Written evidence submitted by Age UK
KEY POINTS
AND RECOMMENDATIONS
Age UK supports the Government's aim to reform the
benefit system and introduce a simpler system which tackles poverty
and provides better incentives to work. However the Government
should not underestimate the challenges ahead in taking forward
this agenda.
In addition to removing financial disincentives in
the welfare system it is important to address other barriers to
work. We are concerned that people in their 50s and 60s may face
increased conditionality without the support needed and suitable
employment opportunities.
Much of the detail remains to be worked out. In taking
forward reform it will be important to balance simplicity with
having a system that reflects individual need. The marginal withdrawal
rates need to provide a clear incentive to work.
We appreciate that the Government wants to move towards
greater localism but we do not believe it is appropriate to apply
this approach to Council Tax Benefit (CTB). Localising benefit
alongside a 10% reduction in expenditure could lead to uneven
outcomes, hardship and increased complexity.
For older people we agree that the best approach
would be to bring support for rent alongside help with other housing
costs within Pension Credit. Claims for CTB could also be integrated
if this is retained as a national entitlement. The marginal withdrawal
rates for older people should also be reviewed.
Older couples where one has reached state pension
age and the other is younger, and older people with dependent
children should not be disadvantaged by the reforms and those
with earnings should not face higher marginal deduction rates
than younger people.
Reforms to meet the needs of younger and older carers
are long overdue and the system needs to ensure that all who provide
substantial care receive financial recognition and adequate support.
Introducing the Universal Credit is a major administrative
task and systems must be are tested and shown to work before this
is done. The Government must be prepared to delay introduction
if necessary.
1. INTRODUCTION
1.1 Age UK works to improve later life for everyone
through our information and advice service, campaigns, products,
training and research. We welcome the opportunity to comment to
the Committee on the White Paper Universal Credit: Welfare
that Works. This response looks at the impact on people in
their 50s and early 60s who are unemployed, disabled or carers,
the interaction between the Universal Credit and the benefit system
for people who have reached state pension age, and other aspects
of the reforms that could particularly affect older people.
2. PRINCIPLES
AND APPROACH
2.1 Age UK supports the Government's aim to reform
the benefit system and introduce a simpler system which tackles
poverty and provides better incentives to work. The Government
is right to be ambitious about welfare reform but should not underestimate
the challenge both in terms of getting the policy right and putting
changes into practice. The details need to be developed with wide
consultation and broad political and public support.
2.2 While we support the aim of providing greater
incentives to work it is important to ensure that those who cannot
be expected to be in paid work on a temporary or long term basis
or who are unable to find employment, should be entitled to an
adequate income relative to general living standards. The welfare
systems and debate about reform should not stigmatise those who
cannot undertake paid work.
3. ADDRESSING
BARRIERS TO
WORK FOR
PEOPLE AGED
50 AND OVER
3.1 In addition to removing financial disincentives
in the welfare system it is important to address other barriers
to work including the availability of suitable jobs. People need
personalised help to re-enter the labour market, improved access
to training and learning, more opportunities for flexible working
and changes in employers' attitudes so they are more prepared
to take on older workers or those with health problems or disabilities.
The development of the Work Programme needs to be responsive to
the needs of people in their 50s and 60s, especially given proposals
to speed up the increase in state pension age. We believe age
discrimination is a significant barrier to work, yet is largely
a hidden problem. This makes it harder to tackle and quantify
the costs involved, but does not mean it should be ignored by
the Government's welfare programmes. There are also other barriers
to work for older people, for example having lower formal qualifications
and caring responsibilities.
3.2 We are concerned that people in their 50s
and 60s may face increased conditionality without the support
needed or suitable employment opportunities. Research we commissioned
found that unemployed individuals aged 50 and over did not feel
fully supported by their Jobcentre Plus.[73]
Since then Jobcentre Plus has introduced new measures to help
their staff engage better, but the service still does not meet
many of the concerns raised in the report. We are not convinced
that the case has been made for additional conditionality. Older
workers may find themselves in a situation where through no fault
of their own they are unable to find employment, but could still
be subjected to punitive sanctions. The Government should ensure
that jobseekers of all ages and disabilities enjoy a level playing
field in the search for work.
4. THE DESIGN
OF UNIVERSAL
CREDIT
4.1 Only an overview of the structure of Universal
Credit has been given and much will depend on the details including
the levels of payments, the design of additions such as those
for disability and caring, earnings disregards and interaction
with other elements of the welfare system including passported
benefits. Some complexity is inevitable given people's different
and changing circumstances and there will need to be a balance
between simplifying systems and reflecting individual needs.
4.2 A single taper should remove some of the
complex interactions between different benefits and tax credits.
The paper proposes a withdrawal rate of 65% which will result
in a 76% withdrawal rate for basic rate taxpayers. People will
no longer face a rate which exceeds 90% but will still gain relatively
little from starting to work. And some will face higher withdrawal
rates. Currently around 1.2 million people in work face a withdrawal
rate of less than 60% but this will fall to 900,000. It will be
important to test out the acceptability of the system including
the withdrawal rate.
4.3 Although we support the aim of a single system
it brings risks. If there is an error or delay with one element
of the claim this could leave someone without any support whereas
if people receive help from a variety of sources a problem with
one benefit will not affect other claims. Systems need to be developed
in a way that ensures different elements can be paid independently
where necessary and there is provision for interim payments.
5. COUNCIL TAX
BENEFIT
5.1 Council tax is a fixed and compulsory charge.
We appreciate that the Government wants to move towards greater
localism but we do not believe it is appropriate to apply this
approach to Council Tax Benefit (CTB). Once taxes are set older
people and others on a low income need to have the peace of mind
of knowing they will be entitled to a certain level of benefit
or rebate.
5.2 Localising benefit would inevitably lead
to different outcomes and to introduce this alongside a 10% reduction
in expenditure could lead to hardship as well as an uneven system
of support. We note that the Government "will aim to protect
the most vulnerable, particularly pensioners" but it is difficult
to see how this could be guaranteed in a locally run system. We
also recognise that there are younger people in a range of different
circumstances who rely heavily on CTB to meet their local taxes.
In the interest of age equality and social cohesion we believe
the benefit or rebate system should work in the same way for all
groups.
5.3 The Government has said that the marginal
deduction rates in the White Paper assume that help with council
tax is included in the Universal Credit and that the DWP would
work with local government and the devolved administrations on
the development of a system where local authorities have more
say on the administration. It is unclear how this would work in
practice and it could add greater complexity and uncertainty for
individuals when the aim is to simplify the systems.
6. UPPER AGE
6.1 Given the radical changes there could be
an increased difference between income-related support for people
above and below state pension age. The system needs to be developed
in a way that ensures a smooth transition at state pension age
with information seamlessly transferred to the Pension, Disability
and Carers Service (PDCS) minimising requirements on individuals
to provide information already held within the DWP.
6.2 Decisions will need to be made about the
treatment of couples where one has reached women's state pension
age and the other is younger. In general levels of means-tested
benefits tend to be somewhat more generous for people over women's
state pension age although the Universal Credit marginal deduction
rates could be less steep. Reforms need to ensure that the system
is clear for couples of different ages and overall we would not
expect any reforms to disadvantage people who have reached women's
pension age or whose partner has done so.
6.3 In some situations people will loose their
partner through death or relationship breakdown or form a new
partnership and may move from being treated under the system of
Universal Credit to pensioner benefits or vice versa. This is
another reason why it needs to be easy to move from one system
to the other.
7. HOUSING COSTS
FOR OLDER
PEOPLE
7.1 The paper suggests that support for rent
could be integrated into the help available for other housing
costs within Pension Credit. We would support this approach assuming
the level of support with rent was not reduced. Claims for CTB
could also be integrated if this is retained as a national entitlement.
This would extend the current system which allows Pension Credit,
HB and CTB to be claimed in one telephone call to the PDCS but
directs claims for HB and/or CTB to the local authority if someone
is not entitled to Pension Credit. Greater integration of benefits
for older people could make the process of claiming simpler and
improve take up. PDCS would need sufficient resources in order
to be able to meet the additional demand.
7.2 Currently older people can face marginal
withdrawal rates of over 90% due to the interaction between Pension
Credit, HB, and CTB. In the interest of fairness and consistency
we would expect that the maximum taper rates for older people
to be reviewed. High marginal deduction rates mean that those
with modest incomes in retirement can feel they are not rewarded
for having worked and saved. Debates around pension saving have
frequently focused on concerns about disincentives to save particularly
for those likely to HB and CTB in retirement.
8. EARNINGS
8.1 Pensioners will no longer be able to access
working tax credits. The paper says that Pension Credit is not
designed to provide in-work support and the Government is considering
"an option of allowing those pensioners who choose to extend
their working lives to claim Universal Credit rather than Pension
Credit". We accept that Universal Credit may be more appropriate
for those with earnings although if there is a choice it will
need to be clear to individuals which system of support they apply
for. In our view older people with earnings should not face higher
marginal deduction rates than younger people so if older people
in employment remain under the Pension Credit system the treatment
of earnings should be looked at. The current system penalises
older people who wish to remain active and undertake a few hours
work as just £5 a week (for a single person) is disregarded.
An increase has been recommended in previous Work and Pensions
Committee reports.
9. CHILDREN
9.1 The White Paper proposes an income-related
element for pensioners with dependent children within Pension
Credit. We agree that this is likely to be the best approach although
it will involve increasing the complexity of income-related support
for older people. Older people with care of children should be
no worse off than under the current system and should get same
amount of help for children as younger people receive within Universal
Credit.
10. CARERS
10.1 We welcome the section on caring in the
White Paper which recognises the invaluable service that carers
provide and sets out concerns with the current system.
We are pleased that the paper states that there will
be no conditionality for carers and that it is not suggested that
Carer's Allowance is subsumed into the means-tested Universal
Credit. However the current inadequate benefit system for carers
remains and the paper simply says the Government is carefully
considering any changes to Carer's Allowance. Reforms to meet
the needs of younger and older carers are long overdue and the
system needs to ensure that all who provide substantial care receive
financial recognition and adequate support.
11. CONTRIBUTORY
BENEFITS
11.1 Restricting the contributory element of
Employment and Support Allowance to one year for those in the
work related activity group is likely to affect many claimants
aged 50 and over. A fair system should provide support to those
in financial need but also ensure that people feel adequately
rewarded for contributions made. People in their 50s and 60s with
disabilities or health problems who have worked and paid national
insurance for maybe 40 years or more are likely to feel let down
if benefit stops after a year because they have modest savings
or a partner in work and have not been able to return work. The
Government should reconsider this proposal.
12. DELIVERING
THE UNIVERSAL
CREDIT
12.1 The White Paper describes the process of
introducing Universal Credit and moving existing recipients to
the new system as "a significant project". The magnitude
of the task must not be underestimated. Government departments
will have to design and deliver the new system, while maintaining
the current complicated systems and introducing other major changes
to benefits at a time when resources and staff numbers are being
cut.
12.2 We support the aim of taking earnings from
employment into account automatically but are not in a position
to judge whether the proposed HMRC real-time information system
can achieve this aim in the timescale set out. We note that in
the past there have been major problems with introducing new Government
programmes such as tax credits and Child Support. All administrative
systems and procedures should be tested and developed with input
from front line staff, outside organisations and individuals.
The Government needs to be prepared to delay introduction if necessary.
12.3 On line claims and accounts will suit those
who use technology on a regular basis and are happy to make claims
on line. It will not be suitable for all. Twenty-two per cent
of people aged 55-64 and 31% of people with income of less than
£10,400 have never used the internet[74]
and those who do use the internet may still not want to provide
personal information on line. While the proportions able to use
on line facilities is likely to increase over time there will
always be a need for telephone and face to face service where
the use of the internet is not suitable and for all claimants
in situations where they need more individual support for example
to discuss a complicated situation or to get a more detailed personalised
explanation.
13. SOCIAL FUND
13.1 The paper proposes that local authorities
become responsible for the administration of crisis loans and
community care grants. Age UK believes the Government should be
cautious about localising financial benefits and take forward
reforms only when there is clear evidence that a local system
would provide better support. Although the current payments are
discretionary they are awarded on the basis of national guidance
and subject to an independent review procedure. It is essential
that under any reformed system crisis payments are available quickly
for people with emergency needs, the availability and procedures
for applying for help are clear and well publicised, and any money
transferred to local authorities for cash payments is not subsumed
into other local budgets.
14. PENSIONS
SAVINGS
14.1 We support the proposal to disregard 50%
of any contributions to a private pension as under the current
Income Support system. The paper states this will result in take
home pay being reduced by just 34 pence for every £1 saved
in a pension by an employee receiving Universal Credit and paying
tax at the basic rate. With automatic enrolment and the National
Employment Savings Trust starting to be rolled out in 2012 it
is important that a clear message is given about the pension reforms
and the value of tax relief in order to encourage people to remain
opted in to workplace pensions and to increase pension saving.
15. ROLE OF
THE VOLUNTARY
SECTOR
15.1 The paper notes that many people look to
the voluntary sector for advice and support and for chasing up
claims or helping when errors have been made. The Government envisages
that there will be improved service delivery under Universal Credit
so this role will be made easier. We very much hope this will
be the case but at least in the short term the demand on advice
agencies is likely to be greater as people want information about
the new system and help to deal with any teething troubles. There
may also be a greater demand for help from those who do not have
internet access if there is pressure to use this as the main form
of contact. In developing the Universal Credit the Government
should recognise the pressure that new systems put on advice agencies
and ensure that they have adequate resources to support clients
and ensure the smooth introduction of Universal Credit.
December 2010
73 Welfare Reform and the Over 50s Age Concern
England, 2009. Back
74
Statistical Bulletin: Internet Access 2010 Office for National
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