Select Committee on Work and Pensions Written Evidence

Memorandum submitted by Citizens Advice Bureau (CP 28)


  Citizens Advice Bureaux (CABx) help with more benefits and tax credits problems than anything else, and handled 1.6 million enquiries in this area last year. Debt is the second largest area of enquiry for CABx. A higher proportion of CAB clients are on benefits and in low paid work than in the UK population as a whole.[404] We are therefore well placed to comment on the impact of poverty on children and families and to contribute to the debate on what particular policies need to be addressed to improve the experiences of families on low income.

  We very much welcome the pledge made by the Prime Minister, the Right Honourable Tony Blair MP, in March 1999, to end child poverty within 20 years. We recognise the achievements that have been made so far in moving towards this target by improving the income of families with children, but believe that more needs to be done to ensure that all families are able to benefit from full and active participation in the society in which they live.

  CABx frequently report clients facing gaps in full benefit income resulting from poor administration of the benefit system. They report clients unable to afford essential household items for their families such as beds and bedding, fridges and cookers and items of school uniform for their children. CABx regularly report applying for charitable trusts to assist their clients in obtaining essential household items. They report families living on less than benefit income because they are having, to repay the debt.

  It is essential that rates of benefits and tax credits are set at adequate levels. Projections suggest that the rate of child tax credit may still need to be increased if numbers in child poverty are to be reduced to the 2004-05 target figure. We also believe that increases in the adult benefit rates need considering as child poverty cannot be looked at in isolation from the family budget as a whole.

  As well as continuing to increase the cash income of families with children, we believe that the following issues need to be properly and urgently addressed if the Government is to properly tackle poverty and social exclusion faced by families on low income:

    —  The need for improvement in the administration of the benefits system, in particular, to improve responsiveness to changing family circumstances.

    —  Complete reform of the social fund to ensure that it can meet its purpose of enabling families on low income to meet the needs that cannot be met from their normal incomes.

    —  The "poverty trap" associated with housing benefit. The need for reform of the housing benefit system has long been recognised. The high withdrawal rates of the benefit leave people with little incentive to work more hours.

    —  The costs of education. CABx frequently report clients on low income struggling to pay the various costs associated with their child's education. Uniform costs, equipment and "voluntary" contributions for trips put pressure on families struggling to make ends meet.

    —  Wider issues of debt, access to money advice and measures to improve financial literacy.


  1.  Citizens Advice welcomes the opportunity to submit evidence to the Work and Pensions Committee inquiry into child poverty in the UK.

  2.  Citizens Advice Bureaux (CABx) deliver free advice from over 2,000 outlets throughout England, Wales and Northern Ireland. All CABx belong to Citizens Advice, which sets standards for advice, training and other matters, and which also co-ordinates national social policy, media and parliamentary work. A higher proportion of CAB clients are on benefits and in low paid work than in the UK population as a whole. The two largest enquiry areas are social security benefits and tax credits, and debt. A recent CAB client survey found that over 40% of CAB debt clients were in receipt of means-tested benefits and therefore due to repayments were living off less than a benefit income.[405]

  3.  The problems experienced by CAB clients on low income result from difficulties in gaining access to their full benefit entitlement and problems affording costs that their normal benefit income cannot meet. CABx frequently report clients struggling to make ends meet whilst waiting for their full benefit and tax credit entitlement to be established and clients not being able to afford basic essential household items for their families such as beds and bedding, fridges and cookers items of school uniform for their children. CABx regularly report applying for charitable trusts to assist their clients in obtaining essential household items. They also report families in debt resulting from living long-term on a low income as well as from changes in family circumstances and overcommittment.

  4.  We very much welcome the pledge made by the Prime Minister, the Right Honourable Tony Blair MP, in March 1999, to end child poverty within 20 years. The Government has introduced a number of measures designed to improve the cash finances of low-income families on benefits and to help move families from reliance on welfare into work.

  5.  Since 1997, the Government has significantly increased both child benefit and the child elements of income support and income-based jobseeker's allowance. There has not however, been a parallel increase in the adult rates of benefit. Projections from the Institute for Fiscal Studies suggest that the Government's recent measures to tackle child poverty will have a significant impact but that it may still need to increase the rate of child tax credit to reach 3.1 million by 2004-05.[406] We also believe that failure to increase adult benefit rates to adequate levels will threaten to reduce the impact of the increases in the benefits for children and put a strain on the overall household budget. We believe that there is a strong case for increasing the adult benefit rates.

  6.  The introduction of the National Minimum Wage and of the working families' tax credit in 1999, followed by the new working and child tax credits were also intended to improve the income of families in low paid work and thus reduce child poverty. The New Deal for lone parents aims to assist lone parents to move from benefits into work—children in lone parent families are more than three times as likely to have incomes below half average incomes as children in other families (UNICEF, 2000). New tax credits introduced in April 2003 form a major part of the Government's programme for tackling child poverty and making work pay. Around 6 million families are expected to benefit from the new tax credits—about nine out of 10 families and take-up figures recently produced look very encouraging.

  7.  Improving the cash incomes of families is clearly a very important measure in addressing child poverty but CAB client experience illustrates that on its own it is not enough. Alongside these measures, improvements need to be made to the delivery of the benefit system to ensure a smooth as possible transition on and off benefits without people left facing gaps and delays in obtaining the benefit and tax credit income to which they are entitled.

  8.  Other steps are also needed to ensure that families on low income have access to financial assistance to help them afford to meet needs that cannot be met out of their normal income. Typically this might include lumpy expenditure. The social fund exists to serve this purpose but CAB evidence shows that it is far from succeeding in meeting this role.

  9.  For example, families cannot get assistance with distinctive items of school uniform from the social fund, primarily because Local Education Authorities (LEAs) have the power to provide this financial assistance to families on low income. The availability of this assistance however, varies tremendously from LEA to LEA and many authorities provide no assistance at all. Cab has reported that children have been sent home from school because their parents had not been able to afford the correct full uniform. Other families report choosing to buy their children's uniform instead of paying other bills and getting into arrears as a result. Some families have borrowed money from unlicensed lenders or sought assistance from charitable funds.

  10.  The withdrawal of housing benefit at such steep rates as income increases can serve to reduce the incentives of families to move into work, trapping people on low incomes. If families are to see the benefits of more generous levels of working tax credit and increases in the minimum wage, then the treatment of tax credits as income for housing benefit purposes needs to be examined further.


  11.  Recent research published by the Centre for Research in Social Policy and Save the Children[407] found that children who face severe and persistent poverty live in families who have experienced many transitions on and off benefit. CAB evidence suggests that one of the reasons for this is families can experience gaps in income whilst they wait for their benefit claims to be resolved.

  12.  Poor benefits administration is one of the most frequent benefit problems reported by CABx. In July 2002 Citizens Advice published national and regional reports on standards of benefit administration. These reports resulted from a campaign run nationally from September 2001 to March 2002. During this time CABx systematically monitored advice cases involving clients with benefit administration problems. The aim was to look at the quality of service delivery during a period of major reorganisation of benefit and in-to-work services, and to provide feedback to assist with improving services.

  13.  The main problems were longstanding and familiar ones to CAB advisers, who have seen evidence of these problems over many years: errors and lost papers, delays in processing claims, confusing letters about benefits, problems contacting social security offices by phone; wrong, inaccurate or incomplete advice. For example:

    A CAB in Hertfordshire Bishop's Stortford reported that their unemployed client—a lone parent with two children was told by her local Jobcentre that she was not entitled to jobseeker's allowance or any other benefits because she already had a firm job offer. Due to delays involving security checks no job ended up materialising and the client had no income for ten weeks. She got into severe rent arrears and had been issued with an eviction notice. She should have been entitled to both JSA and housing benefit.

  14.  One of the problems frequently reported by CABx is the refusal of crisis loan applications by reception staff at Jobcentre Plus offices. People are in error advised not to bother to both to apply, as they would not be eligible. Other people are not fully advised about which aspects of the social fund they can apply for.

    A CAB in North Yorkshire Hambleton reported a teenage lone mother whose baby, aged less than 10 months, was sleeping on the floor after a borrowed cot had to be returned. The client was refused a budgeting loan as she had other loans, and was told to apply for a crisis loan. The client was not given information about a Community Care Grant (CCG), and having sought a crisis loan could not apply again for a CCG for six months. In any event, the client's application for a crisis loan was refused.

  15.  The problems experienced by people on low incomes in April this year when their tax credits changed has been well documented by Citizens Advice along with MPs and other organisations. In the first couple of months CABx saw hundreds of desperate families in dire need as their working families' tax credit payments came to an end and were not replaced by any payments of new tax credits for several weeks. In many cases this was particularly acute where claimants circumstances had changed since they completed their applications but pressure on the system meant that the changes were not able to be processed before payments were due to have started. CABx reported clients in rent arrears and threatened with possession action because they had defaulted on repayment agreements.[408] It is essential that changes to payments of benefits and tax credits are managed effectively and contingency arrangements put in place to ensure that vulnerable families do not suffer further stress and hardship.

  16.  The evidence collected by bureaux suggests poor delivery of benefits may result in key government anti-poverty policies may fall short of their targets, and that people are losing out on money the Government intends them to have.

  17.  We recognise that there have been attempts to address these problems with the roll out of Jobcentre Plus but even in areas where Jobcentre Plus has been rolled out, bureaux continue to report claimants being told that their claim will take up to two months to process.

  18.  We regularly report our concerns over these issues with Jobcentre Plus officials and are currently assisting in the production of scenarios to be used in their "mystery shopping" programme to assist in monitoring the quality and adequacy of advice in areas where CABx have reported most problems.


  19.  In the experience of CABx, the social fund offers too low amounts to too few people and demands repayment rates for budgeting loans that are too high. In our report on the social fund published in the autumn of 2002[409] we concluded that "It is clear that the social fund needs extensive reform in order to achieve the Government's objectives to provide help to people when they need it most, to provide more support to families with children, and to combat social exclusion."


  20.  Community care grants are a tremendously useful part of the social fund as they are there to provide extra money to assist families under extreme pressure and do not have to be repaid. However due to budget constraints, even when applications meet the criteria and the need is recognised, many are refused because they are deemed to be medium rather than high priority. Even whether grant applications are successful, they are frequently too small to meet the need and families under extreme pressure are left struggling.

    A CAB in Cheshire had two clients who were refused Grants because of budgetary constraints. In the first, a woman with an asthmatic son left her violent partner and moved into her parents' home. This was unhealthy for the child, as the client's mother was a heavy smoker. The woman obtained a council house and applied for a Grant of £1,250 to furnish it. This was refused on priority grounds. In the second case, a client receiving income support and invalid care allowance, living with her daughter (who is schizophrenic and receiving income support and disability living allowance) and granddaughter, applied for a Grant for new mattresses and carpets to ease exceptional pressure on the family. Again this was refused on priority grounds.


  21.  The eligibility criteria for budgeting loans are very narrow. Eligibility is limited to those who have been in receipt of income support or income based jobseeker's allowance for more than 26 weeks. There are large numbers of people whose incomes are at, or only fractionally above, the levels of income-related benefits, who have no access at all to social fund loans. People on low incomes do not have the same access to mainstream credit as others, and people on benefits normally have no access. We believe that social fund loans should continue to be available, and should be extended to a wider group of people on low incomes than at present.

  22.  We believe that people who qualify for the maximum child tax credit and/or qualify for working tax credit should be eligible to apply for a budgeting loan. If the eligibility criteria do not widen to include those on maximum child tax credit the numbers eligible will actually decrease as some families will float off income support when the child elements become paid through tax credits. People whose sole income is a contributory benefit such as incapacity benefit or contribution-based jobseeker's allowance should also be eligible.

  23.  People are also turned down if they already have outstanding loans, regardless of whether they are in real need. The following case illustrates the difficulties this causes for some families.

    A CAB in Essex reported a lone parent with two children, one of whom was ill and needed medication kept in a fridge. The client applied for a budgeting loan for the fridge but was turned down as she was already paying off a £530 Loan at £13 per week.

  24.  Access cannot be widened without an increase in budget as too many people who already meet eligibility criteria are refused because of budget limitations. Budget limits, eligibility criteria and rules governing outstanding loans mean that many people in real need are refused assistance. Where grants are awarded they frequently do not meet the needs of the applicants.

  In West Yorkshire, an 18-year-old pregnant client was offered a budgeting loan of £207 to furnish and equip a council house. The local CAB commented that this was inadequate and that, under the pre-1999 system, the client might have received more because the amount paid would have been based on the client's need, rather than on the application of a formula, as is now the case.

  25.  For those who succeed in their application the repayment rates are often so high that they are left struggling to meet their daily household expenses out of incomes well below income support level.

  A Buckinghamshire lone mother with two children was offered a Loan of £375 for beds and a fridge. She wanted to repay over 78 weeks, but has been asked for repayments of £11.90 per week over 31 weeks.


  26.  Unfair an underfunded highlighted the fact that delays in the processing of new benefit claims meant that over one third of all crisis loans were paid to claimants waiting their first benefit payment. We have argued that in order to ease the pressure on the budget there should be a separate budget available for people in these circumstances. However whilst there is not such a budget available it is concerning that families in these circumstances and with no benefit income have been refused loans and told that their child benefit will tide them over. For example:

    A London CAB reports a woman with four children who applied for income support when her husband left her. A week after she made the claim, she was told that it would be a further 11 days before payment would be made. The woman requested a crisis loan but was told she could not have one while her income support claim was processed. Although her income support would be £106 a week, social security staff told her that her child benefit payments of £45 a week should see her through.

  A disabled woman in Yorkshire applied for incapacity benefit after she had been on statutory sick pay for 23 weeks. She was told that payment would take five weeks. She then claimed income support and was told that this would also take five weeks. Benefits Agency staff told her that there was no point in applying for a crisis loan, as she would not get one—she should live on her daughter's student loan. The CAB advised her to insist on applying for a crisis loan.

  27.  The social fund budget is too low, and we recommend substantial increases, particularly to community care grant and budgeting loan budgets. Far too much time and money is spent in administering a complex system with high rates of refusal. Additional resources, over and above amounts already committed, would greatly assist the Government in ensuring that the poorest people in society have the basic necessities, such as beds, cookers, fridges, furniture and warm clothing.


  28.  We believe if exclusion from education is to be tackled effectively then attention needs to be given to the financial costs of participation in school life.[410] The financial costs faced by parents and children range from school uniform costs to school activities and extra curricular activities. As the Government encourages schools to include pupils in extra curricular activities with the aim of improving attainment[411] it will be even more important that the needs of pupils from poor households are taken into account. Costs should not form a barrier to participation in either the academic or social life of the school. But too often, in CAB experience, costs are a very real barrier. For example:

    A CAB in Oxfordshire reported that their client, a single parent on income support had approached the headmaster of her children's school about help with the costs of the forthcoming school residential trip. She was advised that no money was available either from the LEA or from the school. The LEA admissions booklet however, stated that where more than half the time of the trip is during school hours, help is available for parents on income support. A CAB in the Midlands reported their client's fear that her children might miss out on their trips. She was concerned that her younger child would not only miss out on the trip to the Lake District but also on the planned follow-up work in class afterwards. The letter from the school requested deposits from parents wishing their children to take part, but gave no mention of the costs being voluntary or of any help available. The client was on income support and had debts but was eager to do all she could to save and ensure that they would not miss out.

    She had approached the bureau about any help that may be available from a charity.

  29.  Following continual reporting of problems faced by parents in meeting the costs of school uniforms for their children we carried out a survey of LEA policies on offering assistance with school clothing costs. A CAB evidence report published in January 2001, Uniform failure, demonstrated how the lack of help with school clothing costs was causing serious problems for parents on low income. The report showed that the availability and level of Local Education Authority (LEA) school clothing grants had declined in real terms since 1990 and that CABx reported that some children had been threatened with exclusion from school simply because their parents had not been able to afford the correct uniform. An example of the difficulties experienced is illustrated in the following recent case reported by a CAB in Buckinghamshire:

    Their client on income support and higher rate disability living allowance applied for an school clothing grant for his twins who were due to start school. The LEA turned down his application however, as he had received a grant the previous September for his older child, who had transferred to secondary school. He was concerned that the twins were suffering at school because they were not wearing the uniform and he had had two phonecalls from the head teacher requesting that they wear it.

  30.  Following on from Uniform failure, we undertook a survey in the summer of 2001, of every LEA in England and Wales. We found that almost one third of LEAs (30 per cent) provided no help whatsoever towards the costs of uniforms. Nine LEAs had slashed or abolished their grants since 2000. Only 28% of LEAs offered grants to children of both primary and secondary school age. 41% of these LEAs did not offer annual payments and they all operated strict eligibility criteria. The trend towards more restricted eligibility schemes is worrying as this may well be a step towards complete withdrawal of help. The findings from this research were published in a briefing published in August 2002.[412]

  31.  Since this time the Department for Education and Skills (DfES) has re-issued its guidance to schools on uniform policies emphasising that it is better practice for a uniform policy to consist of items of clothing that are available from a number of retail outlets than to have "designer" items that are expensive and only available from one supplier (DfES Feb 02). The issue of provision of financial support however has not been discussed by the DfES. In June this year however, the Welsh Assembly passed a motion calling for subordinate legislation to set standards for LEAs in Wales to provide clothing grants for secondary school pupils on low incomes. The issue of financial support needs to be addressed in England too. We believe that without further action from the DfES pressure of LEA budgets will lead to a continued decrease in the financial support available to families on low income.

  32.  We welcome the fact that the DfES is carrying out research into the costs of education in the autumn of this year. We hope that it will result in clear guidelines both to schools and to LEAs on the level of charges appropriate for activities in school hours. We hope that communications from schools to parents will demonstrate a great sensitivity to the financial constraints of parents and ensure that better financial assistance is available and communicated to parents. We would also like to see the DfES taking a more active role in monitoring the charges or "voluntary contributions" requested by schools to ensure that children are not excluded from full participation in the life of their school.


  33.  The "poverty trap" was always a problem for people on family credit and housing benefit, and it has not been resolved with the introduction of tax credits. People receiving both housing and council tax benefits can now "lose" 85p out of every additional £1 of income from tax credits or work. The problems experienced by clients on working families' tax credit were well documented in our report Work in progress[413] and the situation has not been addressed with the introduction of the New Tax Credits in April this year.

    A CAB in London reported a client with a wife and two children. He was on jobseekers' allowance and had been offered a job working nine hours, five nights a week. With working tax credit he would only be £46 a week better off because of the reduction in his housing and council tax benefit. This meant that he was effectively working long hours, at night for a gain of £1 an hour.

  34.  We hope that the widening of the earnings disregard for housing benefit from April 2004 will improve this situation for people working over 16 hours and claiming working tax credit.

  35.  The poverty trap created by housing benefit, is not helped by poor administration of housing benefit in many local authority areas. These issues are longstanding and a source of frustration for clients and CAB advisers. Despite recent initiatives by the Department for Work and Pensions, the housing benefit system is still beset with delays and continual reassessments caused by the need to notify local authorities of a variety of changes in income and circumstances, including the receipt of tax credits.

  36.  People on low incomes are often working flexible hours for varying rates of pay, and may have to notify small changes frequently. When the benefits section is slow to act on information they receive about changes to income, underpayments and overpayments can build up. The result of inefficiencies in housing benefit processing is that people are landed with debts, in the form of arrears of rent or overpayments of benefit.


  37.  Over the last five years CABx have reported a substantial increase in the number of new debt enquiries. They are now dealing with over one million debt enquiries each year. In May 2003 we published a report[414] based on research undertaken to find out more about the reasons for this increase. The research found that CAB debt clients are most likely to be of working age. They are particularly poor, with high proportions of people in receipt of means-tested benefits and tax credits and many being tenants of social landlords. The average monthly income of debt clients was less than half of that for the UK population as a whole. Over 40% were in receipt of means-tested benefits and therefore the repayments pushed them below income support level. Nearly half of all the debt clients surveyed had children or other dependents living with them, compared to just over a quarter of UK households as a whole. A significantly higher proportion of CAB debt clients were lone parents compared to the population as a whole (20% compared to 6%). This possibly reflects the fact that many lone parents are either in receipt of means-tested benefits or in low paid work, and therefore may be more likely to encounter debt problems due to low income.

  38.  The survey asked people to consider why they were experiencing debt problems. The three most common reasons given were living long-term on a low income, over-commitment and job loss.

    A CAB in Nottinghamshire (Erewash) reported that they were helping a lone parent with three children whose only income was income support. The client had a number of debts, but, despite advice from the CAB, found it difficult to keep up with her priority commitments on her income of £120 per week. The client's careful budget was thrown out of balance when she had to buy school uniform for her two youngest children, as the county council did not provide any assistance. As a result one of her creditors took court action, increasing the debt by £70 in court fees and costs.

  39.  Over the last 10 years there has been a dramatic shift in the types of debts about which CAB debt clients are seeking advice. Now CABx are dealing with people who have considerably higher numbers of credit debts. Low income and the number of credit cards, bank and finance company loans had the most effect on the size of the clients' total debt.

  40.  The impact of unmanageable debt on an individual's life can be overwhelming. By the time they sought advice from the CAB, nearly 40% of the clients said that they felt they could not cope and were feeling in crisis. One quarter said that they were already seeking treatment for stress, depression and anxiety from or via their GP.

  41.  It is difficult to address the issue of child poverty without addressing the issue of debt, the repayments of which, frequently results in families living well below income support levels. Strategies for tackling child poverty must cover a wide range of issues to be fully effective. Initiatives must tackle irresponsible lending and borrowing, lack of access to affordable credit, and access to advice, all have a part to play. We welcome the announcement in the Budget of the introduction in April 2004 of a new fund for Jobcentre Plus managers to improve access to debt advisory services in areas where free provision is limited or does not meet customer needs. We hope that this recognition of the importance of money advice services will be reflected more broadly in government services and government led partnerships, and specifically in strategies to tackle child poverty.

  42.  We also believe that levels of indebtedness would also serve as useful indicators of child poverty.

  43.  In conclusion we believe that strategies to combat child poverty will fail to stop people falling through the net if they do not address the concerns outlined above. Specifically we believe that:

    —  There is continued need for improvement in the administration of the benefits system, to ensure that families do not suffer gaps in their income when moving from one benefit to another, or moving between benefit and work. It is important that claimants are given full and correct benefit advice to ensure that they don't miss out on their entitlements.

    —  We believe that complete reform of the social fund is required to ensure that it better serves the purposes for which it was intended.

    —  The impact of the "poverty trap" associated with housing benefit need to be examined further.

    —  The Government needs to ensure that no child is excluded in education because of the associated costs. Costs should be limited and financial assistance available to those on the lowest incomes.

    —  Increase in the rates of benefit. Whilst families on low income can be assisted by specific grants and benefits, the rates of benefits and tax credits should be set at a rate that enables families to have a decent standard of living.

    —  Outside of specific area of welfare benefits, strategies aimed at improving levels of financial literacy and reducing indebtedness should be addressed.

Katie Lane

Social Policy Officer

404   People's Panel, MORI, 1999. Back

405   In too deep: CAB clients experience of debt, May 2003. Back

406   IFS briefing note 32, March 2003. Back

407   Britain's poorest children: severe and persistent poverty and social exclusion, Centre for Research in Social Policy and Save the Children, September 2003. Back

408   New Tax Credits: CAB clients' experiences of the first two months, Citizens Advice, August 2003. Back

409   Unfair and underfunded: CAB evidence on what's wrong with the social fund, NACAB, October 2002. Back

410   See NACAB response to Strategy for Neighbourhood Renewal, June 2000. Back

411   See Strategy for Neighbourhood Renewal, key idea 17, April 2000. Back

412   Help with school clothing costs: CAB briefing, NACAB August 2002. Back

413   Work in progress: CAB clients' experiences of working families' tax credit, NACAB 2001. Back

414   In too deep: CAB clients' experience of debt, Citizens Advice, May 2003. Back

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