Work and Pensions Committee - Minutes of Evidence576

House of COMMONS



Work and Pensions Select Committee

Universal Credit

Monday 10 September 2012

ALISON Garnham, Gillian Guy and Dr Sam Royston

Evidence heard in Public Questions 114-200



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Oral Evidence

Taken before the Work and Pensions Select Committee

on Monday 10 September 2012

Members present:

Dame Anne Begg, in the Chair

Andrew Bingham

Glenda Jackson

Stephen Lloyd

Teresa Pearce


Examination of Witnesses

Witnesses: Alison Garnham, Chief Executive, Child Poverty Action Group, Gillian Guy, Chief Executive, Citizens Advice, and Dr Sam Royston, Poverty and Early Years Adviser, The Children’s Society, gave evidence.

Q114 Chair: Can I begin by welcoming you to this afternoon’s session? It is our second evidence session of our inquiry into the implementation of Universal Credit. I have to begin with-I don’t know if it is quite an apology-the fact that the Committee numbers are somewhat smaller than you might have expected, but it would appear that being on this Select Committee is a route to preferment, as four of the Members of the Government side have been promoted in the recent reshuffle. We thought it was only three, but we just discovered a fourth one, and unfortunately there has not been time to appoint anyone else. Apologies for that, but what you don’t have in quantity you certainly have in terms of the quality of those who are here to quiz you today. Can I begin perhaps with you, Alison; can you introduce yourself and your organisation, and we will go along the table?

Alison Garnham: Okay. I am Alison Garnham. I am Chief Executive of the Child Poverty Action Group.

Gillian Guy: I am Gillian Guy, Chief Executive of Citizens Advice.

Dr Royston: I am Sam Royston, Poverty and Early Years Policy Adviser for the Children’s Society.

Q115 Chair: Thanks very much. The first set of questions is something that has been in the media yesterday and today, which is around the payment arrangements for Universal Credit. A number of the media outlets, certainly the BBC, picked up on some of the evidence that your organisations submitted to the Committee. One of the big concerns that you have all expressed is the fact that there is an anticipation that most claims, and eventually all claims, will be made online for Universal Credit. I think all of your organisations have expressed a degree of disquiet about that. What are your fears, or what are the problems, moving into the digital age? After all, we are in the 21st century.

Alison Garnham: I suppose the biggest concern is that we know that 8.5 million people do not currently or have never used the internet, and so to base a system on the assumption that everyone is familiar with using that is a problem in itself. There are also other issues to do with implementation that we are concerned about, which are partly about the access to advice. Unlike with the introduction of tax credits, there is not an amount of funding set aside to support the advice sector to be prepared and ready to advise people. That is a real concern, because those families or claimants who want to access Universal Credit are going to need to get advice very often in order to understand the system. For most claimants, it will be completely new to them. We think everyone has heard of Universal Credit; they won’t have, so the whole thing will be a mystery, and they need to be able to go somewhere to get advice and support. That is one of the critical legs, if you like, which is missing from the preparation.

Q116 Chair: Are you asking that actual monies are set aside specifically for the advice and help to make those online claims?

Alison Garnham: Yes. There was a grant stream, for example, made available through HMRC to support training and information around tax credits. With something even bigger like this, which is about to affect up to 19 million individuals, it would make sense to have the sector prepared. Also the sector can help to anticipate problems and make sure the system works better, so it actually helps the system implement more easily.

Q117 Chair: How much would that cost? Do you have any figures?

Alison Garnham: I don’t have a figure, but what I will say is that the problem at the moment is that we are actually seeing a reduction in advice services, because cuts in Local Authority services and the removal of legal aid mean that two legs of funding for many voluntary sector advice agencies have disappeared, so we are seeing a reduced capacity in the sector. Many Local Authorities that have had welfare rights units have closed them down. We are launching a big ship on a falling tide of advice, at the moment.

Q118 Glenda Jackson: Can I just ask on that? The constituency experience was that the tax credits were a total unmitigated disaster, so have you been able to asses what was wrong with the advice that was proffered that was paid for? Was it the fault of the advice, the organisations they spoke to, or what?

Alison Garnham: That did not start right at the beginning. Actually, what happened was that people identified early what the problems were and those were rectified. It was organisations on the ground that noticed what was going wrong before government departments did, so I think it actually worked in the end, but you are right.

Q119 Glenda Jackson: The advice people were quicker to target.

Alison Garnham: Yes, because it is easier to have local intelligence than it is at government level. The same thing will happen with this: this is again very big and, without that preparation, there could be problems. The other thing was that there were obviously teething problems that were identified as soon as tax credits were implemented, which needed to be adjusted, and the same will happen with Universal Credit. It seems to be inevitable that that will happen. Both the design and the delivery need to take that into account.

Q120 Chair: Have you got any sense as to whether people will be allowed to turn up at Jobcentre Plus and expect a computer to be there or the help to be there, or are they going to be discouraged from doing that? Indeed, if they do turn up, will they be turned away, which comes to Citizens Advice, because where they will end up is with you. Is there not going to be any inhouse support in that respect and, if there is not, what needs to happen from your end?

Gillian Guy: The issue is that what we are highlighting here for Government is that, if you are going to bring in such major and ambitious plans for change around Universal Credit, then there needs to be a plan, and that plan needs to be what the safety net is for all of those people-millions and millions of people-who are going to need some help. We are already seeing at Citizens Advice, with the one change around Employment and Support Allowance, that in the first quarter of this year, compared to last year, we have seen 76% more enquiries with people coming to us concerned and very anxious about what their future income is going to be and how they are going to deal with the system. The plan, which needs to come from the legislators and the implementers, is how you are going to make sure that the safety net is there and the advice is available to people to take them through this.

Digital by default is just another complication on top of that because, as well as the 8.5 million there were, another 14 million don’t seem to have IT skills. 30% of the people who come to Citizens Advice don’t have access to equipment to use IT. We are concerned that, on top of the volume of advice, we won’t, as advisers, be able to have assisted advice for those people. Can we access on their behalf? Are we trusted intermediaries? What is the plan around enabling us to give the advice and also to make sure we have the capacity to give the advice?

Q121 Chair: Do you have no sense that any of those questions have been answered at the moment?

Gillian Guy: It is fair to say we are in conversation, because it would be remiss of us not to engage with the Department for Work and Pensions to say, "This is an issue; what are we going to do about it?" What we don’t have at the moment is a plan that says there will be provision and that, against a backdrop, as has been said by Alison, of diminishing resources, something is going to be put here as an investment to make sure that we have the advice there.

Q122 Stephen Lloyd: Do you believe-yes or no-that the DWP does appreciate that there is a real delivery concern? What is their attitude to what you are highlighting?

Gillian Guy: I think they would say that they get it. I would say to them that they cannot get it as well as we get it, because we have people coming through the door, accessing us, sometimes online but also over the telephone, and we understand the devastating impact some of this is going to have, including the monthly payments.

Q123 Stephen Lloyd: Have they given any sense of timelines for when they actually might come to you with a more detailed plan?

Gillian Guy: We are in discussion. I don’t know if my colleagues have any absolute dates, but we certainly are in discussion, and I think there are signs that there is some listening going on. No one wants a disaster.

Q124 Glenda Jackson: It is just on the issue that we have actually raised in Committee with officials, I think, and that is the issue about which you made the point, of whether there will be trusted advocates for the individual who cannot actually handle this. This throws up the much broader issue of security. When we raised the issue of security-because they were talking about people being able to access the internet in internet cafes and things of that nature-they reassured us that security is going to be a top priority. Is this something on which they are saying to you that they cannot allow you to be a trusted intermediary, or has that not arisen?

Gillian Guy: It has arisen, but I don’t think we have got a final answer on that yet. It clearly looks as if it is difficult, but we don’t think it is impossible. If there’s a will, there’s a way.

Q125 Chair: The other big issue that came up in the media over the weekend is the fact that Universal Credit will be paid monthly, into a bank account, to one person. First of all, a large number of people on benefits, even though there have been direct payments for some time now, don’t have bank accounts and certainly don’t have flexible bank accounts. What are you picking up from Government with regard to work that has been done to help alleviate the problem of lack of bank accounts?

Dr Royston: The crucial issue there, or a crucial issue there, is payments to joint claimants, and particularly to joint claimants who don’t have joint bank accounts. We have a situation, it looks like, where if you have a new partner and you move in with them, and you have a child but they are paying the rent, the money for Universal Credit can only be paid into one bank account. Many people may not be ready to share their money when they first move in together. In many respects, what I am really worried about is that this could actually put off people from forming sustainable couple relationships, because they are worried. Either a mother taking her children and moving in with her partner is worried that she is going to lose control of access to money for her children, or a partner, quite reasonably, may be worried about losing control of the money he is getting to cover the rent. It is that kind of dynamic. It does not feel like there has been enough consideration of particularly new couples moving in together, forming relationships in that manner.

Q126 Chair: How easy would it be to change that to allow couples to choose?

Dr Royston: It seemed from our earlier conversations that they have created the facility to enable that to happen, and it seems quite unclear, to me at least, why they are not willing to allow that to happen. That is something that needs a bit more looking into, because the facility is there. They need to create the facility for difficult cases, but there is a lack of clarity in how often they would be willing to use that.

Q127 Stephen Lloyd: I actually asked the Secretary of State, in the Chamber this afternoon, that very question, because obviously I would have particular concerns, for instance, that a lot of women would be likely to lose out. He is coming here next Monday-I will have more time to get more detail-but certainly he indicated to me, this afternoon in the Chamber, that he understood there was a problem, that there would be flexibility and, unless my colleague Chair Anne Begg disagrees, he appeared to be clear that there would be enough flexibility there, so I am not entirely sure whether that has been clarified to outside bodies, or whether he has been overoptimistic. That is certainly something that we would want to drill down on with him, when he presents evidence on Monday.

Dr Royston: I very much hope that we will get a bit more detail on that. You mentioned women; obviously we are from the Children’s Society, and the first priority for us is children. The real concern here is about whether the money will get to the children. We know that, where benefit payments are paid to the main carer for children, that is the best way to ensure that that money gets to the children in the end. There is a concern here that, if the money is not of necessity paid to the main carer for the children, at least some of the money paid on behalf of the children may not end up contributing to their well-being.

Alison Garnham: I just wanted to add to that we know the facility is there, but we understand the preference would be to divide the payment up in percentage terms, rather than in the component parts of Universal Credit, whereas what has happened before is that people have proposed that payments for children, for example, should go to the main carer. It does not seem like they are minded to look at that. The other issue is free choice. What a lot of us are advocating is that couples should just be able to simply choose whether they have split payments or not, because that might replicate the pattern in their family. It is normal in many families for there to be two people earning and so two streams of income coming in, and so it would be more natural for money to be paid in that way. Also then, if somebody got a job, it would be easy to see the impact of that work on your Universal Credit income as well. There are all sorts of reasons to do with the design of Universal Credit why we think that would be more successful.

Q128 Chair: I can see it would be easy enough, and it is just a different box or a different field in the computer programme to split it 50/50 or 40/60. Would not the whole nature of Universal Credit make it impossible to divide it into the different elements, simply because the individual elements don’t really exist any more? Then there is the topup or removal, depending on the way the tapers work, so the global sum is not as easily identifiable as individual components. Isn’t the Government actually right to resist that, because that would be difficult?

Gillian Guy: I think it depends on whether it is more inconvenient for the claimants or for the DWP. I am sure it is quite difficult to separate it out, but the fact of the matter is that, if it is put into one person’s bank account, as we have heard, there are problems envisaged with doing that without giving people the choice and understanding that it is going to reach the right people, and potentially the children, who it is actually aimed at. It feels to me as if it might be in the difficult box, but it is certainly possible.

Q129 Chair: The Government is saying that there will be separate arrangements for those who are vulnerable. I have not been able to work out-maybe you could help me-how they are going to identify who are vulnerable and who are not, and therefore should be left to their own devices. Have they come up with any criteria defining who will be vulnerable, and then secondly how they are going to find them or identify them?

Gillian Guy: We have not seen a definition of "vulnerable". We would like to see it the other way around, which is that people generally are vulnerable. Therefore, they should not be the exceptions who have the rules written for them; it should actually be that the rules are written to cater for people’s very variable difficulties. We have seen a tempering of ambition around the monthly payments, and I am sure there will be more in this Committee’s questioning. It is really a matter of budgeting as well, and people having the wherewithal to be able to budget. There is another issue here, not just the single payments.

Q130 Chair: If you could just go on, my next question was about what problems the monthly payments are going to throw up. Would it be possible, and how easy would it be, to give people choice about how often they receive their payments?

Gillian Guy: We are hopeful there will be more choice about that as the implementation plans become clear. Just to switch over we would certainly say is unrealistic, but quite dangerous as well. We could see people, as we do-many millions of them-getting into severe debt difficulties and not paying the priority bills because they cannot budget appropriately. It does not reflect lowpaid work, because that tends to be weekly or fortnightly payment anyway. What we are also worried about is turning to payday loans and doorstep lenders to bridge the gap, which again is not a healthy situation.

Dr Royston: One thing to welcome about the payment arrangements is that it will be paid as one sum. In some respects, that is an improvement on the current situation, where you have various different types of benefits potentially going into a bank account all through the month, dotted around through the month, and people find it much harder to keep track of them. However, what we would like to see is the option of having that one lump sum but having it more regularly. Then you have the best of both worlds and people are really able to manage their money.

Q131 Glenda Jackson: Have they taken into consideration those millions of people who don’t have bank accounts, will never have bank accounts, and have no access to a bank in many instances?

Gillian Guy: To some extent, they may be the exceptions, which is why I think we are saying here that we should not just look at exceptions as strange and odd cases. Sometimes they are the mainstream cases that need to be catered for.

Q132 Glenda Jackson: They certainly are in my constituency.

Gillian Guy: Exactly, and I can see that going further, because we do see that banks are more reluctant to give basic bank accounts to people.

Glenda Jackson: Indeed they are.

Q133 Chair: Do you know if there are discussions going on with banks about offering the kind of account that they call "jam jar accounts", or is it expected that credit unions will pick up that role?

Gillian Guy: I think there have been some informal discussions. I am not sure how enthusiastic the banks are about them, and we don’t know how much they would cost to administer.

Alison Garnham: There are some other issues to do with the budgeting issue as well. We just conducted a piece of research with the Joseph Rowntree Foundation, called "The Cost of a Child", which shows that to meet a minimum budget for bringing up a child, benefits at the moment only contribute about 60% of the cost. If you are on the national minimum wage, you only get about 80% of the income towards the minimum acceptable budget for a child. Some of these issues to do with budgeting are not just to do with payment methods; they are to do with the adequacy of benefit as well.

One of our concerns about the monthly payment is also the way it interacts with monthly assessment. Particularly in the early stages, for people who are currently paid weekly or fortnightly, there could be quite a long time lag before they get a first payment. This could actually happen on a number of occasions and is affected by the way the assessment system works so that, if you have a change of circumstances towards the end of a month, it is taken into account for the whole month. In some circumstances, people could wait up to six weeks for a change of payment. If they leave a job, for example, and the amount of Universal Credit is very low, it will take a while; there will be a lag before that is taken into account. There are things to do with the design of Universal Credit that are also a bit of a problem in terms of people being able to budget.

Q134 Chair: What is the solution? Should there be some kind of benefits runon?

Alison Garnham: A benefits runon and also very easy access. We are not quite sure how this will work, because we have only just seen the Regulations and lots of things have been left to guidance. That is another general point to be made about Universal Credit: it seems simpler to have fewer Regulations and more things in guidance but, in practice, we have not seen that guidance and have not been consulted on it yet. We don’t know all of the detail. Part of the problem is that we don’t know exactly how these things will work.

Q135 Chair: On what you just said also about the adequacy of the benefit levels, I am just wondering if your organisations have done any work on the changes that are already taking place or are being implemented now. I am thinking particularly of Housing Benefit, where it may be that a family’s housing budget no longer covers the full rent. That must be a particular issue in London, but not just in London. That means that the rest that they get in Universal Credit will be used to supplement the rent, leaving less for other things. Have you been able to quantify the numbers involved who would be in that position, and the amount involved?

Alison Garnham: Not as precisely as that. We know that about 2 million people will be worse off under Universal Credit, so they will see reductions in income. Some of that is to do with the design, so that for people in work the rewards are not as great as for some people on tax credits. It depends which group you are talking about but, for some people, the incentives to progress and advance in work will actually be worse than they are under current tax credits.

Q136 Chair: We have got questions on incentives to work, but I was just thinking more about the housing benefit and the adequacy of the benefit levels.

Dr Royston: In terms of the Housing Benefit changes, there are three key changes and they are all going to be followed through under Universal Credit. We have got a cap on Housing Benefit entitlements, which is affecting a relatively small number of households, but to quite a substantial extent. We have a cap on overall benefit entitlement coming in next April, which will initially be taken out of housing benefit and then, under Universal Credit, will come out of the whole Universal Credit lump sum. Thirdly, we have got the changes to the uprating of housing benefit amounts, so an effect that changes how maximum housing allowance is calculated, so a change from the median level of local rents to the 30th percentile of local rents. That is going to affect a much larger number of people, but to a much smaller extent. I seem to remember the average loss from that was £8 or £9 a week, but what is happening there is exactly what you are saying: people will have to be taking a small amount out of the rest of their benefit entitlement, which is not meant to be covering their housing costs, but you are finding you have to pay £8 or £9 a week out of your other benefits.

There was another question there, which was about the first payment. It is right that you raise the issue of the first payment of Universal Credit, because there is a very important issue that I do not think has been considered enough, which is about automatic backdating. It looks, from the Regulations, that the Government intends to take away automatic backdating of Universal Credit claims, as you would currently get with tax credits. To put this in context, the tax credit backdating, so the period that your award could be backdated from the point when you make a claim to the point when you became entitled, was reduced from three months to one month recently. I have actually got a friend who just had his first twins, and he said what a nightmare it was to claim within a month for tax credits. Under Universal Credit, there is going to be no automatic backdating, so it appears, from what I can tell, that the intention is that you should have to make your claim on the day that you first have a child. It seems unlikely to me that many people are going to be making their claim for Universal Credit on the same day that they have a child. I would be very keen to hear a bit more detail about the Government’s intentions for backdating.

Q137 Chair: Or indeed on the day you lose your job. There is that potential as well.

Dr Royston: Yes. I say, "Have first child", because I suspect that the majority of people making a claim for Universal Credit will be people who come into entitlement as a result of having a child.

Chair: We do have more questions on the impact with other welfare changes coming up, so we will move on.

Gillian Guy: Can I just mention one on housing, because I would not want us to pass on without noting the payment to the claimant rather than the landlord? It is another issue that really concerns us.

Chair: I think we have that coming up.

Q138 Stephen Lloyd: As we all know, one of the key objectives around Universal Credit was to make work pay. It is obviously the theory that has been underpinning it from the beginning, so I have a series of questions around that side and I would value hearing what you have to say. First on the conditionality, does the proposed conditionality and sanctions regime under Universal Credit provide a framework that is likely to be effective in encouraging claimants to return to work, in your opinion, if we start with you, Alison, and move across?

Alison Garnham: One of our concerns about the conditionality and sanctions regime is that we worry that it might actually deter takeup of benefit. The research that has been done on this by the Joseph Rowntree Foundation suggested that, although more people enter work when they are under a conditionality regime, they don’t always progress in work. Many of them don’t understand, if they are sanctioned, why they have been sanctioned, so there is a question-mark about how effective sanctions regimes can be.

We have an additional concern about the fact that some of the hardship payments will not necessarily be automatic and some of them will be loans to be paid back. Particularly for the vulnerable claimants, we are really concerned where they don’t understand why they have been sanctioned and it has been imposed. There is a desperate need for them to have access to good advice in order to be able to comply. To cut a long story short, we think that this kind of regime works best alongside very high quality employment support and advice, because somebody needs to explain why the sanction has taken place and what steps they need to take in order to remove the sanction. The research seems to suggest that a lot of people have got kind of stranded and could not work out how to get back into benefits. We have some concerns about how it is going to work.

Q139 Stephen Lloyd: Broadly, Gillian and Sam, because we do want to get through a lot of important questions, would you agree with what Alison is saying, or are there any particular issues you would want to add?

Gillian Guy: We would agree, and just say that, where people do get into employment, that is very rarely sustainable in our experience, so it is not a longterm effect. The other point is that there ought to be some obligation on the Department themselves to make sure that people have the ability to comply. We have examples of cases where there was never a hope that someone could comply with the conditionality, but it was not picked up early enough and they were penalised subsequently.

Q140 Stephen Lloyd: Is that something that the DWP has taken on board?

Gillian Guy: My impression is that the DWP is in listening mode at the moment because, as I said at the top of this, they do not want to walk into a disaster. I hope that they are taking our comments as constructive to try to make the impact of this as little as possible, in detrimental terms, for people.

Q141 Stephen Lloyd: What about, for the first time, Universal Credit is also introducing conditionality for people in work? What are your thoughts around that, Sam?

Dr Royston: One problem with that so far is that we have not had very much detail on that at all. They have said that the claimants who are in work will not be subject to the core conditionality regime, but they do appear to want to extend some level of conditionality, but they have not really said what. I think basically we need to hear more about that. I am very reluctant to think that there should be any conditionality for people who are working more than 16 hours a week. There are real risks of conditionality being applied to those groups in a way that actually leads to them to make bad decisions with regard to their employment, for example giving up a job where they have reasonable employment protections, they are already established there and they have got maternity rights, for another job perhaps with a couple more hours and slightly higher pay. Basically, we need to see more detail about that.

Q142 Chair: The thing that has already changed in Working Tax Credits is if there is a couple and only one is working 16 hours, but in order to qualify they need to work 30 hours. Do you have any evidence that people have actually given up work, because they have lost the tax credits, so working the 16 hours means they would be better off on benefit?

Alison Garnham: That is one of the big problems with the inwork conditionality, because that is a really good example. If ever there was an enormous incentive to increase your hours that is it. Couples on tax credits, in April, stood to lose up to £3,700 a year if they did not increase their hours from 16 to 24, but they could not find the additional hours.

Q143 Chair: I suppose the Government’s argument is that that should act as the incentive for them to increase their hours, so why did they not increase their hours? Why did they end up out of work altogether?

Alison Garnham: Because the hours are not available in the labour market. We had very good evidence from the shop workers’ union USDAW, for example, which showed that the industry just simply could not give people more hours. People wanted more hours, but could not get them. The thing that underpins the whole of Universal Credit of course is the state of the labour market, and that will dictate how successful or otherwise it is able to be. The other thing on inwork conditionality is that, in the work that DWP did with its customers, it was one of the things that the customers felt was most unfair. They felt that, once they had got a job, they had delivered their side of the bargain and did not really understand why this would take place.

Q144 Chair: They thought they were trying, but they were being punished for it.

Alison Garnham: They had done what was required of them, yes. The indications that we have been given about what the test will be for when you are doing enough work is looking at earning something like 35 times the national minimum wage. For a lot of people, particularly selfemployed people who have very low turnover, and people who have care arrangements who are unable to increase their hours for whatever reasons, it will be very difficult for them to increase their hours to satisfy that requirement, whereas somebody on a very high earning could satisfy it quite quickly.

Q145 Stephen Lloyd: Looking at the earnings disregard, I appreciate it is a bit of a challenge for us, because none of us have the precise detail of what that is going to be. Nonetheless, there have been some recent announcements arguing that the recently proposed simplifications of the earnings disregard may actually introduce more complexity. Would you agree with that and, in your view, does the originally proposed approach offer a better solution?

Dr Royston: Yes, it looked like it did. The original proposal was that there would be two levels of earnings disregard-a lower level and a higher level-and the higher level would apply to people with no housing costs. The rate of earnings disregard would be reduced between the higher and lower level, depending on the level of housing cost that was claimed. The rate that was suggested was that the earnings disregard would be reduced by 1.5 times the rate of housing cost claimed. If £50 a week was claimed in housing costs, then £75 would be reduced from the maximum level of earnings disregard towards the minimum level. If it goes below the minimum level, it is stopped, so they refer to it as the disregard floor. That actually worked quite well in some respects. I know it is complicated, but it worked quite well.

The new proposal, what we see in the Regulations, is that the earnings disregard would be just two levels: high level and low level. If you get no housing costs, then you get the high level. If you have got housing costs, then you get the low level of disregard. You can understand their proposal for this was that this was a simplification. In some ways, you can see why they said that. However, the trouble is that people with low levels of housing cost could be left in a situation where they don’t know whether they would be better off claiming their housing costs and going for the lower level of disregard, or not claiming their housing cost and getting the higher level of disregard, because they are stuck somewhere in the middle. Actually, that could create a huge amount of complexity in the system for people with those low levels of housing cost. There is a real concern that they would go for that option, because of the additional complexity they would actually add to the whole system.

Q146 Stephen Lloyd: What was the Department’s rationale for moving away from their original proposition then?

Dr Royston: We have not really heard much more from them since then. I think we need to be having more discussions with them on that point, but I have not heard from them further on that point.

Gillian Guy: I think it may be another example of it being simpler. It is simpler from the administration point of view, but the impact is not necessary desired or simpler. It is the same for children and not having differences for numbers of children. Larger families are going to be seriously damaged by that.

Q147 Stephen Lloyd: That leads me on to the next question, which is about childcare costs. There are clearly a number of complexities around there. You have mentioned it, Gillian; could you flesh out what you believe the effect of the changes is likely to be on families with children and their ability to find work?

Gillian Guy: I have just mentioned the disregard point, which is about flattening out, no matter how large the family, how many children there are, which is going to be far worse for larger families, in terms of that disregard.

Q148 Stephen Lloyd: How would you define large families? Excuse me for interrupting. What sort of numbers are you looking at-four or five?

Gillian Guy: Even three or four. You start multiplying costs as soon as you have more than one really, so it becomes an issue. The other issue of course is the 70% of childcare costs. We have been asking for that to be reviewed because of the detriment that that would bring about, particularly for lone parents with high childcare costs and low earning ability, and also for those with children with disability. They are going to be seriously discriminated against.

Q149 Stephen Lloyd: I read that submission. It was very powerful. Has the Department actually responded specifically to you on that point about the children and also with disabled children, and the fact of how much the parents are going to lose out?

Gillian Guy: Not so as to amend anything, no.

Alison Garnham: We worked very hard and intensively with DWP to get the childcare element established in the first place. For a long time, it was very unclear what it was going to be and they had to find extra money to create a situation where it was not worse than the current situation, so it is 70% with the same maximum levels as there are in tax credits. The problem is that, currently, there is an additional support for childcare costs through housing benefit and council tax benefit, which means currently you can get up to 95% of your childcare costs covered, so it is actually a reduction to have it at 70%. That is one of the biggest problems because that obviously affects work incentives quite significantly, particularly for people in highcost areas like London, where paying 30% of your childcare costs is a lot.

Q150 Stephen Lloyd: I am going to repeat: has the DWP responded to your concerns on those points yet?

Alison Garnham: We have been in dialogue on this for a long time, but we came to a full stop, because they had found extra money and it was made clear it was going to be very difficult to find any more. This is one of the issues that we need to keep pressing on in the future in order to make Universal Credit work better.

Q151 Stephen Lloyd: If I can go at a slight tangential back to Gillian, I see from your submission the proposition that severely disabled adults with no care could lose up to £58 a week over, over £3,000 a year. Could you explain that?

Gillian Guy: That is right. That is because of the change in the Severe Disability Premium and the fact that adults living alone, if they do not have a carer, will not get the Carer Premium either, so they will have a reduction of £58 a week. We have asked the Department to consider giving the equivalent of a carer allowance to those severely disabled adults who actually live alone and look after themselves, because they have to get help to do that, by the very nature of their being severely disabled.

Q152 Stephen Lloyd: Let us move on to passported benefits. That is one of the other challenges with Universal Credit. It will introduce new "cliff edges" into Universal Credit, and the Government has said it cannot afford to extend passported benefits to all Universal Credit claimants. What interim arrangements for dealing with passported benefits do you suggest should be put in place for the introduction of Universal Credit?

Dr Royston: I think that, for us, the key issue around passported benefits has been around free school meals, because it has a very considerable value for families. There is a real problem with the Universal Credit and passported benefits, in that the current arrangement, particularly for free school meals, means that the loss of free school meals coincides with the gain of working tax credit, which means that one offsets the other. If the parents desire, they can buy school meals with the additional entitlement that they gain through working tax credit. There is no similar point under Universal Credit, because of the design of a smooth work incentive system so that, as incomes increase, benefit entitlement gently goes down. This means that, if you remove free school meals at any fixed point, either with hours or income, then there will be a benefit cliff edge, which means that you could see a considerable drop in income as a result of going over that level of entitlement.

In some cases that could be very substantial. If you are a lone parent with three schoolage children, the value of the free school meals could be around £1,100 a year and, because of the high withdrawal rates on Universal Credit, the fact that you are already only keeping a small amount for every extra £1 that you earn, you could have to earn four times that before you earn that back. You could be talking about anywhere in a field of about £4,000 or £5,000, where you are actually worse off than earning under that threshold where you lose entitlement to free school meals. That is a real problem; it is a real flaw with the fundamental proposals in the system. To be honest, it is a very difficult one to see an effective way out of. The only way that this can be effectively dealt with is through extension of free school meal entitlement. It is proof that something like Universal Credit really cannot be done on a shoestring.

Q153 Stephen Lloyd: How do you mean, extension? Define it.

Dr Royston: If you extend free school meals to all Universal Credit claimants, then you would considerably impact on the problem. It would be a considerably reduced problem.

Q154 Chair: There was a problem with Income Support that, if you were in receipt of it, you qualified for free school meals but someone with the same net income, of around £13,000, who did not qualify for Income Support did not qualify for free schools meals, because the passport was the Income Support. You had two families on identical incomes, but one got free school meals and the other did not, because one’s income was made up from earnings and the other one was made up from Income Support. I do not know if you remember that example. Was that ever solved?

Dr Royston: Actually, in some respects, we were heading towards creating that problem by creating an earnings threshold, an income threshold, for receipt of free school meals that was more generous and would have been a very good thing, in some respects, but would have created the same problem that we had under Universal Credit. That was the proposal to increase entitlement to free school meals to those earning up to £16,000. In some respects, that was a very good thing but, in other respects, it would have created that cliff edge. No, at the moment we do not have that cliff edge, for exactly the reason that loss of free school meals coincides with gaining Working Tax Credits.

Q155 Stephen Lloyd: Have you done the business modelling to show the cost to follow up your suggestion to put everyone on Universal Credit on free school meals? What would it cost?

Dr Royston: If you put everyone on Universal Credit on free school meals, we estimate it would cost about £500 million a year. However, the cost of that could be reduced potentially, if necessary, by reducing the level of earnings disregard received by families receiving free school meals. Basically they would be making partial payment towards their free school meal entitlement from their Universal Credit entitlement, via their earnings disregard. That would not affect outofwork families, because earnings disregards are irrelevant for outofwork families, but would be more generous and solve the problem, to a considerable extent, for inwork families. We estimate that, if you reduced the earnings disregard by £5 per child, it would reduce the overall cost from about £500 million to about £300 million. Actually, in poverty alleviation terms, it is also an extremely effective mechanism for lifting children out of poverty.

Alison Garnham: We have good evidence now from the Institute for Fiscal Studies that it affects children’s attainment levels as well, where there are free school meals.

Q156 Stephen Lloyd: Not least because of the Pupil Premium as well, so you have that higher attainment.

Alison Garnham: Yes, so you have children who don’t get free school meals unable to perform as well in school. There is a lot of evidence that families go without food when they are struggling, and free school meals are often the only meal a day children get. It is interesting from the DWP research as well that these passported benefits, like childcare costs, free school meals and so on are some of the things that parents value most when they are thinking about incentives to work. The DWP’s own research was suggesting this was the sort of thing that parents looked at when they were evaluating whether they would be better off in work-whether they would be able to afford the childcare, whether they would get free school meals still and so on-rather than the marginal deduction rate. Let us face it: not many people sit chatting over breakfast about marginal deduction rates, do they? Things like getting their childcare costs and getting free school meals did make an enormous difference to whether they thought they would be better off in work.

Q157 Chair: It just occurred to me, as we were talking about digital by default and also looking for work incentives, that you can only have the work incentives if you know you will be better off in work. Sam offered examples of where it might be difficult with the housing stuff. Would it be possible, or are there any plans, for an individual, if they are going in to report a change in circumstances, to go into their own file and put in those scenarios? That would tell them if they would be better off or not.

Alison Garnham: There is going to be facility on the computer system that would show you. They are calling it a "betteroff calculation", but it tells you how much more or less Universal Credit you will get. That is not a proper betteroff calculation because, in order to see whether you are better off in work, you would need to see how much more you would have to pay in childcare costs, housing costs, whether you lose free school meals, what your travel to work is and so on. We have actually advised Government that it would make sense to have a much more sensible "betteroff" section in that computer programme.

Gillian Guy: It is another argument for making sure there is independent advice available to take people through all of that, otherwise they could lead themselves into the wrong decision.

Alison Garnham: One of the things you raised earlier was about getting advice and help from DWP. Over the years, as you know, there has been a move towards much more arm’s length processing, with processing going on in remote call centres.

Chair: Dundee is one. Dundee is not remote, but I take your point.

Alison Garnham: That is a huge problem for claimants in itself, because it is very hard to get someone you can talk to about your entitlement. Particularly with a new scheme like this, it is going to be crucial that they talk facetoface with somebody about it.

Q158 Glenda Jackson: That goes to the local knowledge that you talked about a bit right at the beginning. This is essentially about the income entitlement of disabled people. Under Universal Credit, the Severe Disability Premium is going to be abolished. Who are the people who will lose out on this? Are there any precise definitions or numbers?

Gillian Guy: I have mentioned those who live alone and do not have a carer, because they will be £58 a week or £3,000 a year worse off. There are disabled adults who are actually fit for work but unable to earn enough to support themselves fully, and they will lose significant amounts-many around £40 a week, so quite significant there.

Glenda Jackson: Quite a chunk, yes.

Gillian Guy: And families with disabled children particularly, who are not counted as severely disabled, will lose about £29 a week.

Q159 Glenda Jackson: Is that per child or in total?

Gillian Guy: It is per child so it depends how many children you have.

Glenda Jackson: I was going to say. That would be per child. I am thinking of a constituent now who has three children with disabilities.

Dr Royston: The abolition of the Severe Disability Premium is a real concern for us because of the impact on families with young carers. At the moment, if you have a lone parent with a young carer, they would not be entitled to receive carer’s allowance, and we think rightly, because the child should be concentrating on their education; they should not be a fulltime carer. The family would be getting the Severe Disability Premium to help the parent with the costs of selfcare to take away those burdens of care on the child. We know that there are about 25,000 lone parents receiving the Severe Disability Premium, and we are really concerned that those families are going to end up, not only as a result of the loss of the Severe Disability Premium, with the children in the family having to take on some of those burdens of care as a result of the loss of that support. That is a huge amount of money; that £58 a week is very, very substantial money. We don’t want to see the impact of that transferred on to children. That is the real concern.

Q160 Glenda Jackson: There are children who are already caring. We had a debate on this only on Friday.

Dr Royston: Absolutely. When we were looking into this during the course of the Bill, I spoke to a mother and daughter; the mum had had quite a severe brain disease, which had caused her to become paralysed entirely down one side. For a while, her daughter was staying with relatives while her mum was in hospital but, after her mum got home, she moved back in with her and was basically her fulltime carer. Now other people did come in; the mum was receiving highrate care DLA1 and the Severe Disability Premium, which meant that they could get paidfor carers to come in and take some of that burden of care away, but they were not staying overnight. The child was looking after her mum overnight. She said there was one period, while she was doing her GCSEs, when her mum got really, really ill. She was having to get up three or four times a night. Obviously she was absolutely exhausted. She was coming in from school and going straight to bed, because she knew she would have to get up during the night several times. It is families like that that are going to be losing the Severe Disability Premium, and it will be children like the child from that family who will be taking on the burden of those care responsibilities.

Q161 Glenda Jackson: Have you any idea at all of numbers?

Dr Royston: As I say, there are 25,000 lone parent families receiving the Severe Disability Premium, so those are the kinds of numbers we are talking about.

Q162 Glenda Jackson: But not necessarily the very young children in those.

Dr Royston: They are not necessarily very young children.

Q163 Glenda Jackson: The Government’s argument is that they are going to save money, and this money is going to go to support ESA claims. Do you think that is the best use of it?

Dr Royston: One thing that is a real concern and that has been missed is that even the most severely disabled adults getting the support component of ESA will be worse off if they lose the Severe Disability Premium. They will be worse off overall, even after the uprating of the support component of ESA. On that basis, I just don’t think this works. It does not feel like it takes enough account of those costs of selfcare. As Gillian mentioned, there are also real concerns about the impact on disabled children of cuts to the Disabled Child Premiums, which are currently paid through child tax credit, and their comparison under Universal Credit as well.

Q164 Glenda Jackson: An argument that has been put up to us quite consistently from various disabled individuals and groups is that the money is not so much within the home, but it is the failure of society as a whole to actually adapt itself to the needs of people with disabilities. Do you think this kind of payment would assist in that way? Do you know what I mean? I mean of people not being able to get around and things of that nature. Would that be to the benefit of people being able to get work, always given that the jobs are there and employers are willing to change their work environment?

Alison Garnham: Disabled people have considerable extra costs to do with mobility and care needs, and disabled children also. For example, the childcare costs for disabled children are much higher.

Glenda Jackson: I am coming on to that now.

Alison Garnham: There is also a problem for carers in Universal Credit, in that they will not be able to get both the workrelated activity component and the carers’ element, even though it is quite possible to be both sick and a carer. That is a problem as well.

Gillian Guy: It is also not a payment that is designed to deal with the society problems. It could never do that.

Q165 Glenda Jackson: But you know what I mean; people say, "It is not my individual things that I am doing. There is a broader landscape out there, which we are failing to-".

Gillian Guy: You have to work here and live in that broader landscape. They need better systems.

Q166 Glenda Jackson: Absolutely, yes. That does bring me now on to the issue of the disabled child and the reduction that we have talked about, as far as the disabled child. You have given some indication there. Do you have anything more to add?

Dr Royston: One thing to say is we have been absolutely delighted to be working with Citizens Advice and Disability Rights UK in supporting Tanni Grey-Thompson in her inquiry into all of these issues, which will be reporting in midOctober. One of the things we have found from the survey that we undertook with families is the number of problems that families with disabled children face, which that money can help to support.

We do not think that the Government rationale for reducing that support is right. The Government rationale seems to be twofold. Firstly, they say they are aligning support for disabled children and disabled adults, because they are changing the support level for disabled children from £55 a week to align it with the workrelated activity component of ESA that is paid for disabled adults. It does not work, partly because ESA claimants in the workrelated activity group are only expected to be out of work for a while. They will be, shortly afterwards hopefully, moving back into work and they will gain some level of support for moving into work as well. They might get an increased level of disregard, for example, in their entitlement.

Families with disabled children, very often, are going to be out of the labour market for a very long time, because of the additional care needs. In fact, one of the things that we found from the survey was that only a very small proportion, particularly of families with children on middle or highrate care, only about 2% or 3%, were saying that they were expecting to move back into work within the year. In fact, most families were saying they were expecting it to be more than five years, more than 10 years in many cases. We need to think about the longevity of the change. Families with disabled children are having to look much further into the future, needing to cope with that level of entitlement. There are clear reasons why the Government needs to reconsider this.

Q167 Glenda Jackson: According to them, certainly with lowincome families, it is offset by the work incentives. Your evidence does not support that.

Dr Royston: In many of these cases, it is right that some of these parents should not be moving into work, because they have very severely disabled children. We are talking about children on the middlerate care component of DLA. We know that, in many cases, they find it very difficult to move into work, because, for example, of higher rates of childcare costs. There is no additional support within the system to address that. In fact, one of the things that we suspect is that many families are using some of that money, which is paid through the child tax credit and those additions, to pay for childcare costs when they are in work, because they do have to cover those. Reducing that perchild component is going to make it harder for them to cover those additional costs, and so actually could make it harder for them to move into work.

Q168 Glenda Jackson: Quite apart from the reduction in the external social services that we are seeing going down the drain. Disabled people on Incapacity Benefits and ESA who are found fit for work will no longer receive an additional amount under Universal Credit. We touched on this slightly, but what are the additional costs that they will need to cover? Do you have any evidence of specifics? There will undoubtedly be additional costs.

Dr Royston: For many they are workrelated costs.

Q169 Glenda Jackson: Do you mean getting to and from work and things of that nature?

Dr Royston: Getting to work and any adaptations they need to make, things like that. They need that additional support to enable them to do so. It seems very odd that the basis for determining whether somebody should need some additional level of support in work is the same test that is used for determining whether somebody is not fit for work at the moment. At the moment, many people with disabilities can get additional support in work through the disability element of Working Tax Credit, even if they are found fit for work under the ESA work capability assessment. The fact that that will not be true anymore under Universal Credit is a real cause for concern, because that test is very tough, as we know. I cannot quite imagine, having worked as a welfare rights adviser during the introduction of ESA, how it could be that somebody could move into work, go along to their work capability assessment and be found unfit for work. I cannot quite imagine that happening under the current circumstances. I think there does need to be some kind of other test, some kind of other definition, to give that additional support.

Q170 Glenda Jackson: That is an extremely interesting point, I think, the one you have just made. I am pretty certain you have raised it with the DWP. What has been their reaction to it?

Dr Royston: I cannot remember, to be honest, what their reaction was.

Q171 Glenda Jackson: They took it on board, do you think? You have been very fair in saying they are in a listening mode. These are the intricacies of what is being proposed.

Dr Royston: I think they are in a listening mode, and I hope we will find out more after Tanni’s inquiry concludes. Hopefully, we will get a more complete response to that than we have had up until now.

Q172 Chair: The Government cannot say there is double funding here, can they-that the extra help to get into work can be covered by Access to Work or that the individual will qualify for the new PIP2 when it replaced DLA? Both of those cover extra expenses and are appropriate for whether they are in work or out of work. What is the rationale for saying that that extra help should not move into Universal Credit?

Dr Royston: Obviously with the Access to Work scheme, we are starting to see indications from the survey-we would not predict what the final results we are going to get out of the inquiry are-that the Access to Work scheme is quite limited. Many people do not get that support. Fundamentally, DLA is there to cover other additional costs. It is there to cover the whole gamut of additional costs, whether in or out of work. There does need to be that extra money, that extra support, for people who are in work to enable work to remain sustainable and to enable them to remain in the labour market.

Alison Garnham: Some of the changes are a straight cut, like the reduction from £56 to £28 in the Disabled Child Premium. That is just a simple reduction, which will reduce people’s work incentives. They will simply get less money.

Q173 Chair: You said that your report will be in midOctober. We were hoping for September, but obviously Baroness Grey-Thompson’s report is not until midOctober. I don’t know when we will be publishing our report, but I am just wondering whether your report would be available before our report. When you say midOctober, when would-

Glenda Jackson: So we can plagiarise it!

Gillian Guy: The date we have is 17 October.

Chair: If you keep to that, and I appreciate that Tanni has been very busy with the Olympics and the Paralympics, then that might help influence us-not influence, but it will certainly give us some information for our report.

Q174 Teresa Pearce: It is quite clear, from everything that has been said, that welfare is very complicated and Universal Credit was meant to simplify, and that is not actually happening because people are very complicated. One of the areas that I am quite concerned about is the interaction with local authorities. I think all of you have, at some point, said you thought the localisation of Council Tax support and the Social Fund will add complexity. Could you tell me why you believe that to be the case, Alison?

Alison Garnham: The aim of Universal Credit was basically to integrate benefits. Leaving some outside that of course means they are not being integrated, so you have this simple taper, but then you have an additional taper, a 20% taper, for Council Tax Benefit being administered elsewhere through local authorities. Giving people the answer about what happens when you take a few more hours’ extra work through Universal Credit will not be the full answer, because you will need to then tell them about what is going to happen to their Council Tax Benefit and also about access to things like the Social Fund.

The other thing that is a consideration with those is that council tax benefit will be cut by 10% and Social Fund budgets have been cut by something, on average, of around 7%, judging by the letters that local authorities have been receiving. There will actually be less money available for them, particularly for families with children. Under the Council Tax Benefit changes, pensioners are being protected but families with children are not, so Local Authorities are in the difficult position of having to work out how to make the 10% cut. Of course that will have an impact on incentives to work for families with children.

Q175 Teresa Pearce: My constituency, for instance, is half in one borough and half in another. Those boroughs could decide to implement the council tax cut differently. If you lived one side of the road, you could have one eligibility. Do you think that Universal Credit is meant to be easily understood and fair, whereas it will actually depend on which borough you live in?

Alison Garnham: It adds complexity. The mistake about leaving it outside is you now have another complicated issue to work out, in terms of your entitlement, and that is what happens to your council tax. As you say, it will be a bit of a postcode lottery, with areas having different assessments potentially. Certainly Social Fund arrangements will be different from one area to another, because the deliberate intention has been to see a thousand flowers bloom, so you will not know what your entitlement will be from one area to another.

Gillian Guy: It also makes it very difficult for those of us giving advice, because we will see people from a variety of boroughs and Local Authority administrations, which will each do their own thing. In a sense, I feel some sympathy for them, because they are taking it on with a cut and with a ring fence around older people, which is going to make it extremely difficult and almost discriminatory in its nature about who that hits. The other issue for me-and it is a bit like passporting as well-is it is an example of where Departments are doing their own thing on certain areas, which together have a cumulative impact on families. I am not sure that the intended or unintended consequences of that have been fully worked through.

Q176 Teresa Pearce: Are you aware of whether the Social Fund that is going to be given to the local authorities to administer will be ring-fenced?

Gillian Guy: That is not our understanding.

Alison Garnham: No, there is no ring-fencing at all.

Q177 Teresa Pearce: It could be spent on anything.

Alison Garnham: It could be spent on anything. In fact, it was the deliberate intention that it could be spent on anything. In one area, it would be spent on debt counselling services or financial management programmes. In other areas, it will be cash payments. No one will have the complete knowledge that there is a service of last resort when they run out of money, which they do have currently with the Social Fund. There is going to be a real problem for local authorities because, where people used to queue on a Friday afternoon when their money had run out or they had lost money, at the Jobcentre Plus office, they will be queuing at the Local Authority. Local Authorities will have made their own decisions about whether they can respond to that.

Dr Royston: One thing to note, with regard to the Social Fund, is that not all of the Social Fund is being localised. The discretionary Social Fund is being split into two parts. One part is crisis loans for emergency items and community care grants, which is being localised. The other part is budgeting loans and crisis loans for interim benefit payments, which is not being localised and is being integrated into Universal Credit. With regard to both, there are different concerns. With regard to the localised scheme, there are real concerns, particularly that it is going to be harder to get cash grants and loans rather than specific items, which may not help with some things, like if your electricity goes off. On the other hand, we have the elements that are being incorporated into Universal Credit, which I do not think we have had nearly enough information about. That is what they were calling "payments on account" to cover problems with benefit payments and to enable families to budget. They are the same things that the budgeting loans are meant to cover at the moment.

As I remember, quite early on in the discussions, it was not even clear whether everyone on Universal Credit was going to be entitled to receive payments on account in that way, or whether they would need to put some limitations on that for cost reasons. I think we need a lot more detail about how that system of payments on account is going to work under Universal Credit as well.

Q178 Teresa Pearce: Can I just ask you on housing benefit, there are quite a lot of people in one of the estates in my constituency who have an element of service charge in their rent. That is causing a big problem. Have you seen where that is causing a problem, where they cannot actually get housing benefit to cover the service charge element?

Alison Garnham: Yes. That will be translated into Universal Credit, because one of the simplifications is that people will not be able to get their service charge. I know that women’s aid refuges, for example, are very worried about it and say that nearly 300 refuges may have to close. One effect of simplification can be unfairness, and that is one of the things that seems to have gone.

Q179 Teresa Pearce: What are the key concerns around the introduction of the household benefit cap? What changes would you like to see made to the proposed operation of the cap?

Alison Garnham: Shall I give you a list? The first one is we need to exclude child benefit from its calculation. It is clearly unfair that mums with children should lose their child benefit in that way. Secondly, we think that people in temporary accommodation should be exempt from the cap, and that is because, very often, they are put in housing where the rent is extremely high. They cannot take the action that others are expected to take and find ways of reducing their rent; it is simply not possible. Either the Local Authority would have to make up that rent, which would depend on whether they could afford to do that, but their homelessness guidance does not allow them to just move people out of the area and could require the claimant to actually use their other benefits to make up the rent. They are going to be in a very difficult position working out what to do. Some housing associations are saying they will not be able to pick up these families at all, as a result of this. We think that is a clear case where people who are homeless and in temporary accommodation with high rents should be just excluded from the benefit cap altogether.

Then there are other issues about groups who appear to be out of work. For example, they are on statutory sick pay or on maternity leave. We think they should count as if they were in work and therefore exempt from the benefit cap, otherwise they will find themselves affected by the cap and then struggling to get back into the correct position afterwards. We also need to look at people who are employed who are paid termtime only, for example, and the other part of the time might look as if they are not in work, but in fact they are, but the work is seasonal in some way. There are a number of adjustments we think could be made.

Gillian Guy: There is also the general issue that the very existence of a benefit cap makes it sound like everybody is pushing up against that cap, and that is not the case. It is not the majority of claimants who are anywhere near that, so it gives an impression generally that is not right. The fact will be that it is the people who are the hardest up who are pushing at that cap, so we would like to see a better analysis of what the impact would be of imposing that in many of the instances that Alison has spoken about, but a lot of them cumulative.

Dr Royston: One particular issue that has just emerged-I don’t want to go over all the issues with regard to the benefit cap-with particular regard to Universal Credit is the changes to how the inwork exemption from the benefit cap will work. At the moment, from April 2013 when the benefit cap comes into force, the initial route to an exemption on the grounds of the household being in work is receipt of working tax credit. Under Universal Credit, that is going to change and they have suggested that, instead, there will be a monthly earnings threshold, above which you have to earn in order to be exempt from the benefit cap. I think that is going to be set at around £430 per month; I think it is around that amount.

The real concern about that is that there are some key groups that are included within Working Tax Credit, which are entitled to Working Tax Credit, but may not be earning above £430 per month. For example, people on statutory sick pay who would be entitled to receive Working Tax Credit would be considered in fulltime work for Working Tax Credit, but would not necessarily be receiving more than that level of entitlement and that earnings threshold. Similarly in some cases, people on statutory maternity pay and certainly on maternity allowance would again be considered to be in fulltime work for the purposes of Working Tax Credit, but would not necessarily be above the level of the earnings exemption from the cap under Universal Credit. We could get some very vulnerable groups of, effectively, working people-people on sick leave or maternity leave-who are affected by the benefit cap. That really does not seem to me to be the intention of the policy.

Q180 Teresa Pearce: Do any of you understand how they will calculate earnings? Where do salary sacrifices come in? Is it benefits as well as actual cash earnings? Do we have any detail on any of that?

Dr Royston: I understand it is earnings for the purposes of calculating Universal Credit entitlement. I think that is how it will operate, but I am not absolutely certain of that.

Q181 Teresa Pearce: People’s earnings are very complicated, especially in the hospitality industry, where a lot of money goes through tips and gratuities and not through pay. It is not easy, is it? One final question: one of the things that has come up time and time again is about the monthly payment and about the no backdating. Does it seem to you that this system has been set up, where it is being simplified, for the simplification of an IT system, rather than simplification for claimants? It seems to me we are saying we have to do it this way, this way and this way because that would be easier for an IT system to administer, but not easier for real people.

Alison Garnham: This is part of the problem with simplification. One of the reasons there are complexities in the system is because people’s lives are complicated, and also they are trying to respond to need, and it is way of being fair. Rules have developed over the years to make things fairer. When you simplify, inevitably you end up with some situations where, although it is simpler, it is less fair. In Universal Credit, there are also some areas that are actually more complex. A lot of the existing rules have had to be poured into the Universal Credit models. A lot of the complications we already have will be replicated again in Universal Credit, so it is quite a tricky project to try to pull off. There are pros and cons with where there is simplification and where there is more complexity.

Gillian Guy: Having said all that, probably all of us have welcomed some simplification of this system, which is just a minefield for people who cannot understand what they are entitled to. If people did understand what they were entitled to, we would be in a worse financial situation, frankly, than we currently are, because there are a lot of benefits left unclaimed. I think we can see the need for simplification. It is our duty, in a sense, to point out to the Government what the implications of some of that will be. We have already had several instances in this session where we have said, "Yes, that is simpler for the administration of the system, but that doesn’t make it simpler for the claimant." That ought to be the guiding factor.

Q182 Chair: That it is simpler for the claimant. I cut you off earlier, Gillian, I am sorry, about direct payments for housing, because I thought it was going to come up in another section, but it has not done. Can you remember what you were going to say?

Gillian Guy: That was really just not to overlook the ceasing of the direct payment to landlords, for the rental payment, the housing benefit, simply because again if we are in a chaotic situation around budget management, and we are seeing a lot of changes happening, payments of the Housing Benefit over to the landlord could indeed be overlooked. We have had clients already come to us and say that they are themselves quite confused by the whole situation. They are worried about missing dates and want some assistance with that. That, of course, has pretty dire consequences if it is allowed to see itself through to its final course. We do not want to see people taken out of their homes, and then have a whole homeless situation that ensues, but it is a possibility.

Q183 Stephen Lloyd: This is a challenging one, because it was the previous Government that first started pushing this under the perfectly rational view that it was a way of helping people to take control of their lives. I remember at the time thinking this was going to be crazy and cause a lot of difficulty. Today, again in the Chamber, the Secretary of State was asked about this. He again stressed the line that it is important that we help people learn how to behave or act in a way that the majority of society does, and therefore it will help them. I still have profound concerns for the reasons that you have just mentioned but, between the three of you, if you had to choose, would you say to keep going in the direction of travel for the reasons we know, or to do that but have more flexible opportunities for local government, housing associations or landlords to get it paid directly? How would you solve the conundrum of governments believing that this is a key way of helping people learn how to manage in society? How would you square that?

Gillian Guy: I think it is not just governments. At Citizens Advice, part of our ethos is that we try to help people take control of their lives. It is not about propping them up in terms of advice to keep coming back to us to become dependent on us. It is really about giving them the wherewithal to take control. We fully understand that, but what we do not do at Citizens Advice is just close the door and say, "You will get on much better without us, and you are going to have to sink or swim." We really need to think this will not happen because we say it will happen. There again has to be that advice and support behind these people to be able to take that control that is on offer. When we look at the exceptions to it, we would rather they were not when things had already gone wrong and we were facing eviction proceedings, but earlier on to understand categories of people in certain situations, who are really going to have to have a very managed transition into this situation and a lot of advice and help to get them there.

Q184 Glenda Jackson: Is there also not an additional problem here-the increasing need for people to be housed in the private rented sector? If I simply look at my own part of London, there is an evergrowing reluctance on the part of private landlords to accept housing benefit claimants. I cannot see that situation being ameliorated if the money is going to go to the tenant, even if they get the place in the first instance. It just seems to me that that again is something that Government should be looking at very closely, because some of the rents are astronomical, before you get Housing Benefit. These are not just singleroom rents I am talking about here; these are families looking for housing, and private landlords will not take them.

Dr Royston: It has always been a huge misconception that just doing a search on Rightmove for what properties are available to rent below the level of whatever the housing benefit maximum is for that local area means that that property is available. I remember when I worked in a Bureau we did a survey of local properties available for rent to see whether they were genuinely available for housing benefit claimants, and almost none where-just almost none. Nobody really wanted to take on housing benefit claimants. That was a particular concern, actually, for the singleroom rent, because it is particularly difficult to find somebody who is willing to take you in and share their own property with you, if you are on housing benefit. You are absolutely right: one of the few things that does count in their favour is that certainty that the payment can go to the landlord. Taking that away could make it even harder to find those properties.

Chair: Andrew has been waiting patiently. His is the last section, which is on the implementation programme and impact monitoring.

Q185 Andrew Bingham: Implementation-obviously it is a huge reform programme. Do you think the timetable is achievable, in your opinion? I would be interested to hear from each of you.

Alison Garnham: I think it is probably not very long. One of the concerns about the Pathfinders is that we understand that the idea is that some of the easiest cases will be taken on first, for example single people, but I would argue that single people don’t stay single all the time. They could become complicated cases quite quickly. People get partners, leave work, start work and do all sorts of different things. The length of time that they have given themselves is not very long, and so there is limited time for findings to be integrated into the model in order to learn from them. In a sense, we have an indication that the DWP knows that, because they have changed the way takeon is going to happen in October 2013 anyway. It was going to be all new claimants, and now it is going to be segmented with just a few people. I think they have understood that. Our concern is that we need all the Regulations and all the guidance properly consulted on and understood before all of this starts, because there will be too much to learn in the process of the Pathfinders otherwise.

Q186 Andrew Bingham: Does anybody else have anything to add, particularly around the risks as well, which could affect it?

Gillian Guy: I think it is achievable, but the question is: what gets squeezed in order to achieve it? These are many of the issues we have been talking about, about understanding the implications. It is also having time to learn from the pilots that are under way, and making sure that they are put into the implementation and, as Alison has said, making sure there is proper time for consultation on guidance because, if we can get it and get it as near right as we can, then this stands a better change of success. The other thing is setting out some evaluation criteria now, which we can actually judge it by as it goes through implementation. That would be expected of us and I think we should expect it in return.

Dr Royston: I am really concerned by how much they are trying to do at the same time. In some respects, the timetable is a particular concern, given that they are trying to do Council Tax Benefit localisation and Social Fund localisation at the same time. It feels like it would be much more achievable if it was not made all the more complicated by trying to do that. In terms of the biggest risks, I think they are those issues of localisation. It is Council Tax Benefit, the Social Fund and making sure that the right safety nets are in place. The other thing is passported benefits, because we still not have seen a clear plan for what they are going to do around passported benefits, particularly around free school meals. We are very hopeful that we will get to see a consultation on what the Government plans to do about free school meals under Universal Credit as soon as possible, but we have not seen one yet.

Q187 Andrew Bingham: Obviously the Pathfinders start in the North West of England. My constituency is in the East Midlands, so it is very close to where I am. I would be interested to know-you have discussed it briefly-how ready you are to start supporting claimants from next year, in the Pathfinder areas, in your organisations. You have sort of answered it in an earlier thing, so I am just wondering if you have anything further you wanted to add to that really.

Alison Garnham: We are already getting very high demand from advisers on the front-line for training. They are very anxious to get themselves organised in advance, but they are paying for that themselves, so we are concerned that there may be even more people out there who need to be boning up on this, who just are not in a position to pay for it at the moment. Yes, that is a big concern.

Q188 Andrew Bingham: If that demand cannot be met, what is the effect on delivery?

Alison Garnham: I think it is going to be really serious and risky. It is one of the biggest delivery risks. If there is not face-to-face advice available on the ground, claimants will be really up against it. They will not understand it; they will not be able to simply apply straightforwardly. They need those advice services to be there waiting.

Gillian Guy: The other thing that is in the nature of advice services and the voluntary sector is that we tend to be a bit spongelike and just keep soaking it up. The volume and scale of this are not such that we can do that, so there could be a tendency to say, "Well, you do this anyway, so it’s just a bit of additional work." This is a major overhaul to the benefits system.

Andrew Bingham: It is the saturation point, to use your sponge analogy.

Gillian Guy: Exactly so, yes.

Alison Garnham: I am old enough to remember the implementation of the Child Support Agency. I did a lot of work on it at the time, and that was another huge system, hugely reliant on IT. It was not piloted and there was no advice in the field available for people.

Glenda Jackson: We are still mopping up after it.

Alison Garnham: We still have not mopped it up, exactly, so we need to learn from that experience. If anything, Universal Credit is even bigger than that, because it will affect even more people, so we absolutely have to be prepared in order to avoid those risks.

Q189 Andrew Bingham: Has the Government any plans that you are aware of to give you any extra resources to support you with this?

Alison Garnham: We know that they are listening on the fact that advice agencies and those of us who support advice agencies will need some resources, but we have not had any answer yet about it.

Andrew Bingham: You have not seen the colour of the money.

Q190 Chair: Would that money come out of the £2 billion that is anticipated to be the cost of implementation, or the £2.1 billion, although there seems to be some dispute about the figures-£2.5 billion, I think possibly?

Gillian Guy: It is also important just to say that this is not about "gimme, gimme", and that we can see an opportunity here for making a few bucks to give some more advice. This is about genuinely wanting to make the implementation, whatever happens in legislation, work for claimants and for the public. That requires us to have an investment to be there to give that advice to make it work. If we do that together with Government, it will be a better product than it would otherwise have been.

Q191 Glenda Jackson: You said Local Authorities and there will be other constituent partners in this, because it is not just Jobcentre Plus, is it, or Atos? A huge range of people are going to be affected by this.

Gillian Guy: That is right.

Alison Garnham: The HMRC grant scheme was about £3 million over four years. This is arguably an even bigger scheme than that.

Q192 Andrew Bingham: You said something earlier about the guidance that will go from the DWP staff. Have any of your organisations been consulted about the content of that guidance? I think you sort of said that, if you could be, you felt you could actually help and make a difference.

Gillian Guy: I am sure we will be.

Q193 Andrew Bingham: But as yet not?

Gillian Guy: I think we are waiting with bated breath, as probably in October time that might start. The issue is whether we get sufficient time to be able to impact on it to make it work better than it otherwise might.

Dr Royston: Whilst we were very grateful to the Department for the consultations that they did give on the Regulations and the engagement that they had for a series of workshops, one concern was that all of those workshops were held within a twoweek period. If people were away, as actually I was, for that twoweek period, it meant that it was very difficult to participate. Even if people were around, there were about five different workshops held in that period. It would be very difficult for most organisations to attend all of them and they were very important to defining what the Department was going to do about the Regulations and identifying any issues. I would like to see a wider window-similar workshops but held over a longer period and more spaced out.

Alison Garnham: There is also the question of training of DWP’s own staff because, given that so much will be left to discretion, they will need training on how to make those decisions so that they are not made unfairly. As well as seeing the published guidance, there may well be internal guidance that would also be useful to know about, so that we can advise people about that.

Q194 Andrew Bingham: When the DWP monitors the impact of this, where, in your opinion, do you think their priorities should go, in terms of impact monitoring?

Gillian Guy: They should enlist our assistance in that monitoring, because we will see some quite stark examples of what is going on as a result of the changes. As I said earlier, there ought to be some agreed evaluation criteria. If we are talking about incentives to work, did they work? What is the net impact of all of that? Is it simpler, from the point of view of the claimant as opposed to just administratively simpler? How much have we been able to move people online and are they able and capable of handling that kind of interface? Are there significant numbers of missing claimants, as a result of this, who have been cut out by that online system and we have not picked those up? Also think about where debt is and has it been affected. Has it gone up? The housing issues and all of those also ought to be quite closely monitored. We are in good positions to assist with that.

Alison Garnham: I would agree with all of that, but I would also add that we need to monitor those who are going to lose out financially, because we know that there will be losers under the scheme, especially the 1.4 million households in the bottom two deciles of income distribution, which are most likely to be affected. We will also need to monitor the areas where there is going to be a high degree of discretion around things like conditionality in sanctions and so on. We really need good information about what is going on with that to work out if it is working and how it needs to be altered, if not. Finally, we need to monitor takeup and those who are struggling to engage with the scheme; if we are right and there is not sufficient support and advice, then the assumptions that are being made about takeup-very heroic assumptions were made about takeup, which lead to the claim that there will be 350,000 fewer children in poverty, for example, but that assumes a higher rate of takeup. We need to monitor what is happening to that to be able to substantiate those claims and also to see what is happening that could put that at risk.

Dr Royston: The crucial thing for monitoring is localisation because, in some respects, that will be hardest for individual organisations to monitor. Council Tax Benefits-we have got 150 different systems across the country, potentially. Having some kind of monitoring of what is going on will be absolutely crucial and similarly for the Social Fund, just because it would be so easy for that unring-fenced money, for the elements of the Social Fund that are being localised, to just disappear. There does need to be clear monitoring of what is happening, how much is being spent and where that money is going.

Q195 Chair: Would it not have been a lot easier and a lot cheaper for the DWP to give the job to Jobcentre Plus to do all the advice work? They are going to have to train their staff anyway. Their staff are going to be making the judgments as to who gets the benefit, but also therefore they know better how to make a claim. They will also make sure that people don’t fall out of the system; they are in a much stronger position to make sure that people don’t get missed out and people are helped through it. Why have they effectively outsourced the advice to organisations like yours, but without the money, when the ethos of Jobcentre Plus, as of when it was envisaged, was not like the old Benefits Agency, when you had to know what you were entitled to before you went in, rather than going there to say, "I am now out of work. Help me to make a claim for what I am due"? Why are they not doing that?

Gillian Guy: I don’t think the core business of Jobcentre Plus is giving advice actually. I think it is a very different skill set and a very different approach. I can see that Jobcentre Plus has to give some guidance on particular applications, rules and that kind of thing. That is quite different from setting out a person’s circumstances, independently of the paymaster, to talk to them about how they might get the best for their families and their futures. That is very different. That independence and trust are very important. It would require Jobcentre Plus-and I am not managing them thankfully-to actually engage a whole army of advisers to replace the kinds of advisers we are talking about here. They would need training and they would not present the kind of value for money, history and trust that we present here today. That is the piece I agree with.

Chair: You need the money in order to deliver the service.

Q196 Glenda Jackson: Also, there is a conflict of interest, isn’t there, in terms of why the Government did not give it to Jobcentre Plus.

Alison Garnham: I agree with Gillian about trust and independence, but I think also part of the answer is there have been successive efficiency savings over the years in DWP, which have reduced the amount of staff available even to do the routine personal advice interviews that they are required to do in relation to welfare to work. It would be an enormous challenge to also have those people skilled up to be able to advise on the detail of Universal Credit.

Q197 Chair: Have you got any sense of the susceptibility of the whole system to online fraud? That is more of a technical question, but I just wondered whether that is something you have considered.

Alison Garnham: Inevitably.

Dr Royston: I am sure they have, but one of the concerns would be that balance between fraud and simplicity, enabling claimants to handle claims in the most effective way possible.

Q198 Chair: I was not particularly thinking of the claimant who makes an error because it is too difficult; I am thinking of organised crime. We saw that with the tax credit system that was shut down.

Dr Royston: What I am saying is that things like organised crime have an impact on the simplicity for the claimant. We have seen that with tax credits with, for example, the availability of application forms for tax credits. It is making sure that that balance is right between ensuring that people are able to make use of the system and, at the same time, preventing fraud.

Q199 Chair: There are issues around the groups who are going to lose out and there are issues around unintended consequences. I have got quite a long list, which I have already got from you all today, in those two groups. Without going through what I have, are there any that you think we have not picked up because of the nature of the questions we have asked, where there are these unintended consequences or there are groups who will, by their very nature, be worse off, such as the second earners and things? Can you think of any others?

Alison Garnham: Yes. One of the things we did not talk about was the fact that incentives for lone parents and second earners will be worse under Universal Credit.

Chair: We picked that up from last week, so we have that on the list.

Dr Royston: I was pleased that Alison raised the point about the loss of the Housing Benefit disregard for support with childcare costs, because I think that is a crucial unintended consequence. We know from some analysis that the Children’s Society has done that those families who are in receipt of help with childcare costs through Housing Benefit, as well as through tax credits-meaning they are getting up to 96% of their childcare costs covered, rather than 70%- are four times more likely to be living in poverty than families who are receiving help with childcare costs just through tax credits. That is because housing benefit is targeted at lowerincome families than tax credits are, more generally. It is a real, real concern that there are about 100,000 families who get that additional support, who are going to lose that support and could be significantly worse off as a result. They are going to be the very families that Universal Credit was meant to help, the ones who are at the very border of making work sustainable and making it pay.

Q200 Chair: Is there anything you were burning to say that you have not said?

Alison Garnham: Actually I might have to give you a note afterwards, because there are quite a lot of small things that have changed that are in the area where it has been simplified, but turn out to be quite unfair.

Chair: That would be extremely useful.

Alison Garnham: Like young single parents, couples where they have different work eligibility requirements and the flexibilities for lone parents that currently exist in JSA to allow them to accept lowerhours jobs, for example, because of childcare responsibilities seem to be changing. We thought they would stay exactly as they are, but actually they are being reduced in scope, so there are worries around a whole series of areas.

Chair: There may be things that we will not pick up until it is implemented, because of human nature and the perverse things that people do. Maybe not; there are quite sensible things that they do. Anyway, can I thank you very much for coming along this afternoon? It was extremely useful, both your written and your oral evidence. It certainly will help us when we come to write our report.

[1] Disability Living Allowance

[2] Personal Independence Payment

Prepared 21st November 2012