Select Committee on Work and Pensions Written Evidence


Memorandum submitted by One Parent Families

SUMMARY

    —    One Parent Families welcomes the opportunity to contribute to the Select Committee's inquiry into the feasibility of simplifying the UK benefits system.

    —    In considering the simplification of the benefits system, we hope that the Committee will take into account the wider "sea" of benefits, tax credits, and overlapping policies within which DWP- administered benefits swim. To focus simply on DWP-administered benefits is to risk ignoring key areas (and their interactions) which need to be addressed if ordinary peoples' lives are to be made easier. In discussing the "benefits" system, we have therefore included—on common sense grounds—discussion of tax credits and benefits administered by local authorities.

    —    Any discussion of complexity must recognise the different purposes different benefits serve. It must also be recognised that complexity is an inevitable part of a mass system which seeks to target help—by means-testing, by measuring impaired capacity to work, and by scrutinising levels of disability for example. Whilst a concerted drive towards greater simplification is to be actively encouraged, measures which fail to take proper account of the wide variety of different circumstances of those reliant on state help are likely to be either prohibitively expensive or unacceptably harsh.

    —    We consider that existing measures taken to tackle the complexity of the tax credits and benefits system, although useful in themselves, are ultimately on too modest a scale to counter-act the strong drivers of benefits/tax credits policy and business design which continue to create a confusing and incoherent patchwork of provision. Unless resources are found for a more radical and ambitious simplification agenda, it is unlikely that the complex workings of the present system will be improved from the point of view of lone parents, 95% of whom are receiving a benefit or tax credit (excluding child benefit).

INTRODUCTION

  1.  One Parent Families (OPF) is a national organisation which aims to support lone parents and their families, both through the provision of practical support, training, and information services and through ensuring that the voice of lone parents is heard in current policy debates. Direct contact with lone parents informs our work, so that our services, training and policy work reflect an up to date appreciation of the issues they face. Last year our lone parents telephone-based services provided information, advice and signposting guidance to over 20,000 individual lone parents and distributed in the region of 17,500 free publications.

  2.  A major part of OPF's work arises directly from the complexities of the benefits system which have a major effect on lone parents' lives. We therefore welcome the opportunity to contribute to the Work and Pensions Select Committee's inquiry into the feasibility of simplifying the UK benefits system.

  3.  One point which must be made at the outset is that—seen from the customers' perspective—the complexities they face do not fit within neat Departmental boundaries. For lone parents in particular, benefits administered by Jobcentre Plus and tax credits administered by HMRC are inextricably connected. Local authority administered benefits—Housing and Council Tax benefits—and their interaction with DWP benefits are another key part of the picture. In considering the simplification of the benefits system, we hope that the Committee will take into account the wider "sea" of benefits, tax credits, and overlapping policies within which DWP-administered benefits swim. To focus simply on DWP-administered benefits is to risk ignoring key areas (and their interactions) which need to be addressed if ordinary peoples' lives are to be made easier. In discussing the "benefits" system, we have therefore included—on common sense grounds—discussion of tax credits and benefits administered by local authorities.

  4.  Any discussion of complexity must recognise the different purposes different benefits serve. For example, at first sight, it may appear unnecessary to have contribution-based benefits for old age, bereavement, sickness/disability and unemployment sitting alongside means-tested benefits for the same purpose. But as the Committee's predecessor the Social Security Committee found, "a wholly means-tested benefits system would be cheaper, but would have an unacceptably large number of losers, would have severe consequences for on work and savings incentives, and would be a bureaucratic nightmare leading to high error rates and fraud". Having conducted a detailed inquiry into the contributory principle, the Committee concluded:

    "...social security has a wider role than simply providing a safety net for the poor. Tackling poverty is a key goal and means-tested assistance... [is] important in providing extra money. But tackling poverty can not be the only objective of a social security system in today's society; it must have a wider role in tackling inequality and underpinning individuals' steps towards independent and responsibility and, as social insurance, should help protect individuals against adverse consequences, including a drift into poverty, as a result of unexpected life events such as illness or injury."[20]

  5.  It must also be recognised that complexity is an inevitable part of a mass system which seeks to target help—by means-testing, by measuring impaired capacity to work, and by scrutinising levels of disability for example. Whilst a concerted drive towards greater simplification is to be actively encouraged, measures which fail to take proper account of the wide variety of different circumstances of those reliant on state help are likely to be either prohibitively expensive or unacceptably harsh.

EXISTING ATTEMPTS AT BENEFITS SIMPLIFICATION

  6.  Benefits simplification has long been the "holy grail" of benefits reform. A simpler system would make it easier for customers to understand their obligations and entitlements and claim the support available. There would be fewer mistakes in administering benefits and generally less over- and underpayments. The 1986 Social Security Act, for example, was a major attempt to simplify the means-tested benefits system. More recently, the National Audit Office's report on the complexity of the benefits system[21] has highlighted how little progress has in fact been made and has sparked off renewed debate on how the system could be simplified.

  7.  Subsequently, a Benefits Simplification Unit has been established within DWP with a remit to bear down on the complexity among working-age benefits, and it has published a "DWP Benefits Simplification Guide"[22] designed to aid officials to consider the issue of simplification when planning new initiatives. The Department has also sought to clarify the rules governing Housing Benefit and Council Tax benefit, by consolidating over 200 sets of amending regulations into just four new sets of regulations. An overall "simplification plan" has been published by DWP for 2006-07, setting out how it plans to "reduce the burden imposed by its regulation". The Social Security Advisory Committee has also engaged with the issue, now requiring a statement of "complexity impact" from DWP when assessing new measures.

THE CURRENT SITUATION

  8.  The depth and scale of the task in attempting to simplify the workings of the benefits and tax credits system is immense. The recent NAO report analysed five different types of interaction within different parts of the system which drive complexity. These were the actual design of benefits; smaller scale "patchwork" changes by regulation; "horizontal" interfaces between benefits and between different organisations administering benefits, notably between the benefit and tax credit systems; "vertical" interfaces involved in the translation of policy into practical implementation on the ground; and delivery interactions as benefits staff and customers struggle to meet their obligations. The report analyses in considerable detail all the different aspects of complexity and the impact on clients, administrators, on the intended policy design, and on the public purse. Below are some examples of current complexities, as experienced by lone parents.

Tax credits and the interface with benefits

  9.  The complexities of tax credits are well-known and continue to cause grave difficulties for lone parents, notably the large overpayments they can unwittingly incur and which then cause financial difficulties when the money is recovered. Lone parents complain that they find it difficult to make sense of the computer-generated letters they receive, and that communication with HMRC by telephone can be frustrating and inconclusive.

  10.  An issue which has caused considerable problems to lone parents concerns overpayments of Working Tax Credits which can arise when HMRC is slow to stop payments once the lone parent has stopped work. Her Income Support will be reduced or be refused altogether on account of the fact that WTC remains in payment. Later, the WTC will be recovered—most likely by reducing child tax credit. But the shortfall in Income Support will not be made up. Thus the lone parent ends up paying twice for the overpayment. The Chancellor has announced in his most recent Budget that, in future, there will be four-week run-on of WTC at the expiry of a job. This will hopefully help resolve the problem, although it depends on the prompt cessation of WTC at that point. Advisers, whilst welcoming the move point out that it presents new reporting complexities for lone parents—who may or may not qualify for Income Support during those four weeks depending on the level of WTC. They may claim Income Support; be refused; but qualify again four weeks later. It is unclear whether Jobcentre Plus will hold their Income Support applications during this period, or whether they will have to apply again. If they do not qualify for Income Support, they may still qualify for Housing Benefit based on their reduced income. Again, four weeks later, a further claim for Housing Benefit will be needed on the basis that WTC has ceased and Income Support has now been claimed.

  11.  Another example where the interface between tax credits and the benefits system works poorly is in access to Sure Start Maternity Grants, which for people not on Income Support, can be awarded where child tax credit (paid at a rate above the family element) is in payment. Yet HMRC does nothing to flag up entitlement to the Maternity Grant when a new parent applies for child tax credit. Where a lone parent has applied for the child tax credit following the birth of a baby, but it has not yet been determined at the time of her claim for a Maternity Grant, she will be turned down for the Grant—even though she may well qualify. Jobcentre Plus are reluctant to hold on to the Maternity Grant application whilst awaiting the outcome of the Child Tax Credit award because their own "turn-round" targets are then not met.

Child support and the interface with benefits

  12.  As the Committee knows, the interface between the Child Support Agency and Jobcentre Plus works poorly. We would draw attention to two areas: the Child Maintenance Premium paid as an extra amount up to £10 on top of Income Support if the lone parent receives child maintenance; and the deduction of £5 to be made from the benefit of a non-resident parent where he has been assessed to pay child support under the new scheme. We know from correspondence with the CSA that it is aware that there are a number of cases where lone parents on Income Support, who are eligible for a CMP payment, are not currently receiving one. The Agency is currently piloting a scheme to increase the number of CMP payments to eligible PWCs. It is also the case that the £5 flat rate is not being deducted from all non-resident parents in receipt of social security benefits due to problems at the interface between CSA and Jobcentre Plus.

Interface with rules relating to people from abroad

  13.  The entitlements to benefits of people from abroad are one of the most complex areas we advise on. Much depends on a person's immigration status, whether they are an EEA national, and the interpretation of terms such as "ordinarily resident", "habitual residence" and "right of residence". The OPF Advice Line regularly receives calls from young women workers who have come to the UK from one of the eight European accession states, and who want advice on possible financial support after becoming pregnant. They may or may not have entitlement to benefits, but the rules are both complex and ill-defined and depend on a mixture of individual circumstances and law.

Moving into work

  14.  One of the big problems for lone parents considering a move into work is to establish what their income whilst in work is likely to be. This is far from a simple picture—the amount of earnings being just the start. Other elements include the amount of any tax credits award (made up of Working Tax Credit (WTC) including any child care credit and Child Tax Credit (CTC)) if working 16 hours or more per week, or Income Support if she is working less than 16 hours per week. Establishing the actual amount of a tax credit award in advance is quite difficult to do, because it depends on the lone parent's cumulative annual income as well as whether there is a tax credit overpayment which is likely to reduce the level of the actual award. There are also various "bonuses" to help ease the passage into work, which (provided the conditions of entitlement are met) include a "Job Grant" and a "run-on" of any existing award of Housing and Council tax benefit or mortgage interest payment for four weeks. Depending on which part of the country the lone parent lives, and how long she has been on benefit, she may also qualify for additional help whilst in work through an extra "in-work credit" payable for the first year, or have access to an "in-work emergency fund"—designed to help out with sudden or unpredictable expenses when starting work.

  15.  If getting tax credits, there is the amount of a revised Housing and Council Tax benefit award to consider. Again, this requires expert input to predict, as well as a new claim for Housing Benefit which will commence four weeks after work commences.

  16.  Another element to consider is the effect on benefits and other help which the lone parent automatically received by virtue of receiving Income Support, but which when in work depend upon her level of income—free school meals, for example, and also health benefits and access to legal aid.

  17.  This is a difficult and complex area where the Government, to its credit, has tried to help. For example, New Deal advisers can help lone parents work with "better-off" calculations, although this has become increasingly hard to do, due to the annual nature of tax credits. They can also help with fast-tracking applications for tax credits and give discretionary access to "extra" start-up help. However, not all lone parents who start work have entered New Deal and therefore do not access these advisers.

  18.  The complex maze of provision can be hard for lone parents to navigate. Even if potentially better off in work, anxiety about manoeuvring the "switch-over" from out-of-work to in-work financial support can deter people from taking the first step into work. If they run into difficulties, this can make it more likely that they will decide that they are unable to juggle work and home.

Lone parents with a disabled child

  19.  Entitlement to Disability Living Allowance triggers other entitlements, notably the disability premium within Housing Benefit, the disability element within child tax credit and, potentially, Carer's Allowance for the carer. These different benefits are processed separately (by the Disability and Carers Service within DWP, by the local authority in the case of Housing Benefit and by HMRC). Although the problem of benefits "silos" is well known, it is still not resolved. OPF still comes across problems where families have either lost out on entitlements or inadvertently end up being overpaid, if they lose entitlement to DLA later on and omit to inform HMRC, the local authority and the Carer's Allowance Unit. In either situation, the results can be distressing.

WHAT CAN BE DONE?

  20.  We agree with the National Audit Office which concluded that "dealing with the problems associated with complexity is a long-term project which will require a systematic and strategic approach focusing on the system as a whole."[23]

Policy design

  21.  One problem is the proliferation of new initiatives to "fix" identified problems or to implement new policy solutions, without proper consideration of the wider picture and the final impact on real people's lives. For example, there have been a host of pilots, "localised initiatives" and "pathways" to test new ideas operating in different geographical areas. Whilst maybe useful individually, the combined effect can be confusing and make it difficult for officials and advisers to give customers a clear idea of what they can expect to get.

  22.  Sometimes the problem lies in the failure to consider the complex realities of the client group. For example, the DWP has been piloting a new "local housing allowance" designed to make Housing Benefit simpler. Part of the initiative has involved paying housing benefit direct to tenants rather than to their landlord, on the basis that this will "train" them to manage their own rent payments so that they can cope better when they go into work. In practice, the scheme has introduced new complexities as Citizens Advice noted in a report on the local housing allowance (LHA):

    "The removal of claimant choice over how LHA should be paid has created the need for vulnerability assessments which introduce new levels of complexity to the HB scheme. We question whether the procedure is sufficiently robust to cope with national roll out. There is also the danger that some vulnerable claimants will fall through the net."[24]

  23.  In other cases, what seems simpler from a policy point of view turns out to be a complex nightmare when it comes to implementation. One example is the child support reforms of 2001. Intended to produce a simpler more comprehensible system, the reforms proved unworkable due largely to the struggle to design IT which could perform as required.

  24.  There is a need for a more comprehensive attempt within the Department (with additional assistance from HMRC and local authorities) to "map" on an ongoing basis the problems to which complexities give rise and why they occur. This needs to be done systematically and across the country, with input from front-line staff; customer-facing organisations; and customers themselves. This is a continuing process, because the dynamic of the tax credits and benefits system is that it is always altered and added to—without consideration of the combined effect.

  25.  It is also important that the practical implementation of new policy proposals is considered alongside the policy design—right at the start. New initiatives, both great and small, need to be considered not just from the point of view of the Government's policy intentions but from "the other end of the telescope": how they will be perceived and acted upon by claimants in the "real world". Too often, policy designers model their work on a picture of the perfect claimant, not on real customer behaviour.

IT and business processes

  26.  The use of IT has the capacity to improve some of the complex interactions within the tax credits and benefits system, for example by automatically linking information between different systems. In an ideal world, a person would simplify give information once about starting a job, or having a baby, for all the relevant entitlements to be put in place via linked systems.

  27.  More has to be done to enable different IT systems to talk to each other; this is a long-term project but one which should be built into the design of any new IT systems. In the long-term, for example, there must be a strategy to design IT systems within HMRC which can interface with those within DWP, notably the IT systems used for child maintenance as well as benefits and pensions.

  28.  Longer lead-in times for the implementation of policies would enable inevitable glitches to be ironed out before a system "goes live". Too often, civil servants are working to impossibly tight deadlines governed by political imperatives rather than sensible logistical planning. The result can be disaster—as witnessed, for example, with the implementation of the new child support scheme and, more recently, the painful introduction of tax credits. In both instances, the IT systems simply were unable to cope with the volume of work intended, with the result that—within CSA—staff are having to run two systems in parallel (as well as using lots of "workarounds" to overcome IT problems); and within tax credits, there are still over half a million families still receiving Income Support "children's additions" rather than child tax credits.

  29.  The relentless pressure to reduce costs within DWP can—and has—lead to IT and business processes being driven more by cost considerations than by the need to create a system which is "user friendly" and comprehensible to customers. A good example is the poor quality of computer-generated letters, which—too often—come very low on the priority list of IT and business process designers.

  30.  People charged with the task of designing business systems need to think far more carefully, and give higher priority, to how they seek to communicate with customers. For reasons of cost, all organisations now increasingly employ a "call-centre" model, whereby claimants are dealt with by operators who know little about their case but rely on IT systems to answer queries. Staff charged with making the actual decisions on a case are often located elsewhere, and there is a deliberate attempt to shield them from direct contact with claimants. The result is that it can be very difficult for a caller to find anyone to talk to, to get an explanation about a particular decision or to give complex information (relating to the history of a case) in order to raise a specific query.

The contracting out of services

  31.  OPF does not take a view on the contracting out of services. But we would urge the Committee to consider the complexities which are caused by the contracting out process, where every eventuality has to be catered for and every potential perverse incentive ironed out.

CONCLUSION

  32.  We consider that existing measures taken to tackle the complexity of the tax credits and benefits system, although useful in themselves, are ultimately on too modest a scale to counteract the strong drivers of benefits/tax credits policy and business design which continue to create a confusing and incoherent patchwork of provision. We consider that, unless resources are found for a more radical and ambitious simplification agenda, it is unlikely that the complex workings of the present system will be improved from the point of view of lone parents, 95% of whom are receiving a benefit or tax credit (excluding child benefit).[25]

March 2007












20   The Contributory Principle, Fifth Report of the Social Security Committee 1999-2000, HC 56-I, June 2000. Back

21   Department of Work and Pensions: Dealing with the complexity of the benefits system, NAO, HC 592, November 2006. Back

22   Simplification-Guide to Best Practice, DWP, May 2006. Back

23   NAO Report, HC 592. Back

24   Early days CAB Evidence on the Local Housing Allowance, November 2005. Back

25   Families and Children in Britain: Findings from the 2004 Families and Children Study (FACS), DWP Research Report No 340 (2006). Back


 
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