- features weakened and now very complex earnings disregard proposals;

- advances some harsh measures in relation to sanctions;

- and reflects some intervening and problematic policy developments (notably concerning Council Tax Benefit (CTB) and the Social Fund).

2.5 The proposed structure of the UC makes sense, but the devil will be in the detail. The adequacy of benefit rates and of earnings disregards and interactions with other parts of the system - notably contributory benefits - will all require close scrutiny.

2.6 The treatment of housing costs is worrying. Harsh cuts to Housing Benefit (HB) have already been announced and the White Paper goes further, abolishing HB and replacing it with a housing costs component in the UC (and Pension Credit) which is likely decreasingly to reflect real rental levels. Eligible rents in the private rented sector, already severely cut, will be represented by a standard amount in the UC which (if current proposals for uprating HB "local housing allowances" [2] using the Consumer Price Index are carried over to UC) will not even follow movement in housing costs. This will have negative implications for after-housing-costs poverty.

2.7 Meanwhile, there remains no adequate provision for mortgage costs within the benefit system and although this is to be reviewed in the context of the UC, there is no sign as yet of an intention to rectify this omission.

2.8 The following outstanding issues are also important:

- provision for carers;

- the need for more emphasis on high-quality employment support and less on sanctions;

- delivery of the new system and the readiness (or otherwise) of the necessary information and communications technology (ICT);

- safeguarding appeal rights;

- and passported benefits.

2.9 In conclusion, we hope that the Government will build on the positive features of the UC while revisiting aspects that are emerging as problematic and will not seek to find further savings at the expense of the wellbeing of disabled people and others vulnerable to low incomes.

3. The structure of the Universal Credit

3.1 The UC follows the structure of the benefits it replaces by using needs allowances ("applicable amounts", in the current jargon) to represent basic needs for various types of household, from which other resources are deducted and above which benefit tapers out. The sufficiency of these allowances for their stated purpose has not been the subject of any official cost-of-living exercise and this will remain the case. Although annual uprating has for some years related to various inflation indices, the base levels are essentially the result of political judgements and historical drift. Their adequacy remains questionable and many claimants struggle. We believe that research to develop minimum income standards as targets for benefit rates is long overdue.

3.2 The needs allowances in the current system entail both basic living allowances and premiums reflecting particular circumstances - for example, disability, parenthood, caring responsibilities. It is important that the detail of the new structure takes into account the full range of relevant circumstances, retaining features such as the disabled child and severe disability premiums. Something like the support and work-related activity components of Employment and Support Allowance (ESA) will also be retained. These "building blocks" of the new system should be the subject of detailed consultation, as should the associated eligibility criteria.

3.3 21st. Century welfare rightly identified low earnings disregards as a key problem in terms of work incentives. Significantly more generous disregards were envisaged. However, the White Paper introduces a clawback of 150% of help with housing costs, pushing earnings disregards back down towards a floor much closer to current levels for those receiving such help. The logic of this is unexplained in the White Paper, but we understand that it is an obscure mathematical device to shift available resources to those nearest the bottom of the UC eligibility range. Not only does this clawback militate against the original objective regarding work incentives, but it restores a degree of complexity that will baffle the public, contrary to the original simplifying intentions. We believe that this device should be dropped in favour of a more comprehensible model, and earnings disregards both significantly raised and index-linked to protect their value.

3.4 We also have specific concerns around earnings disregards in respect of:

- "permitted earnings" rules for disabled people, where the proposed UC "floor" rate is over £50.00 per week lower than the upper "permitted earnings" rate;

- single childless people, where no earnings disregard is intended.

3.5 21st. Century welfare was also strong on the disincentive effect of very high marginal deduction rates (of over 90% in some cases) where means-tested benefit and tax credit tapers interact with each other and with income tax and national insurance contributions. The White Paper proposes a single taper of 65%, producing a top deduction rate of about 76% for standard rate taxpayers. This is still very high, but much better than 90%+ and also more transparent (although this is about a 6% increase for people receiving tax credits but not HB or CTB - helping to make the case for a lower UC taper).

3.6 However, the proposed "localisation" of CTB creates a puzzle here. It is not clear how far local authorities will have discretion to design their own schemes, but if they were tapered, they would presumably ride on top of the UC, pushing marginal deduction rates back up to confiscatory levels. The White Paper is evasive here, but we understand that the DWP wishes to avoid this consequence and that an element to represent council tax is likely to be included in the UC. It would thereby be subject to the UC taper. We do not know:

- where such an amount would sit (possibly in the housing costs component?);

- how it would be determined;

- how adequate it would be;

- or how this arrangement relates to the suggestion that local authorities would run their own schemes.

These are important questions awaiting answers.

3.7 The treatment of housing costs is a cause for concern. HB has taken a severe beating in the cuts packages announced in the June Budget and October CSR. We have previously submitted evidence to the Committee on this matter [1] . The White Paper effectively abolishes HB, in favour of a housing costs component within the UC. In the case of private sector tenants, this component would (if current proposals for uprating HB "local housing allowances" by means of the Consumer Price Index are carried over to UC) be indexed in future without reference to housing cost inflation and thus almost certainly decline in value against rents over time. (Some sort of link with "actual rents" is promised for the social rented sector, although details are not given). Standard amounts for rent are problematic enough, as shortfalls can and do push many claimants and their families deep into poverty. But the breaking of any kind of link with movement in rents would be a major setback and a proposal which we believe should be withdrawn in relation to HB and not carried forward into UC.

3.8 Meanwhile, the currently very weak housing costs provision for owner-occupiers is to be reconsidered in the context of the UC. We believe that the opportunity should be taken to put mortgage costs on the same footing as rents within the benefit system - permitting in-work claims and removing the waiting period - thus recognising the reality of modern tenure patterns.

4. Relationship with non-means-tested benefits

4.1 The contributory benefits system below pension age has been severely damaged by the decision to time-limit (to a year) contributory ESA for the Work-related Activity Group, as well as the practice of shifting large numbers of disabled people onto means-tested Jobseeker's Allowance (JSA). Contributory JSA is already time-limited (to 6 months).

4.2 The White Paper continues this process to some extent, proposing to align contributory ESA earnings rules with the UC, which will undermine the ESA "permitted work" arrangements (unless they are exempted - which we would strongly urge). Some people have also read this to imply that a partner's earnings would be taken into account - which we understand is not the intention, although we would welcome explicit assurance on this. We hope that further absorption of contributory into means-tested forms of provision will not occur.

4.3 Child Benefit, contrary to one rumour, is not to be absorbed into the UC. This is very welcome, as Child Benefit is an important non-means-tested recognition of the extra costs created by parenthood and the stake that we all have in the next generation. It remains regrettable, however, that Child Benefit is frozen for the next three years.

4.4 Similarly, Disability Living Allowance (DLA) - an important non-means-tested recognition of the extra costs of disability - will remain intact. A cost-cutting review of DLA [1] is under way, however, and we shall fully engage with this, as we are aware of no evidence that significant numbers of disabled people are receiving DLA inappropriately.

5. Other outstanding issues

5.1 The discussion of Carer's Allowance is enigmatic. It seems to imply that its inadequate level suggests pointlessness, rather than the need for improvement. Carers with a working partner or other income could lose from this. We will watch the proposed review closely.

5.2 The White Paper proposes (in England) to transfer aspects of the Social Fund to local government, which will administer "much of" a reformed system of crisis loans and community care grants. It is not clear exactly what this means, but the DWP and its predecessors have made discreet overtures to local government in the past regarding a transfer of problematic aspects of the Social Fund and have been rebuffed. The current climate of major change has doubtless been seen as an opportunity at last to pass this unwanted parcel. Local authorities would thus inherit a difficult rationing task, with limited resources both for payments to applicants and for administration. Moreover, if there were no ring-fencing, this service would be exposed to the effects of local government spending cuts. We believe that the Social Fund should stay where it is.

5.3 The delivery of the new system is highly dependent on technological solutions that to a great extent lie outside the DWP. Comments to newspapers from within HM Revenue and Customs suggest a less than robust inter-departmental understanding regarding the timescale and capabilities of the new HMRC systems.

5.4 Claimants can - with justification - feel apprehensive that technological innovation can go wrong and disrupt their payments. Every effort must be made to safeguard against this. In this context, it is worrying that the DWP tends to "talk down" the scale of the necessary ICT systems development. Underestimation of the challenge would be to invite administrative mishap. We would suggest that there should be careful piloting of the new system in a small number of areas. This would require a longer timescale and robust fallback payment arrangements for claimants in those areas if problems occur.

5.5 Technologically sophisticated delivery also raises important issues concerning decision-making and appeal rights. Substantive decisions relating to a claim should not be allowed to decline into administrative actions that the claimant has no effective way of challenging. This has been a problem with Tax Credits.

5.6 Most people who are able to work wish to do so. We would like to see more emphasis on high-quality employment support - such as an extension of the Access to Work scheme - and less of an artificially high profile given to sanctions.

5.7 Passported benefits are important to disabled people, especially as they include several health-related areas such as free prescriptions and help with dental and optical charges - the last of these obviously being a particular concern of RNIB. Current rules are complex, which impacts on take-up. It is not clear to us that the proposed system based on income thresholds will necessarily be simpler, but the opportunity is there and we would urge thorough consultation on the details.

5.8 The White Paper promises that nobody will sustain cash losses as a result of the introduction of the UC. Such transitional protection is welcome as far as it goes, but does not cover losses arising from the many other changes, so its significance should not be overestimated.

6. Conclusions

6.1 The UC proposals have a number of positive aspects, but these have already been watered down in translation from the original 21st. Century Welfare consultation document, notably in relation to earnings disregards. In a harsh financial climate and in the context of large-scale cuts to the benefit system overall, there is a danger that this weakening of good intentions will continue.

6.2 There are also significant causes for concern in the current proposals, notably the implications for poverty after housing costs; the interaction with Council Tax Benefit; the future of contributory benefits; the transfer of problematic parts of the Social Fund to local authorities; and a heavy reliance on all being well with ambitious ICT requirements.

6.3 RNIB will monitor developments with interest, recognising that blind and partially sighted people have much to gain and much to lose, depending on how events unfold.

December 2010