Examination of Witnesses (Questions 120
- 135)
WEDNESDAY 16 MAY 2007
MR JOHN
WHEATLEY, MR
PAUL TRELOAR
AND MS
ANNA PEARSON
Q120 John Penrose: So it is not just
the accumulated encrustation of rules. If you are going to have
additional things on top of a single working age benefit for specific
eventualities and specific circumstances, you are going to have
to have an application process for each one of those specific
eventualities, and that is going to mean in the end, unless you
actually stop paying money to any particular group of people and
decide they are not going to get it at all, you are going to have
to have just as many forms and just as many types of application
process for the top-ups as you have at the moment for the existing
system.
Mr Wheatley: Yes, and this is
where the attractions of the idea of the citizen's income come
in, I suppose, so that everyone gets a certain amount and there
are departures over and above that. It removes the need for very
top-heavy income-related schemes targeted at those on the lowest
incomes.
Mr Treloar: I think that is where
with means-tested benefits the problems arise, because they look
to exclude people from entitlement, and the interactions between
means-tested benefits, universal benefits and contribution-based
benefits. That is where the problems start arising. If there were
more universality within the benefits system, trying to include
people, and, as I said earlier on, the DWP looking to identify
entitlements rather than relying on people to identify those entitlements
themselves, you could make some gains but that requires the political
will. It is almost the converse of Justine's point; instead of
winners and losers, there will be winners and bonus winners, if
you like, people getting even more than they anticipated.
Q121 John Penrose: The losers will
be taxpayers.
Mr Treloar: Peter Townsend has
done some modelling which has found that the countries showing
good economic growth are the ones where there is a greater redistribution
of income but it actually pans out as having a 43% basic rate
of income-tax across the board. If you take that, I will be surprised.
Q122 John Penrose: How many people
voted for him?
Ms Pearson: I cannot really comment
on the single working age benefit in detail but I think if it
helped make it such that there was one access point for people
and they gave their information once rather than several times,
that would be very positive. It may be that there are other ways
of achieving that.
Q123 John Penrose: That is going
back to the incremental point rather than the single working age
benefit point, but there is inherent approval. Can I ask a few
questions about incentives and disincentives to work? I want to
make a distinction between fact and myth, if you like, or reality
and myth. There seems to be a great degree of fear amongst claimants
that going back-to-work may disadvantage them, and I will come
on to why that perception is created in the first place, but before
I do, can I just ask about the reality of what, in your view,
is the extent of disincentives to work in the existing benefits
system. Have they largely been ironed out or are they ubiquitous
and all too common with the interaction of benefits at the moment?
Mr Wheatley: It is difficult to
answer that without making reference to the fear that people have
about making that transition, especially when you are talking
about people for whom the jump into work is going to make at best
a very marginal difference to their household income. The need
for them is a very fine and accurate calculation about how their
spending and income is going to change.
Q124 John Penrose: Assume for the
moment that we have a perfect information environment—I
know we do not—and that everybody has a perfectly worked
out Better Off Calculation so they can make a perfectly logical
financial decision. How many people and in what circumstances
would make a decision that it is not worth their while going back
into work?
Mr Wheatley: I struggle to drum
this in to government officials, that there are still people for
whom it is not financially sensible to move into work when you
look at the perfect information, because they are moving into
a low-income job, they have childcare costs and they lose free
school meals or other help they might be relying on, and they
have travel to work costs. If the calculation is done correctly,
for many people, the only reasons for moving into work are the
non-financial ones, about it being good for your self-esteem and
being good to go and mix with adults for a change and being good
in the longer term for your career in the hope that you might
progress. We see many clients who, even when told "You are
going to be £20 a week worse off" will still say "Yes,
but I prefer to work." There are some who will make that
decision but they prefer to make it in the certainty that the
calculation is right and not, as some complain to us, that the
calculation done by Jobcentre Plus has entirely missed, for example,
what is going to happen to their Housing Benefit.
Q125 John Penrose: I want to come
on to the accuracy of the calculation in a minute but what I am
trying to get at is—and forgive me; I do not know if your
evidence already includes this—do you have a list of the
interactions and the numbers of people who are going to be objectively
financially worse off which we can check?
Mr Wheatley: We do not have a
list. I think we have examples of where it happens which we could
let you have.
Q126 John Penrose: Do you have any
sort of quantification about how many people are affected and
how severely?
Mr Wheatley: I do not think we
do.
Q127 John Penrose: It would be very
helpful to have the examples. I am just trying to find out if
either of the other two of you have any sort of quantification
of the extent or reality of this problem as opposed to the perception
at this point.
Mr Treloar: I do not think we
have a quantification but we do have views on things like the
cliff edges within the benefits system, the rather inflexible
rules around work, the interaction between things like permitted
work and earnings disregards and so on, which do strongly mitigate
against people doing temporary pieces of work, casual work or
whatever. There could be much more flexibility built into the
system that would encourage people to try out some of these things,
I think. I would also point out from the point of view of disabled
people—and hopefully this is going to be picked up under
the Employment Support Allowance—there are often other barriers
which are as, if not more significant in terms of moving into
work around direct and indirect discrimination that definitely
need attention if the benefits system is going to look at making
work the best route out of poverty; it needs to be much more holistic
than simply Better Off Calculations are and so on and explanation
of the rules. There is a whole raft of ...
Q128 John Penrose: I am still hearing
that better information would help and I am completely in agreement
with that point. What I am concerned about is that nobody seems
to have any sort of quantification about how many people are affected
and how badly by the objective function of the rules which make
them less well-off if they do go into work. Anna, can you help
me out here?
Ms Pearson: I wish I could. I
think it would be very useful information to have. It is probably
the kind of thing the Government holds. For pensioners, obviously,
the situation is quite different. People are not facing an 85p
in the pound withdrawal rate or potentially being worse off from
working. What does happen though is that there is a £5 limit
on the amount you can earn in a week if you are on Pension Credit,
so you are only allowed to earn £5 a week and then straight
away your benefit starts to be removed. We are seeking to get
that changed within the scope of the Pensions Bill because, even
though people might not want to work once they are past state
pension age, or might not be able to work, it is an important
principle. If we are for people working longer, and we want people
to get involved in active ageing, we should not be preventing
people from doing really small part-time jobs every week that
might help them keep integrated in their communities and offer
a whole load of benefits. We are also pulling away a ladder for
people by which they could potentially improve their quality of
life. Similar issues apply to equity release, where if you release
equity in your home, which you are often asked to do for a number
of different things, you will lose your benefits. In both these
cases we need to get better at making sure we do allow people
to improve their quality of life, and I think there is a great
read across there to working age, where, frankly, the situation
seems pretty terrible for a lot of people.
Q129 John Penrose: If I can move
on to the myth, which John has had a manful attempt at answering
already, is it just a question—I think, Paul, you were saying
it is not just a question—or is it mostly a question of
improving the quality and ubiquity of Better Off Calculations
or is there more that needs to be done in order to allay the fear
that going back to work is it is somehow going to make people
worse off?
Mr Wheatley: There is a substantial
problem of poor administration of benefits which does mean that
people are very reluctant, particularly to take work which is
likely to be short-term. We see people who are regularly offered
jobs which might only last six or eight weeks and it is not worth
coming off benefit for that amount of time because it is going
to take much longer than that to get back on benefit. You are
sentencing yourself to struggle for probably a couple of months
without any income if you do take that job, with knock-on effects
that follow it. For lots of our clients on low income, what they
need is certainty about what is going to happen. They know that
interacting with Jobcentre Plus is not necessarily going to provide
them with that certainty, as well as the problem I mentioned about
incomplete calculations from Jobcentre Plus and the different
reporting requirements for different systems.
Mr Treloar: There are three discrete
areas which could require attention in terms of that transition.
One is Disability Living Allowance. We hear quite regularly of
people moving into work having their Disability Living Allowance
reassessed very shortly after moving into work, despite the fact
that that should not make any difference. We do not know what
the reasons are, whether there is some policy within DCS to undertake
those kinds of reviews because they feel the person's condition
has changed, but we would like to see something like a six-month
guarantee that moving into work will not affect Disability Living
Allowance. We think that would help encourage people to overcome
that fear. Housing Benefit: I think the information could be better
to help people understand that you can keep Housing Benefit when
you move into work, because I think people think it stops automatically
because it is passported with a means-tested benefit. The real
fly in the ointment as far as Better Off Calculations are concerned
is Tax Credits. I am not sure anybody can give a robust Better
Off Calculation in terms of Tax Credits at the moment—not
HMRC, not independent advisers—because you are guessing;
you are guessing about further changes down the line, you are
guessing about an end of year income. It is a really big issue
in terms of those transitions and changes in income for parents
of disabled children, who are really worried about being landed
with big overpayments at the end of the year. Those are three
discrete points that I think could have attention paid to them
that could overcome a lot of those disincentives.
Ms Pearson: You do not really
get Better Off Calculations for older people going on. It is normally
a lot clearer than it is for those of working age that you will
still be better off, but the potential for complexity to be imposed
on you as a result of your choice to maybe take a job for three
or four hours a week would potentially put people off doing that.
I think it is a shame when you have to talk in terms of Better
Off Calculations because, in my mind, it should be quite clear
that you can be better off from working. The whole fact that you
have to have one is a bit of an indictment of some of the benefits.
Q130 Chairman: Do you think the option
of deferring your state pension is clear enough to prospective
retirees?
Ms Pearson: I think it is becoming
clearer but a lot of people are quite surprised by a whole load
of the information they receive when they reach state pension
age. For instance, if I can use the example of my own mother,
she had no idea that she had to work 39 years in order to get
a full basic state pension. I think there are many people in that
position. The letters that are sent out are quite difficult to
understand, at the very least, and sometimes the option to defer
is only part of that letter and comes further down. I think people
could probably do with more help with that process and more advice,
particularly in terms of tax implications, because with all the
tax issues for older people, HMRC is operating in a vacuum at
the moment. It is not integrating with DWP. There is no written
information any more from HMRC for pensioners and tax. It has
not been integrated into DWP leaflets. There is a real lack of
information about whether you could potentially be better off
or not.
Mr Wheatley: Could I just add,
Chairman, that we have seen people in the past who have not fully
understood what deferring means and assumed that it means they
do not have to make any contact, that they can defer claiming
their pension, when in fact what they have to do is contact the
Department and tell them that they are deferring claiming. Some
people have lost out as a result of it.
Ms Pearson: Though I think now
they have moved to a system where not hearing from you, they do
defer, I believe. I am not quite sure.
Q131 Michael Jabez Foster: I would
just like to come back to what you were saying. In fact, John
has really interrogated you quite well on what I wanted to ask.
I can understand the benefits security argument where we are uncertain,
but is your charitable organisation's emphasis on "You may
be worse off" not counter-productive? I have gone through
this with lots of constituents and I have never found one that
is worse off if you actually work out. My empirical evidence is
that nobody is ever worse off by going into work. Having said
that, someone with seven children and all sorts of other things
may exceptionally be, but it is so rare, and what I am really
asking you is can you give us examples of where that can possibly
happen, because I do not know any, and you are saying "We
don't actually keep them." I would like to know, because
I think that is probably not very often the case, and we need
to be absolutely clear and the emphasis needs to be on ensuring
people that they are going to be better off. There may be an argument
about how much better off, and I understand that, although I think
that is a social issue about if you are tuppence better off, you
should be working, but the important thing is to get that message
across. What do you say to that?
Mr Wheatley: It is our responsibility
to give people accurate information on which to base their own
decision, and we can certainly supply you with the examples. It
is typically lone parents who are contemplating moving into work
at the minimum wage, who will also have childcare costs and associated
travel to work costs, for example, and who may lose income-related
benefits, including free school meals. There the calculation is
very marginal and indeed, some people can be worse off. What we
have not done is quantified the extent of that, but certainly
not receiving Child Maintenance and moving into a job at minimum
wage are likely to be the trigger points, and the calculation
has to be done very carefully to make sure you are not missing
anything. Do not forget that help with childcare is only for registered
childcare, and a lot of the work that our clients are moving into
is evening, weekend and other kinds of work for which there is
not any help available. So we have to be careful to take into
account any costs that they are going to have to pay friends or
relatives or other people, babysitters, for example.
Q132 Michael Jabez Foster: I understand
that but that is the particular job. That is the point. There
may be a particular job that is not worth doing but at the same
wage a different job that almost certainly is. There is always
an example: if you have to fly to New York every third Tuesday
it will not be worth it but for most people ... The point I am
trying to make and ask you about is whether your attitude in suggesting
to people they may be worse off is not frightening them into not
actually accepting that in almost every situation they will be
better off.
Mr Wheatley: People are coming
to us because they want to find out what their options are and
because they have been offered the chance of increasing their
hours or taking a specific job. Very few of them are being offered
jobs in New York. We are dealing with real-world situations, where
people are looking at what vacancies there are and what is open
to them, and most of the lone parents who we see, I have to say,
do want to move forward. They do not like living on benefits.
It is not a comfortable existence for them and their families
and it is in their interests and it is our advisers' interests
to give them the best possible advice to move forward, but we
are not going to say to them glibly that you are always going
to be better off in work if the figures do not stack up.
Michael Jabez Foster: That is the question,
is it not, whether they do? We will await those examples.
Q133 Chairman: John, honestly, this
is not a cheap shot: is there any average waiting time for an
appointment at CAB to have this sort of check done?
Mr Wheatley: We do, as you well
know, have access issues and CABs have different systems for seeing
people. We are experimenting with different systems, including
telephone advice, diagnostic advice.
Q134 Chairman: It sounds very much
like DWP.
Mr Wheatley: We are going down
that road, yes. We are looking to try and introduce by 2008 a
single number for advice, but the fact is there are only so many
people and a full benefit check, a full calculation, does take
a bit of time. You are talking about at least an hour and if it
is a DLA claim, it is a couple of hours. We are looking to be
a bit cleverer about who we see and what kind of service we offer
them, whether we offer just self-service of information on websites
and so on. We are looking at different ways of doing it.
Q135 Chairman: Again, I go back to
the earlier point about how many millions of people are not claiming
this, that and the other. There are still about 29 million people
claiming a benefit, excluding Child Benefit, and the vast majority
of those never, ever go near an advice centre.
Mr Wheatley: Where did you get
those figures, Chairman?
Chairman: I did this job for 10 years,
do not forget, John. There is that issue about patchy advice around
the country, even where it does exist, but there are areas where
there is none. We must move on. Thank you very much.
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