Work and Pensions Committee - Universal Credit implementation: meeting the needs of vulnerable claimantsWritten evidence submitted London Borough of Lambeth

Summary

London Borough of Lambeth welcomes any change and policy initiative that truly incentivises work and provides income safeguards and certainty for those moving in and out of work, particularly given today’s volatile economic situation. Many aspects of Universal Credit are positive in this regard but we have significant concerns in some key areas—digital by default delivery option, monthly payments in arrears, treatment of self employed earnings, direct payments by default—and these are set out below for your consideration.

There are also likely to be significant revenue implications for the council associated with tenants being unable to manage direct payments under the Universal Credit regime. Our estimate is that increasing arrears may end up costing the council £2 million–£3 million in lost rental revenue.

Specific Comments

1. Digital by default

The Universal Credit (UC) draft regulations suggest the aim is to deliver UC digitally as a default position with almost all future communication with claimants being via personal online claimant accounts (including award and decision information, notice of appointments, etc). We understand that there may also be a limited facility to accept a paper claim but only in circumstances (as yet undefined) where someone has requested a home visit and that any alternative claim and access routes will be kept to a minimum.

Local authorities—through social care, housing services, welfare rights services etc—are the biggest supplier of advice and advocacy services to people with disabilities. They also provide significant advice services to other vulnerable groups. This digital by default approach has the potential both to significantly limit vulnerable claimants access to benefits and to hinder our ability to successfully support people as needed through their claimant journey.

Many claimants are “digitally excluded” and will find it difficult to manage their claim online. They may lack access to a computer, lack the skills required or have security concerns about an online delivery system that deters them from using an online channel. They may not fit into the traditionally vulnerable groups who will qualify for a home visit and limited additional support. The council will have an undefined and unresourced role in supporting them creating new burdens for us. We estimate that this would cost over half a million pounds to the council.

We believe it would be helpful for the Department for Work and Pensions (DWP) to review the digital by default delivery mechanism to ensure that agencies can get the information they need to support vulnerable claimants and that there is more flexibility for those that cannot manage an online claim process.

2. Monthly payments in arrears

The change in arrangements which no longer allow an advanced claim and which mean that UC will be paid more than a month in arrears will necessarily cause hardship for those waiting at the start of a claim period.

Monthly payments (especially when they include an element for housing costs) may prove challenging for those that are unused to managing being paid at this frequency and lack the necessary bank accounts and financial confidence to do so. Ministers have claimed that UC will mimic a monthly salary payment but a significant proportion of lower income workers are paid weekly or fortnightly so this is not strictly accurate. Additionally, there is no guarantee that UC payments will align with rent cycles and particularly with the requirement for rent to be paid in advance as it normally is.

There should be an option for claimants to choose to receive their UC payment more frequently and the claiming in advance provision at the commencement of a claim should be reinstated.

3. Young people

The minimum age for UC will be 18, with exceptions for 16/17 year olds (eg: lone parents, carers and those who are in education or estranged from parents (as now). However, It appears that 16/17 year olds who are unemployed and who would have limited access to JSA now (either through being in child benefit extension period and living away from home or by being in severe hardship) will only have one route to UC in future—that is, by proving estrangement. This would exclude those in severe hardship who are living at home and where the parents (on benefits themselves) are unable to support them.

4. The self employed

Like many local authorities, Lambeth actively encourages residents to consider self employment. At present, Working Tax Credit supports people well during the times that their business is less profitable by reflecting an overall view of the actual state of a business’s profitability, broadly using the same methodology as the tax system. This is fair in that it takes an annualised view of income and it also reduces bureaucracy for the self employed.

However, under Universal Credit, this changes and the self employed may see falls in their income that significantly reduce the sustainability of their business. The main issue that concerns us is that the self employed will be required to report their earnings and have their income assessed over periods of one month. This is impracticable and does not take into account fluctuations in income and the kind of seasonal self employment that sees income vary between months. We are hopeful that UC can make assessments that more closely mirror those made by HMRC for income tax purposes.

5. Incentives to work

Disregards are yet to be fixed but it seems that the principle will be as for pension credit—which is that unless something is specified as counting as earnings or other income, it will be fully disregarded. There will be no partial disregards.

It seems there will not be the equivalent of a HB (Housing Benefit) “run-on” for housing costs in UC—once someone starts work, the use of Real Time Information means that UC is adjusted immediately.

The rather complex rule about earnings disregards being calculated using ceilings and floors and using 150% of housing costs seem to have been dropped for a simpler model—designed so that people in work (however defined) don’t get help with mortgage interest. This may lead to increases in homelessness amongst owner occupiers.

6. Temporary absences from home

Currently, under special circumstances, Housing Benefit can be payable while you are away from home for up to 52 weeks. Such circumstances covered include hospital admissions, staying in a care home, providing care for others or being held in custody awaiting trial.

Simplification of the rules under UC means that prisoners on remand or sentenced will have the same 26 week limit put on the help they receive with housing costs instead of the present 52 week/13 week differences that now apply. This could be hugely detrimental to those given short sentences who are aiming to maintain their accommodation.

The same 26 week limit will apply to people going into hospital and to those going into residential care (where again there is a 52 week limit at present for temporary stays and 13 weeks for trial periods which will be abandoned). This means that people going temporarily into hospital and residential care will only get Universal Credit for six months in future and this has huge implications for local government as providers of both housing and social care.

An explanatory note—issued alongside the draft regulations—states: “…where an adult or child is temporarily absent from their household because they are in a residential institution elsewhere (eg in hospital, staying in a residential care home [but excludes child or young person in Local Authority care home] or residential school) then up to six months temporary absence is permissible, during which Universal Credit is payable as normal as if the adult/child/non-dependent was still in the same household.” This may add to levels of homelessness amongst people with mental health problems and other chronic conditions, even if they are likely to recover in seven months.

7. Direct payments

The default of UC being paid direct to the claimant and this single payment including a payment for housing costs is likely to contribute to increasing rent arrears amongst more financially excluded claimants and it is not clear to us what support or exceptions will be allowed and to whom this will be made available.

Landlords in the private rented sector may be unwilling to rent to claimants causing silt up in hostels, supported housing and hospitals and increasing levels of homelessness as arrears build across all tenure types. A private rented sector landlord survey undertaken in Lambeth late in 2011 revealed that claimants receiving the benefit for their housing costs directly was a concern for many and that many would cease letting properties to claimants as a result.

Many vulnerable claimants do not have access to the transactional bank accounts they would need to set up standing orders and lack the skills to manage what may amount to a single payment of hundreds (often thousands) of pounds. In Lambeth we are working to promote the take up of the Credit Union but there is a concern that

We are keen that the option to maintain direct payments to landlords of the housing element of UC is extended to those claimants that feel they would benefit from it, even if this extension only applies for a 12 month transitional period or similar.

There are also likely to be significant revenue implications for the council associated with tenants being unable to manage direct payments (paid monthly and in arrears) under the Universal Credit regime. This is particularly the case in supported housing but is also true for many of those living in council or private rented accommodation in the community. Our estimate is that increasing arrears may end up costing the council £2 million–£3 million in lost rental revenue.

Case Studies

We draw your attention to the case studies attached (produced by CAB) that illustrate additional concerns. We do not feel the need to duplicate the points they have made so clearly.1

17 August 2012