White Paper on Universal Credit

Written evidence submitted by Surrey Welfare Rights Unit

1. Surrey Welfare Rights Unit is a specialist welfare advice service that provides services to the advice sector across Surrey and the surrounding areas. The Unit is a member of Citizens Advice. The advice team hold significant expertise in social security law and practice. The Unit responded to the Green Paper 21st Century Welfare and this response can be accessed on the website www.swru.org .

2. We are submitting evidence to the Committee on the White Paper "Universal Credit: welfare that works", as this welfare reform is wide-reaching and will affect the most vulnerable citizens. Our main concern, which we will comment on in more detail, is that the balance between conditionality and support has not been reached in these proposals, and that the fundamental principles of welfare rights through social insurance and the expectation of a safety net through means-testing have in large areas been removed. At this early stage we would also like to state that there are still significant areas in the outline of the Universal Credit where any detail is entirely missing, a point made earlier in responses to the Green Paper [1] . This lack of detail needs to be addressed now in order for there to be a full and transparent consultation on the proposals before any implementation begins.

3. The White Paper in several places makes reference to the fact that the principle of simplifying the benefits system was supported by the majority of respondents to 21st Century Welfare. It is unlikely that anyone who has worked with benefit claimants, claimed benefits themselves or studied the complexities of the system would not support the principle of simplification. Without sufficient financial levels of benefit, however, simplification will not create a healthy and aspirational workforce. There are proposals in this White Paper that purport to incentivise part-time work and entry to employment for those currently precluded or who can see no gain in small amounts of work. This focus on part-time work at the expense of addressing current in-work poverty, especially among families, and the need for full-time work in order to float off means-tested benefits could result in the Universal Credit not achieving less "welfare dependency" at all.

4. There are many instances where the White Paper refers to, and uses, examples of 10 hours work. In practice, it is difficult to see how a significant number of non-working households will be incentivised via Universal Credit to move into only a few hours of work each week. Currently, workless households mainly consist of households where there is disability, caring responsibilities or a lone parent with a young child. Workless households that have mandatory jobseeking conditions presumably will still have to actively seek full-time work in order to continue to receive Universal Credit. Households where someone is incapable of work or has limited capacity for work now have more generous permitted work earnings disregards that allow those claimants in most cases to undertake work up to £95 per week without means-tested benefits being affected. Carer’s Allowance claimants can earn up to £100 per week without benefit being affected. It is unclear in the White Paper what the Government’s intentions are regarding carers benefits. Next year, lone parents with a child over 5 will be expected to look for work, albeit within school hours, but this is still likely to be required to exceed 10 hours in order to receive benefit.

5. It is clear from Chapter 2 paragraph 10 that low levels of work are only expected to be for the short-term. It is of concern therefore that the Universal Credit heavily focuses on improving the financial incentives for what could be only a small number of new workers and possibly for only a short period of time before they would be expected to significantly increase hours of work. Table 1 shows that the Governments predicts a certain number to be lifted out of the highest bands of marginal tax rates but overall there is no decrease in the number of low paid workers with marginal deduction rates above 60%. The Universal Credit was an opportunity to remove workers from such high withdrawal rates, higher than any UK personal income tax rate.

6. We are concerned about the lack of detail in the White Paper. In many significant areas the Government has either not made decisions or has not provided enough detail for a full analysis to be completed. For carers and disabled people, the continuing uncertainty regarding future financial support needs to be acknowledged and addressed. In addition, the White Paper does not offer guidance on the future support for families with a disabled child, young disabled adults with no contribution record, housing costs detail or how supporting people payments will be dealt with if Housing Benefit is centralised. We also believe that the White Paper should make it clearer which households will not be better off, and by what margins. The figures used for Eligible Rent and Council Tax in Figure 4 are not realistic for all areas, and for the couple with two children in Figure 5, probably unattainable. More appropriate calculations should have been included.

7. With the introduction of Work Related Activity as part of Employment and Support Allowance, the tougher "limited capacity for work" test, removal of Income Support for many lone parents and the current stringent Jobseekers Allowance regime we do not believe there is evidence, as stated in Chapter 3, for increasing sanctions. [2] Instead, the Government should concentrate on improving local support through Jobcentre Plus offices and achieving sustained employment with a living wage for those who are able to work. The introduction of sanctions that stretch beyond the period of non-compliance into the period after re-compliance will lead to debts, arrears in essential payments and unnecessary strains on families already coping with unemployment.

Chapter 3 paragraph 16 proposes the conversion of current payments into loans. Claimants facing a JSA sanction already have to demonstrate that they are vulnerable in order to receive Hardship Payments. Converting these to loans is unlikely to incentivise these high risk groups, but instead will lead to greater vulnerability and deprivation.

8. Chapter 5 focuses on the current benefit system’s vulnerability to fraud. There is no evidence that the system is "highly susceptible" to fraud and error when considering the scope and size of the service. There is also no evidence that the system, when compared to other Government services, encourages fraud. There is a significant amount of data showing that the financial level of benefit fraud is a very small percentage of the overall spend and that the loss of taxation income to the Exchequer is far greater. Furthermore, the proposal in paragraph 19 that official error payments should be recoverable negates decades of a fair system and penalises claimants who receive incorrect payments through no fault of their own. With reductions in backdating of claims and restrictions on revisions and supersessions when the result is favourable to the client, this change places poorer, vulnerable claimants in the same position as other claimants who have failed to disclose and contributed to their overpayment situation.

9. In summary we would like to make the following points to the Committee:

a. Universal Credit does not appear to improve the financial situation for families who are already working. This is a real concern in relation to the Child Poverty target [3] . The announcements in the Comprehensive Spending Review 2010 on cuts to benefits in the next few years will mean that those cuts will be carried forward into Universal Credit. These include cuts to childcare support through Working Tax Credit, increases in the withdrawal taper, removal of certain payments in Child Tax Credit and the Housing Benefit cuts.

b. The impact on families particularly in the South East where housing and childcare costs are relatively higher have previously been drawn to the Committee’s attention during their scrutiny of the Government’s child poverty strategy in 2007/08 [4] . Further cuts to these two essential payments will directly affect families.

c. The White Paper does not discuss in detail what proposals it makes for the retrenchment of non-means tested benefits, and what relationship the state will have with national insurance payers in the future. The greater take-up of non-means tested benefits and the lower cost in administering these payments means that they reach their intended recipient group. This includes carers and disabled people. The Government has already time-limited contribution-based Jobseekers Allowance and has introduced work-related activity to Employment and Support Allowance with the purpose that unless someone is severely ill or disabled they will return or take-up employment. We do not see, therefore, what evidence there is for time-limiting contribution-based ESA to 12 months. With an imminent rise in national insurance rates there needs to be a full debate on the future of contributory benefits.

d. Furthermore we would not welcome the inclusion of Carer’s Allowance into Universal Credit unless it was excluded from the means-test and any conditionality to seek work.