Work and Pensions Committee - Minutes of Evidence576

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

WORK AND PENSIONS Committee

UNIVERSAL CREDIT

Wednesday 5 September 2012

Sir Merrick Cockell, Councillor Catherine West, Gavin Smart and Pete Challis

Professor Mike Brewer, James Browne, Tony Wilson and Fran Bennett

Evidence heard in Public Questions 1-113

USE OF THE TRANSCRIPT

1

This is a corrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.

2

The transcript is an approved formal record of these proceedings. It will be printed in due course.

Oral Evidence

Taken before the Work and Pensions Committee

on Wednesday 5 September 2012

Members present:

Dame Anne Begg, in the Chair

Harriett Baldwin

Karen Bradley

Glenda Jackson

Stephen Lloyd

Teresa Pearce

________________

Examination of Witnesses

Witnesses: Sir Merrick Cockell, Chairman, and Councillor Catherine West, Executive Member, Local Government Association, Gavin Smart, Director of Policy and Practice, Chartered Institute of Housing, and Pete Challis, National Officer (Local Government and Housing), UNISON, gave evidence.

Q1 Chair: Can I welcome you to this morning’s session and thank you very much for coming along to kick off our inquiry into the implementation of Universal Credit? I wonder if I could ask you just very quickly to introduce yourselves and your organisations, perhaps starting with you, Pete.

Pete Challis: I’m Pete Challis. I’m National Officer at UNISON in the Local Government section.

Gavin Smart: Gavin Smart, Director of Policy and Practice at the Chartered Institute of Housing.

Sir Merrick Cockell: I’m Merrick Cockell. I’m Chairman of the Local Government Association (LGA), representing local government in England, and Leader of the Royal Borough of Kensington and Chelsea.

Catherine West: I’m Councillor Catherine West. I’m the Leader of Islington Council and I’m an Executive Member at the LGA, on the finance panel.

Q2 Chair: You are very welcome, thanks very much. We have a lot to get through this morning. You are our first panel and we have another one after you, so I hope you don’t feel you are being rushed but, at the same time, we do want to get through and cover as much as we possibly can.

The Government plans to make the administration of Universal Credit a digital one by default; in other words, it is digital unless you can prove that you cannot do that. Initially, they are aiming to have 50% of Universal Credit claimants managing their claims online. Do you think that 50% online target by 2013 is achievable?

Pete Challis: The evidence we submitted suggests that it is going to be very difficult. Department for Work and Pensions has been trying to do Job Seekers Allowance (JSA) online. Their 2011-12 Annual Report said that JSA online was 10.4% as at March 2011, and 19.6% as at March 2012. Their target was 80% by September 2013; we do not think they are going to achieve that. I think there is some evidence to suggest that that is the case, because, very recently-in fact, last week-DWP introduced some trailblazers to encourage people to go online, and they are quite punitive. JSA customers who refuse to go online and who insist on remaining on the telephony channel will not be allowed to make a claim over the phone at first contact, but will get a call-back appointment three days after their initial contact instead. Secondly, they are going to mandate customers who they think can and are eligible to use JSA online to do so, and a telephony claim will not be an option for those customers. If that came in in relation to Universal Credit, I think there would be real problems.

Q3 Chair: I am sure the others have got an answer to the first question, and I will come back to you, but can I just pursue that a second? What is the Government proposing that people who may not have access to computers do? Is there anything that you are picking up that the Government is planning to put in place to allow people to have that access?

Pete Challis: We understand that there will be call centre support, but it will be largely the sort of call centre where you press one, press two, with encouragement to go back online. In our evidence, we referred to a statement from one of the lead officers in the design of the programme, who talked about imagining call centres with no staff. We could not understand how that would work.

Q4 Chair: I suppose I am just asking a simple question: physical access to a computer will be a problem for a lot of this cohort. Where are they going to find the computers? Will they be able to go into a Jobcentre Plus? There were "hot phones" or "warm phones", or whatever they were called, in Jobcentre Plus for a while. Will there be computers there?

Sir Merrick Cockell: Clearly, what local government has been initially offering-and I am pleased that DWP has taken up that offer, principally, I think, due to Lord Freud’s close involvement in it-is an acceptance that they are the right organisation to lead the face to face contact. This could be face to face, as you have indicated, because of the short timescales and complication of the system, and with a group of people who may not already have computer skills and may not have easy access to a computer or any online ability at home-and indeed the costs and all those sorts of implications. The face to face, but also helping people through using the online system, is very likely going to be carried by local authorities, but may well be in their libraries as well, where people can generally get free access to the internet and, therefore, could be taken through, if they do not already have those skills.

That is our role. We have pilots that have just been announced-pilot authorities that are going to be doing the work that the rest of local government and DWP will be able to, hopefully, learn from. It is, however, going to be an enormous challenge, just on the assumption or the belief that most of this work will be done relatively easily and cheaply online. It is a great direction to be moving in. That is right and we will all work to make it happen, because it makes good economic and systems sense as well, but it is going to be very difficult to get there.

Gavin Smart: I would agree. The direction of travel is one that we would all support but the challenges are enormous. 27% of households have no internet access at the moment, and about 28% of those are social housing tenants, who tend to be highly represented amongst benefit claimants. Of course, it is not simply about physical access; it is also about the skills, the abilities and the confidence. It is about the degree to which, currently, benefit claimants often receive a degree of support in completing their claim. It is a big move. We support the move, but I think it is important that DWP make clear how they are going to support that move to getting more people online and the additional support and, actually, funding that they need to put in place to make that happen. Otherwise, I think this kind of big-bang approach is quite high-risk.

Q5 Glenda Jackson: Mr Challis, to go back to the point you were making about the trailblazer scheme, I wonder if there is a kind of punitive element in that. There are people, even if there are computers available and there may be assistance in using the computer, who will never, ever be able to use them. Is there going to be some kind of punitive approach or has the Government set in place ways for them to be able to use the system that they already use and know well?

Pete Challis: We don’t know what approach the Government is going to take in relation to them. The point I was trying to make is that we are seeing evidence that the Government sees that they are having difficulty getting people on JSA online from the punitive steps that they are taking in relation to the new procedures they are starting to introduce with JSA claimants at the moment.

Q6 Glenda Jackson: Is your assessment of the trailblazers essentially that the Government is going to push for everybody getting online, and there is going to be no failsafe for people who will never, ever be able to use that system?

Pete Challis: The Government’s target is 80% online by 2017, and it thinks 50% online by October 2013.

Q7 Chair: From what you are saying, Mr Challis, you obviously think that the Government is underestimating the need for face to face contact to help with claims. Now, you have all said that it is unlikely that that face to face contact or help is going to come from the DWP or Jobcentre Plus, so where are people going to go to get that help, even if it is help accessing an online claim or help with completing an online claim? Are the local authorities geared up, and do you have the money and the financing? I suspect the answer to that is no. What is it that local authorities need to do, have been doing or are gearing up to do in order to give a level of support for claimants that they hitherto have not had a role in providing?

Catherine West: On the question of increased amount, just in my own borough we have had 250 more visits from new people into the Citizens Advice Bureau (CAB), which is a sort of council-sponsored Citizens Advice Bureau. Even just the changes to the disability regulations have led to a huge number. The other thing, I think, that you should all expect is much more casework. I hope that you are warning your secretaries that there is going to be lots more casework coming in to your advice bureaux, with letters saying, "Can you help me out with this?", because there are going to be so few contact points for face to face. I think this is the case with all the different changes, because 19 million people are affected by the Government proposals and, even in the areas where there is not very much benefit dependency, there will be lots of people who simply do not know what is happening. That will be a point of contact for them.

Q8 Chair: My local CAB says that, actually, they are less able to help with benefits inquiries now than they used to be, because their funding is under squeeze. Is that something that is across the country? If we are looking to CABs to pick up this workload on less funding, where are people going to go?

Sir Merrick Cockell: Clearly, people are going and will go to places that they are familiar with. If they have been working with the CAB, or the CAB is strong in their area, then they will, no doubt, naturally go there, but I think the default will generally be the local authority, because that is where they have been going and having that face to face work, if they are unable to immediately go online and use the new IT system. Most local authorities are looking at offering some sort of triage model on the basis of the traditional one-stop shop, so that people will be able to go their local authority and, via that, deal with Jobcentre Plus, social landlords, credit unions or whatever it may be. That is where we think people will gravitate to, and they are going to be signposted in that direction anyhow.

Yes, you are absolutely right: everybody knows our very substantial reductions in finance and the other pressures of council tax benefit coming through. There is a lot going on. There is a lot of pressure. We are into a lot of difficulties with our benefits staff; we are in disagreement with Government at the moment as to whether they could or should be able to, under TUPE (Transfer of Earnings Protection of Employment), move across to work for the DWP Universal Credit side. DWP say not, and their legal advice supports that. We would say there are enormous skills already existing in local authorities, with that local knowledge, let alone fraud and all the other vital pieces of great knowledge built up over a long period. It seems rather perverse to lose people with those skills and go through a whole redundancy, with the cost of redundancies to the state, when, actually, those people should be at least given the opportunity to move across into the new system.

Q9 Chair: Pete, you obviously represent those workers. What do you think the Government should be doing with them?

Pete Challis: Because DWP has focused on an online delivery mechanism, and the pilots and the Pathfinders are all set up in order to support the online, what is being missed is that, whilst you will have 12 pilots and four Pathfinders, there are 400 local authorities and Universal Credit is going to come in on day one, affecting all of those 400 local authorities. We have been saying to DWP that they need to be planning now for the integrated local service delivery element of the Universal Credit service, because it is only that way that they will be able to guarantee the quality of service that the public have the right to expect.

If I just give you a very short quote from one benefits manager, "The Universal Credit service will leave face to face to local authorities, but customers will have to deal with claims online. The telephone service is said to be a ‘push one for this, two for that’, before sending people back online. How will anybody ever get any information about claims, particularly support workers? Real people, real problems: nobody to raise questions with except local authorities, who will not have the answers." Unless you establish an integrated model-so, if someone is seeking to make a claim, they are able to go to their local authority and get the whole thing processed through, with the local authority being able to access the DWP system-we think there are going to be real problems.

Q10 Harriett Baldwin: I completely recognise the issue that Sir Merrick was raising about the skills of the implementation teams in local government. In my area, we have an excellent team that administers for three local district councils in South Worcestershire. The point I wanted to ask was really about rural constituencies, because both of you are leaders of London councils. In West Worcestershire, obviously we are very rural. Would you see a role for the Post Office network in being a place where people could use computer screens and have some help with proving their identity and using that network, which is very well established in rural areas, as a hub of delivery of these kinds of services?

Catherine West: There may be data protection issues there, because we know, even within our own systems, that certain departments of the council have to be very, very carefully protected, because of the computer systems being secure.

Q11 Harriett Baldwin: But they do the Check and Send, don’t they, for passports at the moment in Post Offices?

Catherine West: They do. That may be a straw man with which you could try to knock down the data protection, because occasionally it is used as an excuse not to explore a particular option. That may be something which this Committee could work on to try to get better access, because I think access is going to be absolutely key, particularly if the telephone is not going to work. Also, I think maybe an approach needs to be made to the Post Office to ask whether they have the resources to help people to get online. I know library services do that in many local authorities, and I suppose older people will not be affected in terms of council tax benefit, but there might be other Universal Credit issues that will affect them, so that is something that may be worth doing: approaching the Post Office service and seeing whether they are in a position to assist.

Q12 Chair: In the long term, do you think it is likely that 100% of claimants will be able to claim online? If not, how are DWP and how are you going to identity the vulnerable claimants? They will be stuck in some kind of telephone loop, from what you just described, not ever getting to speak to anyone.

Gavin Smart: It does not seem realistic to assume that 100% of claimants will be able to claim online in any eventuality, simply because some people will not have the skills, the abilities or the access to do it, so there will always be a residual number of people who cannot operate an online claims system. I don’t think I want to guess what that would be, but I think any analysis suggests that you would not get to 100%. What that will mean is that a variety of different organisations, whether or not it is local authorities, landlords or some DWP call centre, will have to provide those people with support and advice in order to navigate their way through the claims system.

Pete Challis: There is also an issue about the terminology "going online". Lots of people go online-80% plus of the population are online. They do Facebook, they might Google, but they don’t do bank accounts. The DWP’s own figures say, in the research that was published last month, that only 14% have done a benefit claim online.

Q13 Karen Bradley: That linked quite neatly into the questions I want to ask, which are about financial capability and people’s understanding of finance. One of the things that have been put to me by constituents already is concern about moving to monthly benefit payments. What do the panel think the Government should be offering people to help them move, with the transition, to monthly payments of benefits?

Catherine West: I know that some local authorities have been involved in schools in doing financial education, and I think this is something which needs to be pursued perhaps with a bit more rigour. Also I know that some banking institutions, some people in the finance sector, have been helpful in that regard. However, Universal Credit will be a bit different from the council tax benefit, for example, because they will at least be able to come to the council and ask someone to sit down and go through with them a particular bill. We are worried about the public perception of all these difficulties coming in at the same time, because, at the same time that, obviously, the taxation is changing for people in the upper level-people on £150,000 and over are getting a tax cut, if you like-so it will almost look like the people on the bottom will be paying for the tax cut that the people at the top are getting.

I think this is going to lead to a lot of public perception issues for the Government, because they are coming in, broadly, at the same time, at the same financial moment. I think even people with a low level of financial literacy will be very concerned about the fact that people on £150,000, which is, I think, double what an MP earns, will be getting a tax cut at the same time that people who have never paid council tax before will be having to pay. I think there are really serious financial literacy questions involved in that, but the basic one is fairness, and that is something that we, as local authorities, unfortunately, have to explain to people, even though it is a Government change. That is why councils, in a cross-party sense, are really against the council tax benefit change, because, really, it is looking like a complete shift in the tax burden, from the wealthiest to the poorest. That is really something that we have to grapple with in public perception terms, because they are coming in at the same time. That shift and "We are all in it together" will be seriously challenged.

Q14 Karen Bradley: If I can just say, it is quite a lot more than double what an MP earns.

Catherine West: Triple maybe?

Karen Bradley: What could the Government do to deal with that perception, then? Sir Merrick, do you have anything to add?

Sir Merrick Cockell: I will just say something on the financial literacy side specifically. That is the right thing, isn’t it? We want people to be able to run their households and understand that paying their bills on a monthly basis is a sensible educational process, but this is going to be an enormous change for people, because, under the current benefits system, often people have received benefits at different times through the month and they have allocated particular receipts in against particular outgoings through the weeks or through the months. To get one payment to whichever is the first one in the household to register who, therefore, receives for the household that single benefit once a month, those are difficult enough skills for highly educated people, let alone those who have maybe spent most or a lot of their life on benefits and are used to a very different hand to mouth existence. Indeed, you can see the difficulty of the first month this comes in, with people going from payments throughout a period to, say, at the end of the month. What we don’t want them all going to is loan sharks, even in that first month. Getting people just through the early stages is going to be very difficult.

There are financial consequences for local authorities, because we will, no doubt, with CAB and others-credit unions-be wanting to help and offer that sort of training and those sorts of courses for those we can encourage to take them up, but there are financial implications. We are supposed to be covered by the new burden assurance and we will be pushing hard to make sure that some of the inevitable costs that come through from trying to help Government to make this work are covered, so that we can do that work without putting a burden on the rest of our pressured services.

Gavin Smart: I would agree with a lot of that. There is also a particular pressure on people claiming for the first time and having to wait for a month until their first payment comes through. I think that needs consideration. There is also a point that people are moving into work-particularly low-paid work-where they may still be eligible for benefit, but their benefit amount will be reduced and they will have to wait for a month for that to come through. We would certainly say that, under the current system, there is a system of extended payments to ease the transition into work, and we are not convinced that removing that system is a good idea.

Q15 Karen Bradley: Mr Challis, do you want to add anything?

Pete Challis: I don’t think I have anything specific to add to that.

Q16 Karen Bradley: One of the things that have been pointed out is that local authorities have schemes at the moment that help people; for example, prepaid cards. What could the Government learn from your experiences in local authorities?

Catherine West: One system that we have introduced just very recently is, every time we sign up a new tenant in council housing, to give them a credit union account. Even though they may not know what it is at the time, at least, by putting £2 into it, it opens it. Obviously, this is also to deal with loan sharks, who are very prevalent on the high street in most areas. Mostly they target areas where people are on benefits, obviously. This may be something that could be suggested to all housing associations, so that at least people, firstly, have an account and, secondly, then have access to loans. I think people are going to get into really serious amounts of debts, because people who have never, ever paid tax before will suddenly start having to pay council tax, and I just think people are not going to be able to pay it. I think we are going to get into a poll tax situation, which is going to be really uncomfortable.

Sir Merrick Cockell: Places like Birmingham are already looking at an intensive first 12 weeks package for their residents. Lewisham, I think, has already got an emergency loan system in place. We have talked about prepaid cards. I guess it will be a variety of responses in local areas. But, if I make a general statement, historically the relationship between DWP and local government has been, shall we put it politely, tense.

Catherine West: Strained.

Sir Merrick Cockell: Strained. It is not the Department that we have quoted as going necessarily in the same direction that we are going. I am pleased to say that there have been, quite recently, real changes in DWP’s approach and a realisation that, frankly, unless local authorities and their partners in local areas are there, this is not going to work and we are essential to helping to make it work for the most difficult group. The easiest group will, of course, easily go online, do it all, and it will be a doddle, and they will make up whatever percentage, hopefully somewhere approaching 50%. But we know the difficult ones will come to us: the people who, frankly, naturally have trusted face to face and who know individuals. The message to DWP is, "The more you work closely with us, not just at the beginning but through the next years, and are willing to learn and see how we can co-operate together, the more chance there will be that this will actually end up working in a few years’ time."

Q17 Karen Bradley: Presumably, that can be done through the pilots, to some extent.

Sir Merrick Cockell: Yes, the pilots-we are very pleased that that idea was accepted and that there is a decent sized group. The rest of local government will try to learn from that, but Government and DWP must be looking very carefully at the responses coming through and be prepared to adapt and to give financial assistance when that is clearly necessary to local authorities.

Q18 Chair: Will credit unions be able to help with regard to helping with the initial financial management for individuals?

Sir Merrick Cockell: Where there are credit unions, they will be absolutely key to it, including, in that first month period, ensuring people do not go into unnecessary debt just as the system comes in.

Q19 Teresa Pearce: Sir Merrick and Catherine, there are a lot of costs falling on local authorities here for changes in IT systems and for staffing one-stop shops and help services. In terms of the cut in council tax benefit, which most councils are passing on to people of working age, has there been any cost analysis of how much it is going to cost local authorities to chase that debt? Lots of people are not going to pay it. Is that going to be significant?

Catherine West: I think the whole administration of it is going to be significant because, first of all, we have to consult on it. We have already sent a letter out-most of us-to say that this is likely to happen once it gets Royal Assent. Secondly, a consultation is always expensive. Thirdly is the relationship between us and councils taking over the Social Fund, and how that is being interpreted. Some councils want to interpret that in quite a holistic way, so that, for families or individuals who have long-term problems and who are already known to the local authority, it is part of a package of assistance to get some longer-term solutions, whereas, as you know, under the DWP system, it is a little bit ad hoc. Some other councils, I think, are simply going to contract that out immediately to a charity. Everyone is doing something different, which is something we always ask for-localism-but I think, in this particular regard, there really will be a postcode lottery.

To return to the point of the public perception, what has been good about a lot of Government policy is trying to bring out of taxation the people who are on £10,000 a year and so on, and that has really made some strides, but the council tax benefit decision is just reversing all that, because it is making people, for the first time ever, have to pay council tax. There are a lot of contradictions in the policy, so the people at the bottom will be coming to us with questions like, "We thought we were being taken out of tax", and now they are having to pay tax because not having council tax benefit is like paying council tax for the first time. Different councils are going to interpret this differently, and I think that is going to be quite challenging for some councils who may not necessarily be prepared.

There also cost implications for having what would have to be quite well thought-out policies in quite a short period of time, when, actually, what we are doing is shedding staff. We are still in the middle of a three-year haircut in local government. Most people had the first year, 2010-11, where they lost a lot of staff, but some of the other changes around staff losses have been, basically, brought in over a three-year period. We are still in the process of that. We have to remember that we have not done the cuts to local government yet. We are still getting ourselves to the 29% cut, which we were given in 2010. It is all just going to add up.

Chair: I am going to move on, because obviously time is moving and we started to touch on the impact on local authorities anyway.

Q20 Glenda Jackson: Following on from what Teresa said, it is going to be the most vulnerable households that are going to bear the brunt. How can local authorities attempt to protect those most vulnerable households? Are there any plans in place? Do you know how many households there will be?

Catherine West: We think, for council tax benefit in just one borough, 20,000, but we think, for the whole benefit reforms, it is going to be 19 million people, so even in constituencies where people think there won’t be many people affected-19 million covers quite a lot of the population.

Q21 Glenda Jackson: But is that looking exclusively at the changes to council tax benefit?

Catherine West: That is the whole of the benefits. Don’t forget that working tax credits are included in the whole of the changes. That is why the number is so high. In terms of the council tax benefit, it is 20,000 people in our local authority area, but I could give you the figure across the country for that. It is quite a high number of people who, up until now, just really have not had to engage with council tax at all and now, suddenly, may have to pay up to £190 a year for their council tax.

Q22 Glenda Jackson: Presumably, that is a floating figure. There will be other households that will come into that.

Catherine West: That is right. As we know, not just people on full benefit get council tax benefit. It is tapered, isn’t it? If you are in a high-value area, like London, and you are in a low-wage environment, like London, you often have to have this step up to help pay other things. Even people who are in work will be affected by this council tax, so their liability will increase.

Q23 Glenda Jackson: What is the gap as far as the local authority is concerned? In fact, I don’t mean "gap".

Catherine West: Cut. Our cut is £2.9 million, just in our local authority, and you will have the total on the top of your head, I am sure, Merrick.

Pete Challis: £490 million across the country.

Sir Merrick Cockell: On council tax benefit. It is half a billion pounds.

Q24 Glenda Jackson: Half a billion pounds taken away from local authorities.

Sir Merrick Cockell: Yes, but there will be variability in how this is handled at a local level. Some authorities are not going to pass it; they will just, frankly, swallow their bit of the half a billion pounds. Overall, for local government, we want council tax benefit to be localised; we think that is right. We can even cope with a 10% cut. Cross party, our position is that we could do that, but we need the flexibility to be able to work it out in our areas, in the best way. The Government’s decision to protect particular groups means that the pressure is just on, frankly, those who can least afford it, and particularly those who are just hanging on in work, the last people that we would want to force out of work again. It is that flexibility that is the key to it.

Were Government to rethink this, they could see that local government is and has been pretty good, with the substantial reductions in grants, at being able to sort this out. We have been consulting and talking with the local community and the voluntary sector, and with all our partners-finding out a way that suits Islington, or Kensington and Chelsea, or Worcestershire, or wherever your constituencies are-in a sensible, grown-up way. In some places, it will mean that well-off pensioners might well be having to pay more in order to protect those who are less well off. That is the real difficulty we have and that is where the variability will come in, if it carries on and goes through final assent, as it currently is. Some authorities will simply take it on the chin and others will pass it through, as Government is intending.

Q25 Chair: All this is going to make it virtually impossible for the Universal Credit to get its tapers right to make sure that people are always better off in work, because they won’t know what they are paying in terms of council tax.

Sir Merrick Cockell: I think there is some evidence.

Gavin Smart: It is very difficult to get to the bottom of this at the moment, because DWP have not yet released the information on what the allowances are. But if you assume the allowances look like the allowances under the current system and you try to factor in council tax changes as well, if you take the example of a two-person household with two children, working in a lower-wage job, there is a risk that people on incomes below about £290 a week will be worse off under the new system than under the old system. We would very much like DWP to produce their own numbers, to be clear about what the allowances are, and to tell us, because, of course, we are trying to model based upon a number of assumptions, but it is a concern.

Q26 Chair: Do you understand that that group will be protected? We have been told more than once that nobody will be, in cash terms, worse off.

Gavin Smart: We understand that assurance. In our submission, we said our modelling leads us to be concerned about that assurance, and we would very much like to see DWP’s own analysis of how this is going to pan out.

Q27 Chair: Because DWP won’t necessarily know-they won’t know-what the person is paying in council tax, so I presume there will be no field in the online claim form that actually says how much you are paying in council tax and that will be taken into account.

Pete Challis: We don’t understand that there will be protection in relation to the reduction in council tax.

Q28 Chair: So they might not be?

Pete Challis: We don’t think they will be protected in relation to the changes that impact on council tax and, in the evidence that we have submitted to the Committee, we have looked at the published schemes of more than 20 local authorities. What most authorities are doing is continuing to use the existing council tax benefit system but only applying it to a percentage of the charge. For example, they may say, "We will do the council tax benefit calculation, but only on 80% of the bill," so you have to pick up the 20% anyway and, if you are a working household-and there are 800,000 of those-not only will you pick up the 20% but the only assistance you get will be on the 80%. We have calculated that that will completely wipe out, in most cases that we have looked at, any gain that people make in their personal tax allowance in April.

Q29 Chair: That undermines a lot of the principle of Universal Credit.

Pete Challis: Entirely, and that is what the Surrey leaders said in their letter to the LGA. They said, "We think what was 10% looks like being 20-25%".

Q30 Chair: What do you suggest would be the solution? Would that be that, although council tax is not going to be part of Universal Credit, the calculation of council tax should figure somewhere in the calculation of what someone gets in terms of Universal Credit? In other words, they need to change the online form.

Pete Challis: That would be one option.

Gavin Smart: Or amendments in the detail of the design, so that you can understand that the detail of how Universal Credit operates takes account of the way in which council tax is going to operate.

Sir Merrick Cockell: Yes, and the more you spread the burden of a reduction in council tax benefit, the smaller the impact on anyone, I suppose, is part of that solution as well. The aim we have been having is to spread as widely so it ends up at pretty small amounts.

Q31 Glenda Jackson: Are you saying that you would prefer to see everyone who, at the moment, qualifies for council tax benefit being part of this scheme?

Sir Merrick Cockell: I am saying everyone in the community.

Q32 Glenda Jackson: I mean that they should all see a reduction.

Sir Merrick Cockell: All our residents who are paying council tax, or as wide a group as we could get, would take a share of that 10% cut, so that the consequences on any single individual or any single family were dissipated, really.

Q33 Chair: But can you do that if there is a freeze on council tax?

Sir Merrick Cockell: Yes. There are lots of things we are doing within a freeze on council tax, just by working together and becoming more efficient and all those things, but the local government view is that it would be better that than to put sometimes quite great burdens on people who are least equipped to be able to cope.

Pete Challis: Chair, there is an issue about the financial efficiency of what appears to be happening. We read the reports that are going to council cabinets up and down the country, and finance officers are repeatedly saying, "This is going to be difficult to collect." There is one authority that we are aware of, where the finance officer is going to assume that they collect 35p of every pound that they are now going to charge to people who previously were not paying.

Q34 Glenda Jackson: What reasons do they give?

Pete Challis: Because you are seeking to get money from people who do not have it when times are very hard. Their collection costs will go up, we will see an increased use of bailiffs and, eventually, we will see cases in the courts, where councils are seeking to recover very small sums of money.

Q35 Glenda Jackson: Have they put any figure on their costs?

Pete Challis: They are building it into their bad debt provision, and in the course of that calculation, they are assuming they will recover 35%.

Q36 Chair: Can I just be clear on what you are perhaps implying, Sir Merrick? You said that the Government has interfered by setting parameters of who has to continue to get their discounts, like pensioners, so the burden is falling on those who are least able to pay. If the Government removed those restrictions and said to local councils, "You take your 10% cuts, you now administer it, you do what is best in your area," and, if you decide that, actually, there are quite a lot of pensioners who could absorb some of that extra cost, would you be much happier with that?

Sir Merrick Cockell: Absolutely, and I think that is across the country and across all parties. However, Government can also say, frankly, "You take the blame. If we are giving you that flexibility and you get it wrong, local people will deal with that through the ballot box." In my borough, we have lots of second homes. That is where we will go out, and half the 10% will come from people who are clearly more likely to be able to afford it, but let us sort it out in our own ways.

Q37 Stephen Lloyd: If that seems so patently logical, what is the DWP’s line to that suggestion at the minute? Are they just being completely resistant? If they are, why? Because it does seem to me completely rational.

Sir Merrick Cockell: The second homes or just the flexibility?

Stephen Lloyd: No, the flexibility seems perfectly sensible.

Sir Merrick Cockell: We are into the silos of Government here, so it is not a DWP decision. This comes under the Treasury and the Department for Communities and Local Government (DCLG), so it is not a problem on their desk; it is a problem on Eric Pickles’s desk. His past team and he are very familiar and have heard it face-to-face from the LGA in a succession of meetings.

Q38 Stephen Lloyd: What argument do they promulgate that says, "No, we cannot give you that flexibility"? Because it does seem to me eminently sensible. Why is it not just happening?

Sir Merrick Cockell: I will ask a colleague from a different party to respond to that.

Catherine West: I think it goes back to the fears over the granny tax furore. We have to join up our debate about benefits with our debate about taxation, don’t we? Actually, if this is all coming in at the beginning of the financial year or in the wash, clearly some people will feel, "Why am I paying council tax for the first time when other people are having a tax cut?" and "Why are some people who happen to be in an older age category, even though they are doing very well, exempt from paying this council tax but I am working and bringing up three children on a low income?"

Q39 Stephen Lloyd: My advice is, if you want it to work, don’t sell it as a partisan thing like that, because you won’t have a prayer. My advice is: sell it in a way that you are all talking about, which is that it would be easier for the council to have that flexibility on council tax. If you go in and tell George Osborne and the rest a sort of partisan tax thing, Catherine, you are completely wasting your time and mine as well.

Catherine West: I let Merrick do all the negotiations with Mr Osborne.

Q40 Stephen Lloyd: I agree with the sheer salient point that you are making, Merrick. If councils across the land of whatever party persuasion had that flexibility, there would be much more manageable ways to actually make this work. Why do you think the Government are resistant?

Sir Merrick Cockell: I think, frankly, they got boxed in, at the early stages, by fears that particular groups would be targeted, that local government would go for easy targets and that, therefore, it would be a granny tax. Actually, it should not matter to Treasury.

Q41 Stephen Lloyd: No, because it is the councils’ responsibility.

Sir Merrick Cockell: Also, the half billion pounds have gone. This is not an argument about whether half a billion should come out; it has been taken into account in the Government budgets. One way or another, that half billion pounds is coming out of local government, whether it is a top slice or whether it is through council tax benefit. Therefore, this argument we have been having, indeed, about the software-can we make the system actually work, and could we defer it for six months or a year?-actually is irrelevant because the money has already been taken from local government. If that is the case, that reinforces the "Let us get on with it". I know the Lords, in debate there, have focused very fully on this area, because they have seen-and I don’t know whether you are seeing, as Members of Parliament, through your postbag-the human implications of this. This has the capacity to go pretty badly wrong with a lot of very difficult human cases behind it, and there is not a painless way but a sensible way through it that will allow circumstances in local areas to decide and, indeed, for arrangements to be made at a local level.

Q42 Chair: This will be an argument you will continue to have with the Department for Communities and Local Government.

Sir Merrick Cockell: With anyone who will listen.

Q43 Stephen Lloyd: The other prickly issue is housing costs. In your own views, what are the risks associated with moving to a system of paying housing costs direct to tenants?

Gavin Smart: There are risks because of, I think, some of the financial capability discussions we have already had: that you are moving from a group of people who are used to seeing their benefit paid direct to their landlord to receiving the benefit direct to them and then having to pay it. We know that DWP is doing a lot of work through the demonstration pilots to look at how you would make this work. The early results from those demonstration projects are encouraging in the sense that landlords are managing to make it work, but it requires a huge amount of additional effort. The concerns are, once it is rolled out across all landlords, what does that do to the level of arrears, to the level of bad debts, and how does that knock on in terms of things like the confidence that the funders to those landlords have about their ability to meet their existing obligations and to borrow new funds? It is a major, major change and it is one that the housing sector has been very concerned about. We understand that Government have, if you like, settled their mind on this issue. It is now about making it work and it also about monitoring the consequences.

Sir Merrick Cockell: I think I would agree with that. Bad debt is not something we have been used to, and the implications on borrowing and on future home building-on being able to show a balance sheet that you can borrow against, that basically does not have bad debt in are-are of real importance. There must be a high risk of substantial bad debt. However much we may want people to, as I said before, stand on their own feet and be responsible for their families, we know that the realities of this mean it will be difficult to get some of that money that will be owed.

Q44 Stephen Lloyd: Presumably, for the private sector landlord, it will be even worse.

Sir Merrick Cockell: Yes, and they will pull out, won’t they?

Q45 Stephen Lloyd: Catherine, let us see what your comments are around this. I had a constituent a wee while ago, last Christmas, and she received, I think, £650 in early December to pay the rent. She had three children and no money, so she promptly spent the money on buying presents and what have you for the children, which I don’t think is unreasonable when it comes to Christmas. Would you say that that is something that will probably go up or down if it becomes even harder for payments to be made direct to landlords?

Catherine West: That is right. This is where we come back to the question of having the credit union in at an early stage, so that, when you are signing up tenancies, you are signing up into the credit union system, because it is a safe loan system as well. However, I think it is going to be a question of affordability, particularly in high-value areas, where we know that the cost of living is very high, yet there are a lot of people who will be in this situation and some of the difficulties that that will lead to. I know that the one thing that housing providers have said to us as council leaders is, "Please can you make the case that, even though, in theory, it might sound like a good idea to give people more of an opportunity to learn budgeting, there are administrative difficulties around arrears, just sending out more letters, having to get people to visit and then, eventually, eviction."

I think that councils will maintain some sort of a housing duty; some, obviously, will then just say, "You have been evicted so you will have to go and find another property in the private sector." Other councils may wish to interpret that in a slightly more generous way for the benefit of the children, because there are Children Act implications as well. However, that is also a cost to the council in that they have to re-interview families, re-house them in other accommodation and so on. There is a loop there, which is really unhelpful. We have got to a good point in local government where people understand they do have to pay their rent. However, by changing the system in this way, it is leading to a greater fragility in people’s ability to budget, and then to homelessness in the end. We will see more cases of homelessness.

Q46 Stephen Lloyd: Back to what Merrick was talking about, flexibility, in the previous area, the Government say that it will be clear, under exceptional circumstances, that councils can choose to shift or to ensure that the money goes to the landlord. Is your view that their "exceptional" is too exceptional, and there should be, again, more flexibility, to allow either DWP or, more likely, the local authority to decide who receives the money? In other words, is that "exceptional" too exceptional?

Gavin Smart: Our concern here would be that, at the moment, DWP’s position is, "For vulnerable people, we will be happy to see direct payments kept or reinstated."

Q47 Chair: Have they defined "vulnerable"?

Gavin Smart: No, they have not yet defined vulnerable, so that is a concern. We would also have a particular concern, in particular parts of the country, in terms of values, about particular forms of accommodation, and particularly some supported accommodation. Where you are dealing with people who may have very chaotic lifestyles, who may stay for very short periods of time, paying the benefit direct to those tenants in particular makes it extremely difficult for the landlord to be confident that they will receive the rent. I think you would want to explore whether or not the most simple proposition here would be to say that people in supported housing are vulnerable by definition, and benefit is paid direct.

Chair: That would certainly please the Foyer in my constituency. They were very worried about the original proposals.

Q48 Glenda Jackson: Increasingly, local authorities have to advise people to look for housing in the private sector. Do you have any idea what the knock-on effect is going to be with private landlords, who are already reluctant to take people on housing benefit?

Catherine West: We know that, particularly in your constituency, Glenda, the private rental sector is just too hot to touch-there is no availability at all for people who are on benefit. Really, local authorities have to broker that, to some degree, for many, many cases. The more people get evicted, the more they go round that loop. If we can get a broader definition or allow us to make up what we think is "vulnerable", that would really help at least to try to protect people from getting into that loop of homelessness.

Q49 Glenda Jackson: Essentially, what I am trying to get down to here is whether you think that, if the rent was paid directly to the landlord in the private sector, that could help reduce the reluctance of private landlords to actually rent to claimants?

Catherine West: Yes, I do.

Gavin Smart: I agree. I think that is what you would imagine. Actually, this goes to another point that would be worth noticing. Because this is a UK-wide policy, it impacts differently in different places, and that needs further attention. For instance, in Northern Ireland, we think there are 60,000 private landlords who currently receive payment of housing benefit direct-about £250 million a year. That system will not continue into the future. We will be concerned about what that means for the provision of private rented accommodation for people on benefit in Northern Ireland, but that is really just an example of why it is important to pay attention to the UK-wide nature of the policy.

Q50 Stephen Lloyd: I have had a very definite representation from representatives of private landlords that, if there was that flexibility that would allow the payment to be made directly to them, it would be a lot easier for them to match the housing benefit cap. Would you agree broadly with that principle?

Gavin Smart: I can understand why they would say it. Any landlord particularly prefers certainty of income, and you would trade certainty of income for an element of rent. I can see that.

Q51 Harriett Baldwin: Could I just specifically ask the CIH (Chartered Institute of Housing) about whether you have done any work on supply of premises-the willingness of landlords to supply properties in the private sector as a result of this change?

Gavin Smart: Not specifically-not to this level of detail.

Q52 Harriett Baldwin: Would you consider doing a bit of research on that?

Gavin Smart: We would certainly consider it. I think it is something we would want to do alongside the other private landlord bodies, because they have access to private landlords.

Q53 Harriett Baldwin: Are you aware that any of them have done any work on this at the moment?

Gavin Smart: I am not aware, but that could just be my memory.

Q54 Stephen Lloyd: Could I quickly get on to having benefit capped? There are only a few minutes left. I am not going to ask you if you think it is a good idea, because we don’t have time for that and we would go round in circles. What I would be really interested in, with the people we have here, is: what amendments would you like to see to the Regulations for administering the cap, for example in relation to temporary accommodation? Have you any specific recommendations to tell us, the Committee, about what amendments would actually make it better, whether we like it or not, if you know what I mean, in principle?

Catherine West: On the question of the budget and some of the transitional arrangements, if we can have a bit more flexibility about what we define as a transition period, because we know that these tapering arrangements sometimes really do end up just landing then on local authorities. At the moment, there is some provision that there will be some allocation of budget to help with differences in the housing benefit allocation-obviously, a big issue for high-value areas like ours. If there could be some flexibility around the transitional arrangements, so that not everything is locked down immediately, I also think that would be wise in terms of fallout from any other benefit changes at the same time, so that we have a bit of a sense that there may be a pot to call on. At the moment, it does feel as though local authorities will be made to carry this burden for much longer when, actually, perhaps it is not really local authorities’ fault, if you know what I mean. Perhaps just having a bit of an understanding of the length of period because, sometimes also, with these allocations, they are just very much in one financial year and you don’t really know that you will need it until halfway through the financial year. If the spending could just be stretched over a period, that would be very helpful, because I think the transitional arrangements are essential.

Sir Merrick Cockell: I am advised, in the Local Government Finance Bill, that there is an amendment seeking flexibility, certainly on council tax benefit, but I think, as Catherine has said, that flexibility on the cap, on the transition, just would make things-

Stephen Lloyd: A lot easier.

Sir Merrick Cockell: Yes. I would want to make sure that we are not just giving you a London perspective.

Chair: To be fair, it probably impacts more on London.

Sir Merrick Cockell: Yes, exactly. It is more intense with us than anywhere else.

Q55 Glenda Jackson: Where would the money come from?

Catherine West: This is the idea of the transitional payment. There is a public consultation about Discretionary Housing Payments currently. It just finished at the end of last month. I will leave you this: this is our local council response to that, just saying, "Please, don’t just say there is one little lump sum for a very short period of time that we can call on if needed. If we could just stretch out that allocation for a longer period, we can wait until all the changes come in, so that we can try to line up." We have written to everyone who is affected by the local housing benefit cap, and hardly anyone has come back because we have said, "Next April, you will be affected," and they just think, "Oh, worry about that later."

Stephen Lloyd: Yes, it is human nature.

Catherine West: Whereas we are really, really anxious about how that is going to affect people.

Q56 Glenda Jackson: There is £100 million that the Government has said is there, which is going to run for a year, which is why I said, "Where is the money coming from?"

Catherine West: If we could have that stretched out, that would be really helpful.

Stephen Lloyd: But that wouldn’t just be London, I would have thought-Manchester and some of the bigger cities.

Glenda Jackson: That is a national amount.

Stephen Lloyd: I wouldn’t mind a copy, certainly for myself and possibly for the Committee, of that. I am sure it gets a lot of the headline ideas.

Gavin Smart: Just one quick point on supported accommodation: looking at the Universal Credit regulations as they are currently drafted, they do not appear any more to have this category of exempt accommodation, which is where, previously, particular kinds of accommodation-and particularly supported accommodation-were exempt from referral to the rent officer. We think that might be an oversight, but it has caused us some concern and it needs to be reinstated.

Q57 Chair: Does that include women’s refuges? Women’s refuges have been campaigning.

Gavin Smart: That is one of the points that they would be concerned about, yes. We think, from DWP officials, that they do not necessarily intend to change the way the system operates. It is just about getting the Regulations right. As currently drafted, however, the Regulations do not appear to recognise this category of accommodation.

Q58 Chair: That is where accommodation has a service charge attached to it and they will get their housing benefit for the accommodation but not for the service charge. But these are vulnerable people.

Gavin Smart: It may also have a higher rent because of the nature of the client group that you are working with. Historically, what has been allowed to happen is for those properties not to be subject to referral to the rent officer, because it is recognised that there are particular categories of properties providing a particular sort of service.

Q59 Stephen Lloyd: Pete, anything to add?

Pete Challis: Nothing to add to that.

Q60 Teresa Pearce: I will try to be quick. Firstly, we have had a lot of evidence on Universal Credit, and we agree on the policy, to a certain extent, but it is the implementation that is really worrying us. This late in the day, to still have uncertainty about what certain terms mean and how things are going to work, is that a real worry?

Gavin Smart: Yes, it is. One of the points that I wanted to raise today was that I think, generally, we are concerned that the amount of information from DWP is insufficient to allow all sorts of different groups of people to prepare for the implementation of the policy, be that tenants or landlords or, actually, the prepaid card organisations, who need more information. We would want to say to DWP, "You need to do more to communicate more clearly and, even if you cannot give certainty now, give people a point of time at which you will be able to give an answer", because then they can start to prepare.

Q61 Teresa Pearce: I think it was in your written evidence, Gavin, you suggested that costs arising from the transition to Universal Credit might fall on other bodies. Which other bodies did you have in mind, and do you have a number?

Gavin Smart: I don’t have a number but, for instance, if you look at the demonstration projects for direct payments, it is quite clear that the landlords in those areas are ramping up things like the amount of financial inclusion and the amount of advice and support that they give to tenants and residents. That is a cost that they are absorbing that will not come back through the benefits system.

Q62 Teresa Pearce: So you think housing associations and organisations like that.

Gavin Smart: And local authorities.

Q63 Teresa Pearce: The Pathfinder pilots begin in October 2013. What are the likely consequences to come out of that, do you think? Do you think there will be any changes after that? Do you think there is sufficient time to learn the lessons from those Pathfinders before everybody is into the system?

Gavin Smart: I don’t know what will come out of them, but I think you are right: there is a risk around time. To run the pilots for long enough to gather some data, to understand what it means and then to understand what the changes ought to be, it looks very tight.

Q64 Teresa Pearce: At the moment, there are so many unknowns. If the Pathfinder does anything, it will find some of those unknowns, but will there be time to actually implement?

Gavin Smart: I am not sure there will, and we would like to see a clearer statement from DWP about the relationship between the direct payment pathfinders, the pilot pathfinders that you are referring to, and the design of the policy, so one can see how the findings from those things feed through into policy change.

Q65 Teresa Pearce: We have talked a lot about the responsibilities falling on local authorities. Are there any realistic estimates of the additional cost to local authorities for the transition to Universal Credit and, if there is, have you got any undertakings from the DWP about the sharing of those costs or do they fall solely on local authorities?

Sir Merrick Cockell: Part of the problem is-

Teresa Pearce: You don’t know.

Sir Merrick Cockell: We don’t know, and the costs will only be clear as the process is going through; therefore, the new burdens doctrine/policy should kick in here. But what we do not want is a decision to be taken now on what that might mean and that is the end of the story. We want to work with DWP and others as we go through to evaluate what the real impact is as it goes along, because, as we have been hearing, so much of this is unintended consequences of changes, where the motivation behind it was right and it all seems to make sense, but, as we have found out, particular people might well be receiving less than they have done, whatever assurances have been given. It has to be evolving, and the legitimate cost implications to local authorities must be worked out over the implementation period, rather than a figure be plucked out and allocated under new burdens.

Q66 Teresa Pearce: Is there one thing each of you thinks is a key risk in the implementation, or the main risk?

Catherine West: The main risk is around the complexity of that many different forms of benefit in one project.

Teresa Pearce: All at the same time.

Catherine West: Because at least if one element of someone’s benefit stops, or there is a problem with it-and people’s circumstances change all the time-even though the principle behind Universal Credit is to flatten that, and we agree with that principle, in actual fact I think it is going to be quite difficult to do all of that on a day one-type arrangement, because my experience of computers is that they can sometimes let you down; letting 19 million people down is another thing, so the potential for a problem is quite high. If you marry that up with the council tax benefit, which is being administered separately, and the fact that they are tending to be targeted at the same income groups all the time, then I think we have big costs for local authorities trying to pick up homelessness and other problems, and also a lack of provision across the country around the Social Fund-some councils are going to be quite good at this, because they are used to dealing with lots of problems-and shift in population as well. It is not just councils; it will be schools.

Teresa Pearce: There is not one single key risk. It is all risky.

Catherine West: Schools and PCTs1.

Q67 Glenda Jackson: Also, the fact that you have all lost so much staff, so there is a time element in this as well, isn’t there?

Catherine West: Yes.

Glenda Jackson: When the problems come up, there is going to be a time lapse before someone can help someone to solve it.

Catherine West: That is right.

Pete Challis: You have risks that Real-Time Information won’t deliver.

Glenda Jackson: Exactly.

Pete Challis: You have risks with the DWP’s own computer development, which is being done on the basis of agile computer systems, and we know the history: agile was what was tried in the NHS computer system, which was eventually abandoned. You have risks with the identity assurance protocols and the identity assurance providers, and whether or not that is going to work. But the biggest risk is that the whole thing is being designed without having put in place in every local authority the arrangements for what happens where people cannot get answers to the legitimate questions that will arise as they are seeking to try to make their claim, whether that is to do with the process, whether it is to do with the verification and the documentation. We need to have that integrated model, and we have the staff to do it.

Q68 Glenda Jackson: You have got the staff to do it?

Pete Challis: They exist in local authorities now. It is a question of integrating them.

Gavin Smart: I would take a slightly different tack and say that this is why having proper monitoring and understanding in place is so important, because, as other speakers have said, with such a massive array of changes all happening at once, you need to be monitoring what is happening to the way the system is working and to the consequences it is producing, to try to understand whether or not it is doing what you thought it would do and, if it is not, how you need to make changes to it. We need to see greater certainty around the amount of monitoring that DWP intend to put in place, how they will evaluate it and how they will then feed that back into policy design and policy change.

Sir Merrick Cockell: Local government is quite used to picking up the pieces and sorting out problems just through what we do, but history tells us that all-singing, all-dancing new online systems, if they go wrong or are found to be open to relatively easy fraud or something like that, people lose any confidence in them. So around IT is the big risk.

Q69 Chair: That was why they had to shut down the child care tax credits online, because there was huge fraud.

Can I thank you very much? Unless there was anything else that you came along today burning to say and we have not asked a question that has allowed you to say it, I think you have been very imaginative in how you have managed to get most of the things you wanted to say in via the questions we asked. I meant that as a compliment, by the way.

Pete Challis: Would you be happy for us to send you some additional material?

Chair: Absolutely. Any more information, particularly in terms of hard figures as well about the costs, would be extremely useful, because there is obviously an issue about the cost-sharing and the burden of implementation. The other thing that we are looking at is what the dangers are. You have articulated that very well, but what are the risks? I think our Report will be: what does Government need to do now and address now to make sure that there is a smooth implementation of the Universal Credit?

Can I just say thank you very much. I will need you to move, unfortunately, very quickly, as we have a second panel to come in now, but thanks very much for coming in this morning.

Examination of Witnesses

Witnesses: Professor Mike Brewer, Research Fellow, and James Browne, Senior Research Economist, Institute for Fiscal Studies, Tony Wilson, Director of Policy and Research, Centre for Economic and Social Inclusion, and Fran Bennett, Women’s Budget Group, gave evidence.

Q70 Chair: Can I say welcome to you all? Can I ask, perhaps starting with you, Tony, if you could very quickly introduce yourself and your organisation?

Tony Wilson: My name is Tony Wilson. I am a Director at the Centre for Economic and Social Inclusion. We are a centre that delivers research, analysis, policy, events and various other things around welfare to work, employment, skills and welfare reform.

Fran Bennett: My name is Fran Bennett. I am a Senior Research Fellow at the University of Oxford but I am here on behalf of the Women’s Budget Group in particular, which is a group that does gender analysis of budgets and spending. I will also be drawing on my wider personal and academic experience.

James Browne: I am James Browne. I am a Senior Research Economist in the Direct Tax and Welfare sector at the Institute for Fiscal Studies (IFS).

Professor Brewer: I am Mike Brewer from the University of Essex and a Research Fellow at the IFS.

Q71 Chair: You are welcome. I think you were all sitting in for our first evidence session, so we will try not to repeat those questions, because, obviously, one of the issues about Universal Credit is it is such a wide-ranging benefit that is going to cover so many different aspects. That, for us as a Committee, is quite difficult to get a handle on as well, because there are so many things to it. Perhaps I can address the first question to Fran. The Government has said that Universal Credit is going to be paid monthly, with only very limited exceptions. I understand that you believe that claimants should have a choice of more frequent payments. Why?

Fran Bennett: Yes. This is partly because lots of things are happening at once. It is a kind of multiple whammy for claimants that we heard something about in the first session. Claimants budget less than monthly, commonly, because they are living on a low income, not necessarily because of weekly benefit frequencies or because they are bad budgeters, but because they want to keep control over their low incomes. It will, therefore, make things much more difficult for them if they are losing the labelling of payments that we have at the moment, the payment to different people within the couple that we have at the moment, and not just those but the more frequent payments that we have at the moment.

This is not just something for people out of work, as tends to be suggested in some of the debates; it is actually people in work as well, because if you are on tax credits in work, you can choose to be paid weekly. Of course, if you are in low-paid occupations in particular, you are more likely to be paid weekly; for example, one in two under £10,000 a year is paid more frequently than monthly. It is not a typical experience to have a monthly budget of one payment for very many people in the kind of situations that Universal Credit will involve.

Q72 Chair: The Government’s argument is that it wants to simplify the administration, and certainly monthly payments must simplify the administration, particularly if we are looking at Real-Time Information. Does the Government not have a point that this is actually saving taxpayers’ money and, ultimately, we are more likely to get the calculation correct if it is monthly payments?

Fran Bennett: No, I think there are two issues. One is monthly assessment and one is monthly payment. The Government, during the debates around the Bill, acknowledged that payment more frequently would not, actually, be hugely more costly, and that the computer technology could deal with it. The Government wants to pay monthly because it believes that that is mimicking the situation in work, which, as I have said, I do not think, for a lot of people who are on Universal Credit, is actually the case, and because they want to change people’s behaviour. I would argue that that is inappropriate for people who are on low incomes and choose to budget more frequently than monthly, and the Government should be facilitating the way in which people on benefits and in work on low incomes are more likely to budget their money successfully.

Q73 Chair: Can I ask the others whether you think that the Government will achieve its aim of simplifying the administration and thereby saving money?

Tony Wilson: I agree with everything that Fran said, and we made similar points in our submission. I would possibly go further and say that, actually, paying Universal Credit monthly could serve to undermine the incentive to work. We know that people on benefit budget more frequently than monthly; they budget weekly. We know that people in work on low incomes, even if they are paid monthly, budget more frequently. It is a consequence of being on a low income. Actually, moving to monthly payment increases the risk of claimants, for example, running up debt, having to rely on other ways to meet that debt, becoming less financially included, leading to less certainty, and potentially undermining their likelihood of going back to work. Of course, if your Universal Credit is only being paid monthly and your income is only being paid monthly, then that transition in and out of work does become less smooth. You have to wait longer for those payments to restart. I am not really clear that the Government achieves much, if anything, by moving to monthly payment. I think, at the very least, in the short term, we should be continuing with fortnightly payment and actually testing whether moving to monthly payment increases financial inclusion and increases the likelihood of moving back to work.

Q74 Chair: One of the witnesses in the last session-I cannot remember if it was the Local Government Association-said that perhaps the Government should look at carrying on the transitional run-ons that presently exist and that I think are due to stop under Universal Credit. Would you go along with that?

Tony Wilson: Benefit run-ons and so on, yes.

Chair: Benefit run-ons, yes, is the phrase.

Tony Wilson: The Government probably has a point here that that should become less necessary as a consequence of benefits being paid monthly. If I move into work, my next benefit payment will be much later on and act as a sort of run-on as well and, if I move out of work, then my last pay cheque acts as a run-on as well. There are some ways in which benefit run-ons should become less necessary because they, essentially, allow for the transition between in-work and out-of-work payment systems, and also in-work and out-of-work benefit systems. Of course, we are integrating that in Universal Credit. I would, however, say there is another important function that run-ons serve, which is actually to increase the cash incentive to work for some groups. I will make this point now and I will probably make it again later: I do think that the abolition of In Work Credit, Return to Work Credit and the Job Grant, which all provide additional cash support for long-term unemployed or disadvantaged people to move back to work-and that is going to happen at the same time as Universal Credit-I do not think really stands up to scrutiny. I think that there is a strong argument for continuing cash support and additional cash payments for some groups when they move into work.

Q75 Chair: When do those things stop?

Tony Wilson: They will stop, I believe, next year, so it may actually be well in advance of Universal Credit.

Q76 Chair: Yes, that was my understanding: they were going to stop for everybody next year but, of course, they will not migrate, necessarily, for some time.

Fran Bennett: Could I just come back, Chair, on your initial point about simplification and saving money? The point we were trying to make in our submission is, actually, that the way monthly budgeting is going to have to lead to exceptions is likely to undermine the successful introduction of Universal Credit and also be very costly, because the exceptions are going to have to be referred and then a decision is going to have to be made by a member of staff. They are then going to have to be monitored and reviewed because the Government only wants exceptions to be temporary. All of that is going to be incredibly labour-intensive, and I think it is much more likely, if the Government allows people the choice of whether they want to be paid monthly or more frequently, to be less costly than if they are operating a huge system of exceptional payments for people to be paid more frequently. The other option is if the exceptions are only very limited, then it is likely, I think, that lots of people are going to be applying for the advance payments of Universal Credit, which will replace the alignment crisis loans that are available at the moment. Again that will be a very labour-intensive process and will mean that people start off their Universal Credit lives in debt already.

Q77 Chair: But if Pete Challis from UNISON, from the last session, is right, it is going to be very difficult for people to become exceptional cases, because they will be caught in this telephone loop that keeps putting them back to the computer. If the Directgov website is anything to go by, you end up in a loop in it; it always brings you back to where you started.

Fran Bennett: Yes, I think he was talking about online claims rather than monthly payments. There may be exceptions for online claims but there are exceptions for monthly payments, for direct payment of housing benefit to landlords, and also for split payments between the two members of a couple. Those are the three main classes of exceptions that the Government is thinking about implementing.

Q78 Chair: I think my question is: how do they get to the DWP or Jobcentre Plus to say that they are an exception, if they are having to do everything online?

Fran Bennett: The referrals can either be directly from the DWP, apparently, from other agencies outside, or self-referral by claimants. We don’t know very much about how the whole process is going to work yet. The other thing is that the Government is proposing that those people who are exceptions to monthly payment will be given budgeting support. I think that there may be a misunderstanding that people are necessarily bad budgeters because they budget more frequently, but there is no indication yet about whether additional resources are going to be given for that budgeting support that is going to be available for people with exceptions.

Q79 Chair: What is the IFS view on monthly payments?

Professor Brewer: I agree very strongly with what Tony and Fran have said. This does not seem to me to be about simplification at all. It is not complicated to pay someone benefits weekly or fortnightly. It is no more complicated than paying it monthly. Your previous witnesses were talking about examples where they think that paying benefits monthly will lead to higher costs for them. Chair, you said paying benefits monthly might save the taxpayer money; I think it will probably cost the taxpayer money paying benefits monthly, because local authorities and organisations like that will be dealing with the people who cannot cope with monthly payments.

Fran Bennett: Could I just add two points? One is that direct debits are often very inflexible in terms of the date that they have to be paid. If people are being encouraged to take up direct debits and they only have a once-a-month payment, with all their eggs in one basket, then that may very well lead to real problems. The other issue from the Women’s Budget Group point of view is that we fear that the pressure of having a monthly budget is likely to fall on women in particular, because women are the ones who usually have to do the more frequent payments for housekeeping and children and so on. If the emphasis of the Government’s approach is towards monthly payments of bills in full, on time, if that is prioritised, no matter what the circumstances, then it is likely the pressures of that situation will fall on the mothers in particular, in low-income families with children, who do the more frequent purchases.

Q80 Chair: Can we look at the help for making an online claim? Where is that help going to come from? What support and advice do you think needs to be in place? Who should be delivering it and paying for it, in light of the previous session, to help maximise the number of people who can manage an online claim?

Tony Wilson: Certainly, in our view, it is the Government’s responsibility to make sure that people are able to access the benefits to which they are entitled. I agree, actually, with the previous witnesses that the move to online claims has to be the right direction of travel. It is lower-cost, it will increasingly reflect the way that people manage their lives, and it should be more straightforward. Of course, the problem is, as others have said, that, actually, access to the internet declines with income. More disadvantaged people are less likely to access the internet; disabled people are less likely to access the internet. Currently, claims are very low: only about 20% of JSA claims are online. There has to be a responsibility on the Government to make sure that they have a digital inclusion strategy in place-that is critical-and they are doing a lot of work on that. That is welcome, but also, alongside that-

Q81 Stephen Lloyd: On that note, Tony, can I come in quite quickly? I accept all that you say. But that very group that has been stuck in benefit dependency for two, three or four generations now-we are talking about a lot of people-are often also not IT-literate. Philosophically do you then accept or not accept that it is a bit of a blunderbuss philosophical approach but, my God, we have tried everything else, we have to do this as well, and what we need to do is to somehow find a way of underpinning it so that those individuals or those families in that situation do not get completely hung out to dry? In very simple terms, is that really what you are saying?

Tony Wilson: I think that is right and it is exactly the point I was going to make. As well as having an inclusion strategy, the Government really needs to understand why it is that some groups are less able to access the internet, or less likely to use it for managing money, or are more likely to access it in some ways rather than others; for example, increasingly through smartphones rather than through fixed computers. It needs a much richer understanding of what the barriers are and then working to overcome them, because digital exclusion and social exclusion overlap very strongly and we should be trying to reduce both. It has to be a prerequisite of moving to payments online. Again, a similar point to the last one about monthly payments: we feel like we are potentially moving too far and too fast, and that maintaining the ability to opt in to telephone-based claims, at least for an interim transitional period, would be hugely beneficial. The risks around moving to a predominantly online service and really reducing the access and the channels people can access are quite significant. It is not necessary to do this all by 2013 or to an arbitrary deadline.

Fran Bennett: There were some concerns expressed, I think, in the user-centred design research that the Government did, about the clunkiness of the joint claims online process and the cumbersome nature of that. There were also some concerns about the fact that everything would be shared online, including decisions and including, apparently, decisions about where there would be split payments. There were some definite concerns amongst claimants about the online process for joint claims in particular.

Q82 Harriett Baldwin: I think it is quite easy to forget in all of this discussion of the implementation that the basic purpose of moving to Universal Credit is to try to improve incentives to work and make work pay for every hour of work that people choose to do. I just wanted to ask you the basic, obvious question: do you expect that Universal Credit will provide additional incentives for people to work?

James Browne: Yes, definitely. I think we have shown in our research that Universal Credit does strengthen the incentives for people to work, particularly for those people who have the weakest incentives to work at the moment, but it is not a universal improvement in work incentives. For some groups, the incentive is weaker.

Q83 Harriett Baldwin: Those are for the people who are already in work, though, aren’t they? Which groups of people do the incentives weaken for?

James Browne: It is mainly for people who already have a partner in work. At the moment, Universal Credit gives a lot more support to single-earner couples, but then that support is withdrawn more quickly than it is under the current system. Another very important point to make here is that a lot of the strengthening of work incentives that Universal Credit is likely to bring about could be undermined by the decision to localise support for council tax to local authorities; the decisions they make are going to be very important in determining the extent to which work incentives really will be strengthened. A lot of the very high marginal deduction rates that we have at the moment come about because the tapers of lots of different benefits are overlapping and, if you still have these overlapping tapers, you could still have the very high marginal tax rates that Universal Credit was meant to get rid of.

Q84 Harriett Baldwin: My understanding, though, is that the council tax that people could be asked to pay-we heard from earlier evidence-could be as high as £190 a year. That leads me into the earnings disregard: do any of you have any guesstimate for us as to where you think the earnings disregards will be set?

Fran Bennett: No, except that the Government did produce examples. As I understand it, the earnings disregards were the elements that were changed in the formula, because of the council tax benefit localisation decision, and that is how I understand the Government said they were trying to cope with that: by increasing them a bit. The point I wanted to also add to this is that I am not quite sure how many people have yet taken on board the zero earnings rule for the support for mortgage interest. Support for mortgage interest, of course, is not going to be paid direct to claimants; it is going to be paid to lenders, in a reversal of the policy about financial responsibility. Leaving that aside, however, the Government has decided that there will be a zero earnings rule for support for mortgage interest. That is likely to hit particularly lone parents who have been left with the family home, paying the mortgage and currently have been able to get support for mortgage interest on income support in jobs up to 16 hours a week, until they went on to tax credits, which were more generous. Apparently, that is not going to be possible any more, and I think that is a real problem that has emerged in terms of work incentives.

Q85 Harriett Baldwin: I think I am also right in saying that mortgage interest support only kicks in when you have been on Jobseeker’s Allowance for six months or more.

Fran Bennett: I think it is actually longer.

Harriett Baldwin: Is it nine months?

Fran Bennett: I think it is nine months.

Tony Wilson: It has been reduced during the recession. I am not actually sure what the default will be in the Universal Credit and the rates; I am not sure it has been specified, but the default is, I think, nine months.

Q86 Harriett Baldwin: That potentially still gets withdrawn linearly when you move into work, so it does not have the same impact as the overall Universal Credit. Am I right in my understanding?

Tony Wilson: It is a cliff edge. It is linked to your JSA or to your out-of-work benefits; when you lose entitlement to out-of-work benefit, you lose your entitlement to the support. Under Universal Credit, what happens is, as soon as you work any hours at all, which could be much less than that, you will lose your entitlement to support. For a small but significant group who have mortgage responsibilities and who want to take up mini-jobs, which is a huge and really important objective in Universal Credit, particularly for parents with caring responsibilities, that will be a big issue.

Q87 Harriett Baldwin: Do any of you have any estimates in terms of how many people might be affected by those two things?

Tony Wilson: I don’t, and one thing I have looked quite extensively for is data on, for example, tax credit recipients who have mortgages and on the payment of support for mortgage interest to different groups. I do not know if others have but I have not found that data. One thing that we said in our evidence was that, actually, it is quite hard to make judgments about disregard policy and the level of disregards if the Government is not able to produce the data that would enable a judgment to be made. It is likely to be a small group but it is a small group for whom there will be a very large impact, so it is hard to make judgments about how to set policy without that evidence.

Fran Bennett: One thing which, again, people are only just realising the impact of is the monthly assessment period and the whole-month approach to changes of circumstances. The Government has clearly outlined this but, as I say, it is the first time I have fully realised, and I think it may be for other people as well. Although the Government wants people to be able to be very clear about the impact of their decisions about working on their Universal Credit income and, therefore, there is a single taper, actually, because changes of circumstance are all going to be bundled up together and only given in a decision letter, apparently, at the end of the month, and will all take effect for a whole month, then it seems to me that that muddies the waters in terms of people being able to see clearly the impact of increased earnings on their benefit, because there may be other changes of circumstances that are (a) muddled up with those and (b) not necessarily responsive to the changes of circumstance themselves but, actually, take effect for the whole month rather than pro-rated.

Incentives to work, it should be said, are very much a perceptions issue as well as an economic modelling and marginal deduction rate issue. For example, a lot of people think you cannot get help with your housing costs in work and, of course, you can. It is very much an issue of perceptions and of timing and people’s real lives, as well as what marginal deduction rates apply to which groups.

James Browne: Yes, I absolutely agree with that. You cannot just look at the pure measures of financial work incentives. You also need to think about people’s perceptions of the system; moving to an integrated benefit may actually have a bigger impact on people’s decisions than the pure changes in financial incentives that arise. Having an integrated system does make it easier for people to understand, and would hopefully correct some of these misperceptions about not being able to get support for housing costs or council tax when you are in work.

Tony Wilson: Research we did in 2008 for the Joseph Rowntree Foundation threw up exactly these sorts of issues. Issues around complex claim forms, having to give information to multiple agencies, poor-quality advice, and delays in payment, for example, are all major barriers to work. Work incentives are also about complexity, transparency and perceptions. That will all be addressed through Universal Credit, to a greater or lesser extent. The bigger risk with council tax benefit is less about necessarily the precise amount better or worse off people may be with the localised scheme; it is the sheer complexity. As others have said, you would need a GPS system to know whether you are better off or worse off in work rather than a calculator, because it will be different in every place. That will create barriers, and barriers the Government will need to address.

Q88 Chair: Do you know if there are any plans, therefore, to have a calculator on an individual online claim that they can put in: if I earn £50 a week, what difference will that make? Will they be able to do that?

Tony Wilson: As I understand it, that will be a key part of the Government’s online portal for Universal Credit. There currently is I think a very decent attempt online to do that, which has been produced by Deven Ghelani, currently from the Centre for Social Justice, which, again, attempts to show how people can be better or worse off in work. But with this opportunity of simplifying and creating a single benefit, we should not need to rely on complex calculators with multiple variables that need a heck of a lot of local information as well to make those judgments. So tackling that inherent complexity in the Universal Credit, a large part of this reflects individuals’ complex lives, is absolutely necessary, but part of which does reflect decisions that the Government has made and will need to unpick, council tax benefit being the most important in those.

Q89 Stephen Lloyd: I believe you were in the room when we were hearing evidence from the previous witnesses. Are you then saying that, actually, you would not want the council tax benefit flexibility that would make it easier for the councils, because that then adds to the complexity of Universal Credit, or that you would think that is a good idea?

Tony Wilson: The witnesses were absolutely right that the Government, having given local authorities flexibility, has then said, "You cannot apply that to half of your caseload"-pensioners. Effectively, a 10% cut becomes an 18%, 20% or 21% cut. Then additional guidance was issued and there was much debate over the last year about how far there should be guidance and how far there should be hard and fast requirements about making sure it fits in with Universal Credit. There was talk about localised systems all operating off the same system to ensure everything aligned perfectly. So what started flexibly risks becoming incredibly complicated.

Our preference would be to maintain the council tax benefit as an in-work and out-of-work benefit, with national rules and national criteria, and to integrate it into Universal Credit. It has echoes of Poll Tax all over it, really, and I think there will be huge challenges for local leaders to explain the impacts and the decisions that they are making. They have only got another three or four months to set out what their schemes are going to be.

Fran Bennett: On the incentives, I just wanted to emphasise the point about second earners in couples. I think I am right in saying it is partly a result of the Universal Credit being on net income, whereas, for tax credits, at the moment, the withdrawal rate is on gross income and is much lower. Quite a lot of second earners, compared with their current situation, are going to be in a worse situation in terms of incentives. Actually, that is the kind of group where the financial disincentives, albeit in context as we have all said, are shown to be more important, because, for example, somebody might stay at home longer after maternity leave or go back to work. I think that is right. They are more sensitive to those kinds of incentives. It is exactly that place where incentives are going to worsen for a lot of people. Of course, if you are thinking about child poverty, for example, or even about somebody who may split up and then have to be in the labour market when they are a lone parent, to make it more difficult for second earners to go into work just seems a bit counterproductive.

Q90 Harriett Baldwin: Moving on, then, to another area of complexity, which is the passported benefits like free school meals and free prescriptions and so on, do you have any recommendations as to how that should be transitioned or what the long-term solution to that particular issue is?

James Browne: This is another difficult issue that the Government has not really got to grips with yet and which could undermine a lot of the strengthening of work incentives that Universal Credit is going to bring about. At the moment, they are hoping to spend about the same amount of money and give the passported benefits to roughly the same group of people. That could create some nasty cliff edges, where people immediately lose all their entitlement to these benefits if they increase their incomes by a small amount. Solutions to that might be things like cashing up the benefits with things like free school meals and just having that as an element of Universal Credit that is withdrawn in the same way as the other ones, or just having a series of smaller cliff edges.

Q91 Harriett Baldwin: Again, the point I made on council tax benefit and the free school meals: if it were cashed up, it is still going to be much less than the earnings disregard, isn’t it? You would not have to have a withdrawal rate on it, would you?

Tony Wilson: It may be. There is good analysis by the Children’s Society on this, and I think they are giving evidence next week. They modelled, I think, a lone-parent household with two children earning a certain amount, and they could face very significant cliff edges, where, actually, increasing hours or going back to work becomes unviable.

Q92 Harriett Baldwin: But only if the-

Tony Wilson: Disregards are set at the wrong level.

Harriett Baldwin: And the passported benefits are withdrawn immediately when you return to work, presumably.

Tony Wilson: Yes, but you might still reduce the financial return from work relative to others. Even if people are not actually worse off in work, they will still make a judgment about the value to them of going back to work against not working and spending more time with their children, for example, particularly factoring in childcare costs and other financial constraints.

Q93 Harriett Baldwin: Have you done any work where the cash value of these benefits is taken off, as it were, the top of the earnings disregard? In other words, you go into work, your earnings disregard continues at 100%, but the amount that you can disregard is reduced by the cash value of your passported benefits. Wouldn’t that be a potential way of dealing with those incentives?

Tony Wilson: Yes, and you would make your disregards a bit more complex. That comes back to the issues around complexity. There are no easy answers. Actually, on passported benefits, I would absolutely cut the Government slack, because this is a problem that currently exists; it has existed for years. Unlike the council tax benefit, where, actually, that was not a problem and we have created one, passported benefit is a long-running problem that we have not been able to solve. The Social Security Advisory Committee looked at this and they said, essentially, in the short term, we should look at things like allowing run-ons of passported benefits as people move into work-I think that would be a very good idea but it has a cost-and in the longer term, look at these issues about whether you can cash them or reform them in other ways, but that is not going to happen outside the Spending Review process, I don’t think, because there are far too many Departments involved. I am sure the Government are working on it now but they should be working towards the back end of 2013, I think, to get solutions.

Q94 Harriett Baldwin: None of our wise panellists have a recommended solution for us to put in our report?

Tony Wilson: Running on passported benefits for a year, or just for a period after people enter work.

Fran Bennett: We should be a bit cautious about the cashing-up idea, partly in relation to something we have not yet discussed, which is the payment for couples, where the Government is going to make couples at the moment choose one person or one account. If you think, for example, of free prescriptions, if you cash up free prescriptions and the amount is then given to the person who is not the person with the health problem, it seems to me that is a bit problematic.

James Browne: Cashing up would be sensible for things where there is an ongoing need; for free school meals-your child always has lunch. You do not always need a prescription, so you might not worry about the cliff edges in that case, because it is going to be less salient when you are thinking about returning to work that, "I’m not going to get free prescriptions any more."

Professor Brewer: Yes, I agree with what Tony said, that this is a problem that the previous Government did not solve and this Government does not yet have a solution either.

Q95 Harriett Baldwin: We were just hoping that you, as our panellists-

Professor Brewer: You came up with the obvious solution. I suppose what the Government could also do at the same time is review these passported benefits and decide whether they should be means-tested at all or should exist at all. It is decided that people on low incomes should pay some council tax, whereas, previously, they did not; maybe people on low incomes should pay some prescription charges where, previously, they did not, or maybe nobody should pay prescription charges. The decision goes beyond Universal Credit; you should think about all these benefits in themselves and maybe have different decisions on different benefits in kind. Maybe you do different things with free school meals than you do for free dentistry care.

Fran Bennett: Which is what the Social Security Advisory Committee said, I think, but also it brings up the devolved administrations, of course, because, in some areas, these are free to everybody.

Q96 Harriett Baldwin: Moving on to a third area of complexity-and, hopefully, very quickly-obviously, at the moment, you need to work 16 hours minimum before you get help with your childcare, and money has been put into the system so that childcare support now starts from the first hour of work, which will make it a much more linear decision for people. At the same time, however, the amount that you can claim back in terms of childcare support is being capped at 70% of the actual cost. Have you, as a group, done any analysis in terms of who the winners and losers are in those different examples, and how many of them are winners and how many of them losers, and again, what the impact is on work incentives?

Professor Brewer: No, to answer your last bit. I don’t think we have done hard and fast analysis. I would say that the current situation is an odd one. It is odd that we give people who receive housing benefit a bigger subsidy on their childcare than people who are not on housing benefit. That is the current situation, and the Government is getting rid of that, which is an odd anomaly. I think it is fine that we are moving to a position where everyone gets 70%. It would be nice if everyone could get 80% or everyone got 90%; it is odd that some people currently get 90% and some people get 70%. I also think it is a good thing that people can get help with their childcare from the very first hour. Particularly for lone parents, we know that 16 hours is a bit of a big jump. At the moment, they cannot get help with childcare if they are doing mini-jobs, and I think it is a very good move that that change is being made. That will definitely help work incentives and it may well help lone parents’ progression, although the evidence on mini-jobs is a little bit unclear. The losers are going to be those people who are paying money on childcare, are in work and are receiving housing benefit. I suppose that means they are more likely to be in high-rent areas, but I think the Government is ironing out what is currently an anomalous situation.

Q97 Harriett Baldwin: Do you have any idea in terms of numbers in those two different categories? It is, presumably, quite hard to estimate.

Professor Brewer: We probably could work out how many people would lose, although I do not have the answer in my head. The people who are gaining are probably going to be families who are not currently using childcare, because it is too expensive for them, so they are potential gainers. It is not easy to estimate how many there might be, but I think we could probably get back to you on how many losers there are.

Tony Wilson: I don’t have the figures to hand, but there has been work looking at the scale of losses. Essentially, it is coming from the perspective, inevitably, of looking at a reduction in the level of childcare support to 70% for people who work longer hours and the potential scale of losses and numbers of losers. The difficulty with doing the analysis of who the gainers might be is that we have a benefit system that strongly disincentivises working short hours, for all sorts of reasons. It is actually quite hard. As Mike says, it is like the evidence on progression from mini-jobs to longer jobs. We don’t, actually, have a huge amount of evidence; people, on the whole, do not work mini-jobs if they are on benefit, for example, because it is quite hard to do that work.

Q98 Harriett Baldwin: In conclusion, then, can I just ask the panel if you all agree that there is likely to be more incentive to take on mini-jobs as a result of this overall package of reforms than there is under the current system?

Professor Brewer: Yes, absolutely, and especially for parents.

Tony Wilson: Absolutely. I would say we also do need to look at the potential interactions with other issues here, an obvious one being automatic enrolment in pensions, where, for people who work shorter hours, the employer won’t have to contribute to pensions. Although mini-jobs may be desirable, there is, actually, also a risk that we create a kind of second tier of work, which is mini-jobs where employers don’t have to pay into pensions, for example, and where employment is subsidised to a much greater extent by the state. So those are risks as well. The short point is we have to crack progression from short-hours working to longer hours and higher-paid working in order for mini-jobs to be desirable.

Q99 Harriett Baldwin: I have not had time to touch on the potential for increased conditionality for in-work situations that is mooted, I think.

Tony Wilson: Briefly, on that point, at the moment the Regulations specify that in-work conditionality will be for the purposes of obtaining paid work; in other words, finding another job. In-work conditionality will not be defined around increasing earnings. We have said the Government really should look at how they define the Regulations here. The focus should be around increasing earnings, which might be working another job or it might be taking on more hours or more responsibility.

Q100 Chair: Coming back to the whole thing of reducing complexity, Fran, you mentioned the move from the purse to the wallet-I keep getting it the wrong way round there. You expressed some concern, but will it make the whole administration simpler if only one person in the household can receive the benefit, or do you see pitfalls ahead as a result of that?

Fran Bennett: We certainly see pitfalls ahead. I don’t think, again, it adds to complexity very much if you just divide the payment between two people, and I don’t think the Government does think that, to be fair. I don’t think it increases the cost very much either.

Q101 Chair: You are suggesting you just cut it down the middle.

Fran Bennett: I suggest that, logically, if the Government is allowing the couple to choose which account Universal Credit is paid into, they should also be allowed to choose whether it can be paid into two accounts and the percentage that they might want to divide it in. Originally, we and lots of people would have been keen on, for example, retaining the element that is for children to go to the main carer, and that has been shown to be important in terms of directing it to where it is meant to go. You could also argue that the payment for housing costs should go to the person who is responsible for housing costs, and similarly with any free-prescription replacement, as I was saying. The Government seems to have set its face against dividing Universal Credit by its component elements and, however much we may regret that, that seems to be what it was saying in the parliamentary debates. Therefore, at this stage, when the claims and payments Regulations are still in draft and they are not going to be debated in the House, because they are not that kind of Regulation, it is an opportunity for the Work and Pensions Committee to suggest that the Government follows its logic of choice and allows people to choose to split the payment as well as to choose other than monthly-payment frequency too. It is a real opportunity to do it now.

Q102 Chair: That would be a single recommendation that those two go together.

Fran Bennett: Absolutely. The Universal Credit has to work for all kinds of families. It may well make no difference to some families whether it is in one payment or more, but we know that women, for example, are more likely to have an individual account; we know women do not like having to ask all the time for money. In the most problematic situations, it is likely to be the case that the more powerful partner, who is likely to be the man, gets the payment. It is also a problem, if the woman gets the whole payment, if she is seen as, therefore, being responsible for making it stretch from month to month. The actual way in which couples divide their money may be different and they should be given that choice to do so, and I do not quite see the arguments against it.

Q103 Stephen Lloyd: Thank you, Fran. Can I interrupt there? Those are some really powerful points, which I appreciate, but just to check, while I have the others here, do you agree with what Fran Bennett is saying, or disagree?

Professor Brewer: I agree. It does not seem it would cost the Government very much more money, if any more money, to allow couples to split the payment. It does not make it more complicated and it would give them more choice. We know that low-income families budget in lots of different ways. We talked about the period earlier. They also share their money in lots of different ways, and here the Government seems to be saying, "No, you will budget monthly and we will give you one payment."

James Browne: I agree. Choice is a good thing and it seems to be a relatively low cost of giving people that additional choice.

Tony Wilson: I agree.

Fran Bennett: I also think it would undermine the Government’s own aims about committed coupledom, personally, because I think some people would find it difficult to take the risk of not just doing a joint claim for Universal Credit but for having virtually all their money-including perhaps, as a lone parent, for children whom they have had from a previous relationship-going to the other person, and that may well be a risk too far in a situation in which they might otherwise commit.

Q104 Stephen Lloyd: You don’t feel that there is any danger of a domino effect, not on choosing which partner or both-I accept that totally-but on having the flexibility of not just monthly or weekly. You don’t feel that there would be any danger that that might undermine one of the key principles of Universal Credit, which is getting people back into the habit of monthly payments, as most people are in work. You don’t think that would fundamentally undermine it.

Tony Wilson: That is exactly the principle that we should test. We should start from where we are now, which is that, as far as possible, we try to make the benefits system reflect the way that people live their lives, and then let’s test, actually, whether a benefit system that reflects an inflexible payment model etc that is associated with work makes people more likely to go back to work. As I said earlier, my view, actually, is that it could well make it less likely, because people will continue to rely on benefits in and out of work, and having a flexible benefit system alongside perhaps, potentially, a less flexible employment payment system could be beneficial for claimants in making decisions about moving in and out of work.

Fran Bennett: Politicians are really susceptible to the power of magical thinking. For example, under tax credits, we tried to have a system where income was seen annually, as an annual total, and that did not really fit with how low-income families live their lives. We are in danger of repeating that, I think, with seeing monthly as a kind of emblem of normality, if you like. It really is not, for a lot of low-income families. That is not how they live their lives, and a month is a long time in poverty.

Q105 Chair: Which, actually, leads me neatly on to my penultimate question, which is: what evidence is there that lessons have been learned by Government from previous reforms in taking forward the Universal Credit implementation programme? Have they learned lessons, and which ones have they not learned? We have one there but are there any other lessons? If there was a big-bang approach to Universal Credit and then the IT did not work, there is a big danger. It is a single payment and it is the whole income.

Tony Wilson: Certainly, my perception now, from outside Government and from when I was in Government, in the Treasury and in DWP, is that the Government are learning a huge number of lessons and are very conscious of the issues around the rollout of tax credits in the early 2000s, around the failures of child support reform in the mid 2000s.

Chair: And it is still going on.

Tony Wilson: But what I would say is, as we said in our evidence, we need to make sure they learn the right lessons as well. For example, saying that agile computers will be better than the inflexible computers that underpinned child support reform misses a large part of the problem with child support reform, which was also around staff ability to use the systems, culture within the Child Support Agency, and inadequate management, particularly of risk. Those, I think, are really critical areas that Government needs to address. I do worry somewhat whether there is enough very close control at the very centre of Government-by the centre, I mean Number 10, the Treasury, the Cabinet Office-in terms of the control of major projects. I am sure there is, but for me having Ministers and senior officials breathing down necks at every available opportunity is, in my experience, a hugely powerful driver for making sure that things go well.

Q106 Chair: I want to ask you whether that is more or less likely as a result of the lack of movement in the Secretary of State.

Tony Wilson: I would be happy to address that. Iain Duncan Smith is hugely personally committed to this, and I think, for the purposes of delivering Universal Credit, it must be a good thing that he is staying in post. I would say as well, actually, the appointment of Mark Hoban, who has done good work on financial inclusion in his previous role as Financial Secretary, will also have an important role in, hopefully, at least asking some of these questions and coming up with creative solutions around how we ensure people are included.

Q107 Chair: My last question, then, is: what should the DWP’s key priorities be for monitoring the impact of the introduction of Universal Credit?

Fran Bennett: Partly, I would like to commend the Government, by the way, for its user-centred design research that it has been doing and also its quantitative research with people who are likely to be claimants of Universal Credit. It then needs to take the lessons from that research on board-that is the key thing-and some of those are not necessarily welcome.

Q108 Chair: Do they have time to do that?

Fran Bennett: Yes, the kinds of things we have been talking about. But the Government said it would monitor the impact of Universal Credit on the distribution of income within the household between couples, and that is a very crucial thing for it to follow through.

Professor Brewer: I would just like to point out that we are not going to be able to do a comprehensive impact assessment of Universal Credit. The phrase you used, Chair, was "monitoring the impact". We cannot do that. We can monitor the outcomes for Universal Credit recipients but we are not going to know for sure what the outcomes would have been under the previous system; the Government is going for, basically, a big bang rollout. It is not properly piloting Universal Credit in certain parts of the country. You asked, in a previous question, what it has learned from previous reforms. I agree with Tony’s answer: it has learned that big-bang, day-one reform does not work, but it is not learning from DWP’s previous experience in piloting these major reforms, and we have seen that with the Work Programme, LHA (Local Housing Allowance) reforms and now Universal Credit. It is going full speed ahead on really big reforms and we just will not know what the real impact is.

Q109 Harriett Baldwin: They are doing pilot areas, though.

Professor Brewer: There might be some trailblazers or Pathfinders, and I know that, in the early months, some areas will get it sooner than others.

Q110 Harriett Baldwin: And there is a four year phase-in.

Professor Brewer: But the four year phase-in is not being done systematically by area; it is being done according to the type of person. If it were being done by area, then that would be great for evaluation purposes. The rollout is being designed not to make it easy to evaluate but for operational reasons. That is not a criticism; it is just a statement.

Q111 Chair: I think the sense is that the rollout is about how it operates in practice rather than whether the policy is working.

Professor Brewer: Absolutely, yes.

Tony Wilson: Just on the monitoring of impact rather than the evaluation, for me the most important point-there are many-is user voice, the claimant’s voice. This comes back to a point that Fran made. We will be publishing a report on this next month as a follow-up to the work we have done previously for the Joseph Rowntree Foundation, but ensuring that the Government continues to listen and is able to listen in real time to what customers and claimants are saying is going to be hugely important, because that is a hugely powerful tool and it is often underestimated.

Q112 Chair: It is not just the listening; it is also the acting.

Tony Wilson: Exactly, and I do think potentially there could be a role for some independent oversight of that-an ombudsman or a quasi-ombudsman-type role. I certainly think the Department should be more clearly codifying its responsibilities to claimants in a similar way that does happen in many other systems. Australia has got good examples of that and it is less evident, certainly, in the Regulations. It is making sure that Government is clear about what its side of the bargain is and then monitoring impact and listening to customers and claimants.

Q113 Chair: But the rollout should allow that to happen more easily, simply because they will be doing it through segments of particular claimant types rather than geographically.

Tony Wilson: It should, but it would not be as easy as, for example, the rollout of Jobcentre Plus, which happened in different parts of the country at different times, which enabled an assessment of impact, because you could compare the pre-and post-from different areas. It will allow some assessment, but an even more phased rollout-phasing the rollout of new claims, for example-would allow more of that.

Chair: Our time is up and the Committee is just about to disappear. Is there anything that you felt you should have said and you have not said this morning or have you had a chance to say it all?

Can I thank you very much for coming along this morning. Your evidence will be extremely useful for us when we come to compile our Report.


[1] Primary Care Trusts

Prepared 21st November 2012