Welfare Reform Bill

Memorandum submitted by Barnardo’s (WR 40)

1 Introduction

1.2 Barnardo’s works directly with over 100,000 children, young people and their families every year through 400 projects across the UK . We use the knowledge gained from our work with children to campaign for better policy and to champion the rights of every child. With the right help, committed support and a little belief, even the most disadvantaged and vulnerable children can turn their lives around.

1.3 Barnardo’s aims to reduce the impact of poverty on children, young people, families and communities through social, economic and community action . A round one third of our work focuses on the alleviation of poverty, and it is an inescapable elem ent of nearly all our services. Many of the families we work with are users of the benefits system, and will be directly affected by the measures put forward in the Welfare Reform Bill.

2 Summary – Barnardo’s position on the Bill

2.2 Barnardo’s is supportive of many of the principles behind the Government’s welfare reform agenda, and in particular we welcome steps to improve work incentives in the benefits system by the introduction of universal credit. However, such a radical reform of the benefits system requires careful planning, and we have serious concerns about specific provisions in the Bill.

2.3 Furthermore, we are very concerned about the heavy reliance on regulations. The Bill represents a once in a generation reform of the welfare system: it is therefore important that the Government provides as much detail as possible about its plans in order that they can be debated in Parliament as fully as possible.

2.4 Barnardo’s recommends that:

- the Bill should explicitly set out how childcare would be delivered under universal credit

- the Bill should explicitly state that people aged 16-17 will be entitled to universal credit if they would otherwise face severe hardship

- the Government should align the structure of support for free school meals to reflect the structure of universal credit, or even include it within universal credit

- council tax benefit should be brought into universal credit, and the housing element of universal credit should be generous enough to cover rent/mortgage interest and council tax. This would make it easier for people who need help to claim, and help to simplify the system – one of the Government’s key aims.

- the Government should consider how universal credit can be modified to avoid penalising second earners

- clauses 128 and 129 should be removed pending the results of the Government’s consultation on child maintenance

- clauses 69–72 and 98, should be removed pending the results of the Government’s consultation on the social fund

- the Government should provide more detail on how universal credit awards will be calculated, including factors such as what the unified taper rate will be, and how disregards will be tailored to family circumstances

2.5 We have made several recommendations on the new conditionality regime:

- the Government should reflect the importance of childcare and its commitment to promoting children’s wellbeing by requiring officers to take children’s wellbeing into account when drawing up a jobseeker’s agreement/employment and support action plan

- the Bill includes provisions which would make in-work conditionality possible. If the Government plans to introduce in-work conditionality, it must make the details of its plans public.

- the Bill includes provisions for significantly longer periods of sanction than are currently available. Such a punitive approach runs contrary to the Government’s commitments to support people into work – as they consider that the Government has ‘given up’ on them. We recommend that the Government reconsider this element of the conditionality regime.

- we recommend that the Government reconsiders their plans to make hardship payments recoverable, as well as any plans to introduce conditionality into the hardship payment system

3 Childcare

3.1 There is a strong body of research evidence showing that access to affordable, good quality childcare is a key element in the decision for mothers to enter work. [1] We are therefore greatly concerned that no mention at all is made of support for childcare costs under universal credit in the Bill.

3.2 If inadequate provision is made, work incentives for lone parents and second earners in low income households will be worse than under the existing system, because childcare can often cost more than is gained in earnings from extra work.

3.3 In the Comprehensive Spending Review (CSR) the Government announced a reduction in support towards childcare costs from 80% to 70%. Any further cuts to this budget will negatively affect work incentives for many families at a time when the Government’s stated objective is to improve them.

3.4 We urge the Government to provide families with a specific additional payment towards childcare costs, on a means tested basis. Given the Government’s stated commitment to simplify the system of payments, this childcare element should be included as another element added to the basic universal credit for working families.

3.5 As a minimum the level of support should be equivalent to that in the current system - and families must not receive less due to any cap for childcare costs.

3.6 Under the rules for claiming housing benefit and council tax benefit, childcare costs can be disregarded resulting in childcare support of as much as 97% for some families. This money should be included within the total resources available for child care.

3.7 Universal Credit: welfare that works sets out the option that childcare costs are disregarded for the purpose of calculating taper rates under universal credit. [2] We do not support this approach. This option would fail to support a move into and progression through work for parents who do not earn as much as their universal credit earnings disregard. If a family is already receiving the maximum universal credit award (as they are working few hours), small increases in their earnings are likely to be outweighed by the resultant increases in their childcare costs.

3.8 The Bill should explicitly set out how childcare would be delivered under universal credit, including a minimum percentage of support that should be offered (before tapering). This should be set at at least 80%,    and as a minimum the Government should provide a level of support with childcare costs which is equivalent to that provided under the current system, to avoid parents losing out. To aid simplicity, this should be incorporated as a specific additional element of the universal credit award.

4 Welfare Support for 16-17 year olds facing severe hardship

4.1 Currently, people aged 16-17 are entitled to claim Job Seeker’s Allowance (JSA) if they would otherwise face severe hardship. The Bill does not include provisions that would continue this entitlement (the basic conditions for claiming universal credit include being over 18 years old and not receiving education).

4.2 Clause 4(2) provides a regulation-making power to specify exceptions to both of these conditions. However, in previous welfare legislation [3] there have been clauses which specify that people aged 16-17 who would otherwise face severe hardship are entitled to welfare payments. We are very concerned that this is no such provision in this Bill.

4.3 To prevent the most vulnerable and disadvantaged young people losing out under the new system, the Bill should explicitly state that people aged 16-17 will be entitled to universal credit if they would otherwise face severe hardship.

5 Free school meals

5.1 There is a strong body of evidence showing that free school meals improve children’s health and educational outcomes, [4] as well as making a real difference to families’ financial situation. [5]

5.2 Pupils’ entitlement for free school meals is currently dependent on whether their families receive specific out of work benefits, tax credits and the level of household earnings. As these benefits and tax credits will no longer exist, new entitlement criteria will need to be established.

5.3 The DWP white paper Universal Credit: welfare that works suggests that entitlement for free school meals would be set based on an income threshold.

5.4 A simple income threshold would create work-related disincentives for many families in a welfare system specifically designed to avoid them.  This is because they would lose support for school meals altogether once they hit the income threshold, rather than losing support gradually as their earnings increase. 

5.5 We are pleased that the Secretary of State for Education has stated that he is "sympathetic to arguments for extending eligibility" [6] for free school meals. Research shows that about 20% of children in poverty are not entitled free school meals - which we believe is unacceptable. [7]

5.6 The need to set new entitlement criteria presents a valuable opportunity to find a better system for ensuring children who would most benefit from a free school meal actually receive it. We believe that the Department for Education should take the lead and ensure that the development of new eligibility criteria leads to a system which will:

Help make work pay by avoiding steep "cliff-edges", where exceeding a certain income point would result in a loss of benefit which means that the household loses money as a result of earning more.

Provide support for school meals to every child who needs it.

Be simple for families to understand and for schools and Government to administer.

Contribute to tackling health inequalities by improving the health of the poorest fastest, as set out in the Government’s public health white paper, Healthy Lives, Healthy People.

5.7 Not only would setting free school meal eligibility according to these principles provide health, educational and financial benefits to children and their families, it would also provide the Department for Education with a more accurate proxy for low income deprivation when determining entitlement for other education benefits and the pupil premium. This would be particularly valuable for the Department in light of the intention to simplify the system of school funding, and to make it better reflect local levels of disadvantage.   

5.8 In order to realise these principles, we suggest that the Government aligns the structure of support for school meals to closely reflect the structure of universal credit or even include it within universal credit. This will enable entitlement to reflect need more accurately, and support to be withdrawn in a way which ensures the preservation of work incentives. The system would be designed to ensure that the money could only be spent on school meals, and not be given as cash to parents.

5.9 We have drawn up a number of models of how the integration of support for school meals with universal credit might work which we have shared with civil servants in the Department of Education and would be pleased to share with the Committee.

6 Conditionality

6.1 The Bill includes provisions for overhauling the system of sanctions that are applied to people who do not meet the conditions placed upon them (for example, looking for employment). Barnardo’s has concerns about several elements of the new conditionality system:

6.2 Child wellbeing

Current primary legislation [8] relating to both JSA and Employment and Support Allowance requires that when drawing up a jobseeker’s agreement/employment and support action plan, officers must, as far as practicable, take into account its impact on the wellbeing of any child affected by it. The equivalent for universal credit – claimant commitments – has no such requirement.

6.3 Clause 24 makes provisions for regulations to define the circumstances under which requirements (and therefore conditionality) are imposed. However, we believe that the Government should reflect the importance of childcare and its commitment to promoting children’s wellbeing by including provisions in the primary legislation.

6.4 In-work conditionality

Clause 19, which sets out who will be in the no conditionality group, states that regulations can make provision for criteria related to hours worked, earnings, income, or the amount of universal credit payable. This means that in theory, there could be conditionality requirements on people who are already in work. Similarly, several clauses refer to claimants looking for ‘more paid work or better-paid work’. [9]

6.5 If the Government plans to introduce in-work conditionality, it must make the details of its plans public - in particular, how people will be helped to progress in work rather than simply being required to take on more hours in low-paid, low-skilled jobs, or move from one such job to another in order to take on extra hours. Any in-work conditionality should also take into account the numbers of hours lone parents are able to work: otherwise lone parents could be forced to work longer hours to the detriment of their family life and their children’s welfare.

6.6 Length of sanctions

The Bill provides for significantly more punitive sanctions than are currently in place. In particular, claimants can lose their universal credit award for up to three years if they do not comply with work search, work preparation or availability requirements. [10] Such a punitive approach runs contrary to the Government’s commitments to support people into work, and we are seriously concerned about the detrimental effect on families if the Government were simply to ‘give up’ on them for three years after breaching a claimant agreement.

6.7 We would also question the value of clause 27(5)(c), which gives the Secretary of State the power to impose an open ended period of sanction followed by a period of 26 weeks of sanction (this example is given in the explanatory note). As with the length of higher level sanctions, it is hard to see how this is consistent with incentivising claimants back into work, and so simply appears punitive without being effective.

6.8 Reasons for sanctions

Clause 26 sets out provisions for claimants to be penalised with higher level sanctions if they voluntarily and for no ‘good reason’ cease paid work or lose pay. ‘Good reasons’ are to be defined in regulations. We are concerned about looseness of this wording, and the implication that the burden of proof is on the claimant to show that they have a good reason for ceasing work or losing pay.

6.9 Some claimants’ circumstances will be such that, at certain times, leaving work or reducing hours is an appropriate decision (for example, when faced with illness in the family) - and the assumption should not be that claimants will be automatically liable for punishment by leaving work or losing pay.

6.10 Lone parents

Clause 56 (11E) sets out varying levels of conditionality for lone parents, depending on the age of their child. Lone parents of children under the age of one are not subject to conditions. Up until the age of at least three (the exact age will be determined in regulations), lone parents will be required to have work-focused interviews.

6.11 The explanatory notes suggest that lone parents of children with a youngest child aged three to four will be required to undertake work preparation, thereby implying that they will be subject to full conditionality when their child is five.

6.12 Lone parents are likely to be particularly affected by the omission in the Bill of any provision for conditionality needing to have reasonable regard for the claimant’s circumstances (as in the Jobseekers Act 1995, for example) and the lack of provision for taking the welfare of the child into account.

6.13 Hardship payments

The Bill includes several provisions relating to hardship payments for claimants whose benefit has been reduced. [11] It provides for regulations to set out conditions which claimants will have to satisfy to remain eligible for payments. The Government should provide detail on what these ‘conditions’ might be: if their aim is to introduce conditionality into the hardship payment system (as was implied in Universal Credit: welfare that works) then this is something that we would strongly oppose. Hardship payments ought to operate as a safety net to prevent families from entering destitution – imposing conditions on families defeats the point of them.

6.14 We are also very concerned about the provisions for some hardship payments to be recoverable. By definition, hardship payments are paid to families who are struggling, and who may well find being in debt extremely difficult. If benefits are supposed to cover a family’s basic needs, then any amount of debt a family gets into is likely to have the effect of reducing their ability to pay for those basic needs.

7 Council tax benefit

7.1 In Universal Credit: welfare that works, the list of benefits that were going to be replaced by universal credit did not include council tax benefit [12] (CTB) - the intention being that Local Authorities rather than central government would decide who would be eligible for CTB and how much they would be eligible for. [13]

7.2 We believe that council tax benefit should be brought into universal credit as long as the housing element of universal credit is generous enough to cover rent/mortgage interest and council tax. This would make it easier for people who need help to claim, and help to simplify the system – one of the Government’s key aims.

8 Impact on second earners

8.1 Evidence shows that – at present - couple families where one parent works full time and the other works at least part time are much less likely to be in poverty than couple families with just one earner [14] . Yet the Government plans to introduce a system where second earners will not benefit as much from universal credit as main earners, [15] and have acknowledged that this may lead to some second earners choosing to leave work:

Although the number of workless households will reduce, it is possible that in some families, second earners may choose to reduce or rebalance their hours or leave work. In these cases, the improved ability of the main earner to support his or her family will increase the options available for families to strike their preferred work/life balance. [16]

8.2 As many second earners are women, this statement is of great concern from an equalities perspective: furthermore, women giving up work may have direct effects on the health, wellbeing, education and future life chances of their children.    

8.3 The Government should consider how universal credit can be modified to avoid penalising second earners.

9 Child maintenance

9.1 Clauses 128-131 make provision to reform the child maintenance system. The aim of the provisions is to encourage private voluntary agreements between parents on the payment of child maintenance. If a parent wishes to make use of the statutory service [17] , they will have to demonstrate why a private voluntary agreement with the other parent is not possible.

9.2 However, there are many circumstances which make voluntary agreements inappropriate or highly likely to break down, potentially leading to children being left without support. We are therefore concerned about the onus being placed on the parent with care to show that they require use of the statutory system.

9.3 The above provisions give the Government the power to implement policies in the recent Green Paper Strengthening families, promoting parental responsibility. The Green Paper also includes the proposal to levy charges to use of the statutory system (an application fee to be paid by the care providing parent and a percentage charge to be paid by both parents on any maintenance collected.) This would require the use of the regulations provided for in section 6 of the Child Maintenance and other Payments Act 2008.

9.4 Although it is proposed in the Green Paper that the fees would be lower for parents receiving benefits, we believe that these measures would unfairly penalise the parent with care and cause undue hardship for families during a time of family breakdown. Additionally, we strongly object to the Bill pre-empting the open consultation on the Green Paper. Therefore, we are calling for the removal of clauses 128 and 129.

10 Social fund

10.1 We are concerned that provisions relating to the Community Care Grant and Crisis Loans are included in the legislation whilst the DWP consultation on them is still open. Barnardo’s strongly disagrees with these reforms being enacted in primary legislation before the consultation has finished and evidence from stakeholders has been analysed.

10.2 We are also greatly concerned about the changes announced to the Crisis Loan on the 3 March 2011, especially that help will no longer be available to purchase beds and cookers, and the plans to reduce the rate paid for living expenses from 75% to 60%. This will have a great impact on the most vulnerable families which whom Barnardo’s works, and could force many to go to doorstep lenders.

10.3 The Social Fund is a lifeline for many of the poorest and most disadvantaged people. The decentralisation of the Social Fund will, in the current financial situation, inevitably lead to less money getting through to people who need it unless it is accompanied by a robust guidance. Without such guidance and tight monitoring by the DWP as to how Local Authorities administer the Fund there is a risk of inappropriate and confusing regional variation. We also oppose the abolition of the post of Social Fund Commissioner, the independence of which makes an important contribution to the operation of the Fund.

10.4 We strongly urge the Government to remove clauses 69–72 and 98, pending the results of the DWP consultation.

11 Clarification on the earnings disregard and taper

11.1 The two key components of universal credit that should deliver improvements over the present benefits system are the generous and tailored earnings disregard for most families and the unified taper. It is surprising therefore that there is hardly any mention of either in the primary legislation. They are mentioned only once, in clause 8(3), in brackets, and language used seems to imply that regulations could set out a way to calculate universal credit payments which do not necessarily involve the tapering of the disregard to family circumstances.

11.2 The Government should confirm how universal credit awards will be calculated, including detail such as what the unified taper rate will be, and how disregards will be tailored to family circumstances.

12 Disabled children

12.1 Barnardo’s works with almost 15,000 disabled children every year. We know from our services that disabled children are more likely live in poverty: child disability is frequently a ‘trigger event’ for poverty, as a result of additional costs, family break-up and barriers to accessing work that can follow the birth or diagnosis of a disabled child.

12.2 We are concerned about the lack of information in the Bill about additional assistance with childcare for families with disabled children.

12.3 We are also concerned about how the new Personal Independence Payment (PIP) will affect this group.

12.4 Barnardo’s supports Every Disabled Child Matters, who are submitting evidence separately on this issue.

March 2011

[1] For example, see: Equality and Human Rights Commission (2010) Childcare Matters: Improving Choices and Chances for Parents and Children available online at: http://www.equalityhumanrights.com/uploaded_files/research/working_better_childcare_matters.pdf

[2] DWP (2010) Universal Credit: w elfare that works . p.22

[3] Social Security Contributions and Benefits Act 1992

[4] For example:

[4] School Food Trust (2007 ) School lunch and behaviour: systematic observation of classroom behaviour following a school dining room intervention. Sheffield : School Food Trust

[4] School Food Trust (2009) School lunch and learning behaviour in secondary schools: an intervention study . Sheffield : School Food Trust

[4] School Meals Review Panel (2005) Turning the tables: transforming school food . Sheffield : School Food Trust

[5] For example, for a family with three primary school-aged children, school meals cost an average of £1043 per year

[6] Gove, M. (2010) Letter to Rt Hon Ed Balls MP, 7 June 2010

[7] Assessing current and potential provision of free school meals: Economic research on free school meals entitlement and exchequer costs (Report prepared for The School Food Trust by London Economics (2008))

[8] S ectio n 31 of Welfare Reform Act 2009

[9] For example:

[9] 15 ( 3 ) – on the work focused interview requirement

[9] 16 ( 1 ) - on the work preparation requirement

[9] 17 ( 1 ) - on the work-search requirement

[9] 18 ( 2 ) - on availability for work

[10] Clauses 26, 46 and 49

[11] Clause 28, clause 55, clause 46, clause 102, schedule 5 paragraph 4

[12] DWP (2010) Universal Credit: w elfare that works p.14

[13] DWP (2010) Universal Credit: w elfare that works p.20

[14] DWP (2010) Household Below Average Income: An analysis of the income distribution 1994/5-2008/9, Table 4.3

[15] DWP (2011) Universal Credit Impact Assessment p.18

[16] DWP (2011) Universal Credit Impact Assessment , p . 18

[17] Currently the CSA. A new service to be designed by CMEC and implemented in 2012