Further supplementary memorandum submitted
"My DWP" Project
The "My DWP" Project is delivering
the first iteration of a secure customer account on the internet.
The first release, in spring 2008, will focus on customer enquiries
and establish the IT platform to enable further releases to follow
as the DWP Change Programme progresses.
This will provide easy access to welfare information
for each customer. It will provide information about:
potential benefit entitlement;
individual pension information; and
enable the customer to search for
It will also provide access for formal customer
representatives in the form of a Trusted Intermediary Model. This
will be invaluable for vulnerable customers who need support in
accessing any of our services.
The Department's objective is to introduce a
secure internet service that will appear through the DirectGov
site by the end of March 2008. This supports recent recommendations
that citizen/ Government services are accessed through a single
site. Most services will be available around the clock.
The solution will recognise the need, on occasion,
for cross-channel journeys. For instance, a customer may access
the on-line service and wish to follow that up with a telephone
benefit claim. These cross-channel actions will be kept simple
and will aim to make the customer better informed before they
call, and ensure they understand who to call or to visit.
These services will be prioritised and phased
in to ensure that the most beneficial services for customers are
delivered first and customer analysis currently underway will
The service will integrate Government Gateway
enrolment and authentication services to provide secure access
to those services that require it. This means that customers will
be encouraged to enrol with the Gateway so that they can receive
services that give them access to their personal data, in a very
secure manner. If customers do not enrol for secure services they
will still be able to access services such as identifying what
benefit they could receive.
The Department will develop a take up and marketing
strategy to advertise the new service.
The new services will include:
a customer benefit enquiry service
that shows which benefits are in payment and when from; and
a benefit advisor service that will
seek to identify which benefits a customer may be entitled to,
based on information input by customers, and signpost the customer's
next steps to claim or make further enquiries. This service will
also, at first for a limited group of customers, provide an initial
calculation of benefit entitlement.
The Department plans to involve customers in
the design and testing of the new services. During July we will
demonstrate the early service design to a customer focus group
and use the feedback to refine and improve the service, prior
to completing detailed design work. Later, we will test the services
with customers to ensure that the final design has met their needs
and can be easily used.
DWP, HMT and external organisations regularly
carry out analysis related to the impact of the benefits system
on work incentives. The main pieces of research and their key
findings are outlined below.
It is important to note that the structure of
Tax Credits, Housing Benefit and Council Tax benefit are designed
to ensure that work pays for most people. As the analysis shows,
subject to the level of work-related expenses and passported benefits
in individuals' cases, the situations where incomes in-work may
be lower than incomes out-of-work are fairly uncommon. In addition,
this factor in isolation may not have a significant impact on
people's work decisions.
Research set out below highlights the role that
understanding the benefits systemespecially the availability
of in-work benefitsplays in an individual's decision to
enter work. In this respect, the complexity of the system is clearly
part of the problem because it makes it hard for people to understand
the potential gains from working.
Qualitative research has found a positive link
between work decisions and estimated gains to work of over £40,
but there is also a strong evidence base showing that work is
generally good for physical and mental health and well-being.
This reinforces the idea that although financial gains are clearly
an important factor in work decisions, there are also other benefits
The few structural disincentives within the
benefits system may be less significant than other factors such
as; awareness and understanding of the benefits system, individual's
in-work costs and passported benefits, alignment of in work and
out of work benefits and other non-financial factors.
The following concepts and definitions are often
used in relation to work incentives, and are referred to in the
The unemployment trap occurs when
those without work find the difference between in-work and out-of-work
incomes too small to provide an incentive to move into work.
The poverty trap occurs when those
in work have little incentive to move up the earnings ladder because
of only limited net gains.
Marginal deduction rates (MDRs) measure
the extent of the poverty trap by showing how much of each additional
pound of gross earnings is lost through higher taxes and withdrawn
benefits or tax credits.
The replacement rate is the ratio
of net income when out of work to net income in work, thus measures
the extent of the unemployment trap.
Each year the DWP publishes the Tax Benefit
Model Tables which illustrate the financial circumstances of a
selection of hypothetical local authority and private tenants
They contain a wealth of information about work incentivesfor
the various household types, they show the replacement and the
marginal deduction rates faced at a variety of income levels.
It should be noted that the tables do not cover all types of families
in receipt of benefitin particular, the disabled client
group is not included. Also, the individual's costs associated
with entering work are not included in the calculations. The main
points to note from the tables:
Marginal Deduction Rates are generally
below 100 per cent, indicating there is a financial gain from
an increase in gross earnings.
However, it is possible for Marginal
Deduction Rates to rise briefly above 100 per cent where a benefit
tapers out, ie falls below its minimum payment level.
In the scenarios depicted, Replacement
Ratios are generally below 100 per cent at all income levels,
indicating net income is higher when in work than not.
The tables show Replacement Ratios
of over 100% for families where the head of the household is earning
less than £90 and working 16 hours per week.
However, in the case of IS, the benefit rules allow the non working
partner to claim on behalf of the couple, allowing the working
partner to work up to 24 hours before IS entitlement is lost.
Therefore, if the couple are claiming IS, the in-work income is
higher than the gross earnings depicted in the table, and the
Replacement Rate does not exceed 100 per cent.
HMT publishes an analysis of the tax and benefits
system on work incentives in Chapter 4: "Increasing Employment
Opportunity for all" of Budget 2007 (http://www.hm-treasury.gov.uk/media/73B/65/bud07<au1,3> chapter4<au1,3> 267.pdf
sections 4.68 to 4.71). The main messages were:
The introduction of the minimum wage
has increased the minimum income that people can expect on moving
into work, thereby reducing the problem of the unemployment trap.
Weekly Minimum Income Guarantees for various family types can
be found in Table 4.1.
The Government's reforms are ensuring
that workers have improved incentives to progress in work, with
only around 50,000 households facing MDRs in excess of 90 per
cent. The numbers of families facing MDRs of over 100, 90, 80,
70 and 60 per cent can be found in Table 4.2.
DWP have recently published research on "Housing
Benefit and Council Tax Benefit as in-work benefits; claimants'
and advisors' knowledge, attitudes and experiences" (http://www.dwp.gov.uk/asd/asd5/rports2005-2006/rrep383.pdf).
This research on awareness and understanding of Housing Benefit/Council
Tax Benefit as in-work benefits, and our work incentive analysis,
highlight areas where we need to improve the basic awareness and
understanding of HB and CTB as in-work benefits amongst Jobcentre
Plus staff and claimants.
This is because in general claimants
do not take account of HB/CTB in their better-off calculations
and this distorts their decision to move into work.
Evidence reveals that if some clients
had been aware or made aware that HB/CTB could be claimed in work
then this would have influenced their decision to take up employment.
Therefore increasing awareness and understanding of in-work HB/CTB
could perform an important role in encouraging moves into employment.
In addition to the information contained in
the Budget, and Pre-Budget reports, the HMT also publish a range
of reports related to work incentives because of their lead on
tax credits. http://www.hm-treasury.gov.uk/documents/taxation<au1,3> work<au1,3> and<au1,3> welfare/work<au1,3> and<au1,3> welfare/tax<au1,3> workwel<au1,3> index.cfm
A number of external organisations also conduct
analysis on the impact of the benefits system on work incentives
(which do not necessarily represent DWP views). Some examples
of these are as follows:
The IFS report "Financial Work
Incentives in Britain: Comparisons over time and between family
types" (2006) by Stuart Adam, Mike Brewer and Andrew Shephard
The ESRC Research Centre for Analysis
of Social Exclusion report "Ends and Means: The Future Roles
of Social Housing in England" (2007) by John Hills (http://sticerd.lse.ac.uk/dps/case/cr/CASEreport34.pdf).
An article in Journal of Mental Health
"Welfare benefits and work disincentives" (2001) by
DWP/HMRC JOINT WORKINGTHE
DWP, HMRC and North Tyneside District Council
have, over recent months, been developing and testing possible
service improvements in a trial in the North Tyneside Local Authority
district in the North East of England. This has focused on delivering
improvements in the client experience during the transition into
and out of work through closer working and service integration.
This is not wholly new territorythese organisations already
seek to share information as part of many core processesbut
it represents a potential step-change in the scale and impact
of that activity.
When an unemployed person in the trial area
leaves benefit to take up work, Jobcentre Plus staff will work
with them to initiate and partially populate a claim for Tax Credit
at the same time as they close the benefit claim. They will similarly
pursue possible Housing Benefit/ Council Tax Benefit claims or
changes in conjunction with local authority staff. This ensures
that people are aware of, claim and much more quickly receive
in-work benefit and Tax Credit entitlements.
Conversely, when someone leaves work and claims
Jobseekers Allowance, Jobcentre Plus staff share information as
appropriate with colleagues in HMRC (so that appropriate Tax Credits
can be stopped immediately, thus avoiding overpayments and debts)
and the local authority (to initiate or amend a claim for Housing
Benefit/ Council Tax Benefit).
In the initial stages the trial involved some
co-location of staff. This has helped to break down organisational
barriers, in particular, increasing levels of trust between people
working in the different organisations so that one is prepared
to take the authority of another as sufficient evidence that information
is correct. It should, however, be possible to achieve similar
results without co-location.
The trial officially ended on 28 February. Although
the final report is still to be published, evidence shows that
the initial impact has been very positive.
More claimants are aware of potential
Claimants moving into work are having
Tax Credits processed within three days.
People moving out of work are receiving
both JSA and Housing Benefit within around 17 days, compared to
a baseline for the latter of around 37 days.
DWP and HMRC are planning to test the trial
model in another six or so Local Authority (LA) areas from around
September 2007. This will provide the opportunity to test more
fully: how the application might work in different types of LAs;
where the associated costs and potential savings fall; whether
an IT solution can successfully replace the faxes used in the
trial to transfer information; and the impact upon performance
and customer experience. The trials will incorporate some additional
changes that have been identified which compliment the North Tyneside
trial approach and support improvements to customer service.
19 Note that these tables were published in April
2006 when the National Minimum Wage was £5.05, so 16 hours
at the NMW resulted in gross earnings of £80.80, and the
applicable benefit rate for a couple was £90.10. Back