Act 2006 imposes a statutory duty on local authorities to identify and meet childcare needs, Northern Ireland has no corresponding childcare legislation and there is no statutory obligation on local or public authorities to provide high quality and affordable childcare. The barrier this places on parents’ ability to enter the workplace cannot be underestimated. Much of the welfare reform proposals for both lone parents and working age couples are underpinned by the assumption of sufficient readily accessible and affordable childcare. Universal Credit will fail to get the targeted people into work in Northern Ireland if these barriers to the workplace are not effectively broken down.

The Work Programme was launched in Great Britain in June 2011 and has faced multiple challenges, for example, with concerns over sanctions for young people who leave a ‘voluntary placement’ early. The Department for Employment and Learning’s new employment programme Steps2 Success was published on 23rd July and is currently out for consultation, with any equivalent not expected to happen until at least October 2013. A recent report published has worryingly found it ‘feasible but very tight’ for the new Northern Ireland Employment Programme to start at the same time as Universal Credit. [7] In addition it appears to fail to address the challenges to the programme presented by the implementation of Universal Credit.

We anticipate that there will be a substantial number of appeals against sanctions and loss of income forcing many to obtain advice, evidence and representation from advice organizations or other professionals. At present advice services are under exceptional pressures as a result of the welfare reform changes and this will undoubtedly continue during the parliamentary passage of the Northern Ireland Welfare Reform Bill. This is all happening at a time when the voluntary and community sector is experiencing funding cuts. We are concerned that the voluntary and community advice sector will not have the capacity or resources to provide claimants with advice due to the large caseload.

Disability

In relation to the government’s objective of maintaining protection for the most vulnerable claimants, we are concerned about the detrimental impact of reductions in entitlement for disabled claimants by the removal of disability premia, in addition, to the replacement of Disability Living Allowance with Personal Independence Payment. Reductions of this size will compromise the dignity and independence of disabled people and those with long-term conditions who are able to live independently. In addition to clear implications for disability poverty, the extent of these reductions will undermine disabled people’s quality of life and the Government’s objectives to promote independent living.

Young carers looking after disabled lone parents will also lose under with these new measures. The payment of severe disability premium (SDP) to lone parents where there is no non-dependant in the household helps to address the current unfairness that children and students are not entitled to receive any Carer’s Allowance for looking after a disabled person. We believe that the SDP should be replicated within Universal Credit , in order to ensure that those households in which disabled people have no other adult to look after them are able to receive support towards the additional costs that this creates. We are concerned that the transitional protection provided will not sustain sufficient long term safeguard.

The Welfare Reform Act 2012 also replaces the disability element of Child Tax Credit with a ‘disability addition’ for children. While we welcome the change for severely disabled children to receive a slight increase from current rates, the majority of children with disabilities could end up receiving less than half of their current rates under Universal Credit . [8] A Contact a Family Report [9] in 2012 found that 41% of parent carers responding to their survey in Northern Ireland had taken out a loan to help with expenses and 54% had fallen behind with bill or mortgage payments.

Carers

The NI Welfare Reform Group believed that the development and introduction of Universal Credit was an opportune time in which to improve resources for carers that was not fully exploited .

We welcome the Government’s decision to replicate the carer premium in the means-tested Universal Credit; with a ‘carer element’ for recipients with ‘regular and substantial caring responsibilities’. In addition, we welcome the decision to enable Universal Credit claimants to qualify for the carer element without having to make a claim for Carer’s Allowance. For carers who would be entitled to the carer element, but not for Carer’s Allowance, this will remove the confusing bureaucratic necessity of applying for a benefit they are not entitled to receive in order to gain access to other support which they are entitled to receive.

We are disappointed, however, that under Universal Credit, claimants will only be able to receive either the LCW/LCWRA element or the carer element which is overly restrictive. This means that claimants will either not be entitled to recognition of their disability or of their caring responsibilities. The fact that a claimant has LCW or LCWRA does not necessarily preclude their regular and substantial caring responsibilities.

In particular, carer’s incomes could be significantly affected by the carer/LCW elements being exclusive and the loss of the SDP which will not be replicated in Universal Credit

23 August 2012

The impact of the changes on local authorities

As outlined above, Northern Ireland presents particular circumstances with regards to social security and welfare reform. Moreover, Housing Benefit arrangements in Northern Ireland are different from those in the rest of GB. There is no equivalent to Rent Officers; instead all arrangements are made by the Northern Ireland Housing Executive (NIHE). LHA is also administered differently in Northern Ireland, with the continuation of direct benefit payments to landlords in approximately 25 percent of cases. [10]

Law Centre NI is concerned by the proposals default position to be for the housing element of Universal Credit to be paid direct to tenants. While we welcome the commitment in the explanatory notes of the regulations to continuing direct payment to landlords for the most vulnerable , we are concerned about the lack of detail about what factors will be considered in determining vulnerability. DWP has indicated that there should not be a blanket exemption and that direct payments should be decided on a case by case basis.

We understand that options for the future treatment of the rates element of Housing Benefit are still being considered by the Northern Ireland Executive Sub-committee on Welfare Reform. We hope, however, that a decision will be made in the near future in order to clarify details of the replacement scheme. We are also awaiting the outcome to the call for evidence by the Department for Work and Pensions on Supporting Mortgage Interest (which closed on 27 February 2012) but which is expected to confirm that the maximum amount of Universal Credit will include an amount for housing costs, including mortgage interest for those not in work. We remain concerned, however, with proposals to stop help with mortgage interest for claimants taking even a small number of hours work as this will act as a disincentive to claimants taking mini-jobs.

Self E mployed

The monthly reporting requirement of income and expenditure is unnecessarily onerous and does not recognize the way many small self employed businesses work. As the Minimum Income Floor will be introduced after 12 months after 12 months and only applied once will also create undue barriers to pursuing self employment as many small businesses take more than 12 months to become fully viable. Moreover, an initial business failure should not automatically preclude a grace period before the MIF applies again.

Impact monitoring

The White Paper talks of no one losing in cash terms at the point of change, yet many claimants will be affected by proposals already announced and implemented before the introduction of Universal Credit in October 2013. It is vital that the government ensures robust safeguards for vulnerable people who will need support with this transition and long term protection.

We believe that the rights of children have been overlooked and will be severely compromised by the provision of the Welfare Reform Act 2012. It is estimated that there will be a substantial increase in the number of vulnerable families with children between 2010 and 2015 as a result of the changes in tax and benefits, spending cuts and the ongoing effects of the economic downturn. Research estimates that the incidence of several vulnerabilities will increase by 120,000 more worklessness families, 100,000 more families living on a low income, 25,000 more families in material deprivation and 40,000 more families living in poor quality or overcrowded housing. [11] Furthermore, in a recent report by the Northern Ireland Children Commissioner, it was predicted that at least 6,500 children in Northern Ireland alone would be affected by the benefit cap. [12]

Conclusion

Law Centre welcomes the opportunity to provide evidence to the Committee.  We trust you will find our comments helpful. If there is any further way in which we could contribute to this process we would welcome the opportunity to do so. 

For further information about this response contact:

Policy Unit

Law Centre (NI)

124 Donegall Street

BELFAST

BT1 2GY

Tel: 028 90 24 44 01 FAX: 028 90 23 63 40 Textphone: 028 90 23 99 38


[1] James Browne., IFS Briefing Note 114 The Impact of Tax and Benefit Reform to be introduced between 2010/11 and 2013/14 in Northern Ireland pg 4

[2] Ibid

[3] See for example, Goode , J., Callender, C. and Lister R (1998) Purse or Wallet? Gender inequalities and income distribution within families on benefits , London : Policy Studies Institute

[4] The Consumer Council for Northern Ireland (2007): Managing Money - How Does Northern Ireland add up: http://www.consumercouncil.org.uk/filestore/documents/Financial_Capability_06.09.07.pdf

[5] Julia Griggs., Welfare sanctions may work in the short term, but at what cost? Joseph Rowntree Report 2011

[6] ibid

[7] Centre for Economic and Social Inclusion 'A new employment programme for Northern Ireland - Feasibility study'

[8] Joint Briefing: Report and Third Reading of the Welfare reform Bill June 2011. Available at http://www.cpag.org.uk/cro/Briefings/CPAG_JointWRBriefing_0611.pdf

[9] Counting the Cost, The Financial Reality for families with disabled children in Northern Ireland, Contact A Family, 2012

[10] Email statistic from Northern Ireland Housing Executive. Copy held on record at Law Centre (NI), Policy Unit. Received 30/07/09

[11] Howard Reed., In the Eye of the Storm: Britain’s forgotten Children and Families A research Report for Action for Children, The Children’s Society and NSPCC pg 9

[12] Northern Ireland Children’s Commissioner., Goreitti Horgan and Marina Monleith A Childs Rights Impact Assessment of the Impact of Welfare Reform on Children in Northern Ireland . Please see http://www.niccy.org/uploaded_docs/2012/Publications/CRIA%20Welfare%20Reform%20FINAL.pdf

[12]

Prepared 7th September 2012