HC 576 Progress towards the implementation of Universal Credit

Written evidence submitted by the Women’s Budget Group

Summary

Monthly payment of Universal Credit

· Universal Credit (UC) will normally be paid monthly - with limited exceptions, and budgeting support and loans to help those finding this difficult. We suggest UC claimants should have the choice of more frequent payment.

· The government says monthly payment of UC mimics life in work. But many on low incomes in work have wages and/or benefits and tax credits paid more frequently, which matches common budgeting patterns for those on low incomes.

· Monthly payment with only limited exceptions does not chime well with the government’s promotion of choice and arguments against interfering in household money management. Only 1 in 10 claimants think it would make their lives easier.

· This is not just a problem of transition or about a small minority who have difficulty budgeting. And women are likely to be hit harder, as in low-income families they tend to make more frequent purchases that will be squeezed as money is stretched.

· Providing choice to claimants would avoid UC becoming bogged down in labour-intensive discretionary front-line staff decisions on exceptions or overwhelmed with applications for advance payments, and would therefore aid its smooth introduction.

Payment of Universal Credit to one person/account for couples

· Couples must choose one partner/account to be paid UC (possibly a joint account). Absorbing payments for children and rent into UC makes this more significant. There will be very limited exceptions (such as for domestic violence), as now.

· The government argues that paying all of UC to one account mimics wages. But wages are not jointly owned or assessed, like UC; and many families have 2 wages.

· Paying all the UC a couple gets to one partner/account is likely to result in less equal couple relationships, and one partner not gaining or practising financial capability.

· Logically, if couples can choose the partner/account to be paid UC, they should be able to choose to split UC between them too - which is what we propose. This is compatible with UC technology, and the government favours expanding choice to split UC by percentages over dividing it by its constituent elements.

· Arrangements for UC must be flexible enough to work for all kinds of families. Equality and sharing of resources cannot be assumed for all even with joint accounts. And facilitating individual access to income and financial security is not a threat to family stability, but on the contrary is likely to strengthen and support it.

1. Introduction

1.1 The Women’s Budget Group (WBG) is an independent voluntary organization of individuals from academia, NGOs etc. We have been scrutinizing the gender implications of UK governments’ Budgets and spending plans since the early 1990s. We believe that knowing about the gender implications of policy changes is important in order to reduce gender inequalities and to ensure policy changes meet their goals effectively. We have already undertaken gender analysis of the Welfare Reform Bill (now the 2012 Act).

1.2 This evidence focuses on the proposals for monthly payment of UC, and payment to one person/account for couples. Further information can be obtained from the following documents on our website - http://www.wbg.org.uk/RRB_Briefings.htm

- response to Social Security Advisory Committee consultation on draft Claims and Payments Regulations;

- briefing on frequency of payment of UC for Committee stage of Bill in House of Lords;

- briefing on UC payment issues for earlier stages of Bill.

2. Monthly payment of UC

2.1 The government intends to pay UC monthly in arrears to most claimants. This may align better with some rent/mortgage payments, but differs from how most benefits/tax credits work now, as they are largely paid more frequently (or this is a choice), for those in work as well as out. Monthly payment is a significant change; we do not believe the problems it poses affect only a small minority of claimants who cannot manage their money, or that these problems are just transitional.

2.2 There is no right of appeal about how benefits are paid; so it is important the government gets it right. We are particularly concerned about the impact of monthly payment on women, as they are more likely to manage the household budget in low-income families, and be responsible for the more frequently purchased items (daily/weekly). If there is pressure on household budgets, women are more likely to go without, as the ‘shock absorbers’ of poverty. Women also often manage household debt. So the strains of trying to make UC last a month are more likely to be borne by women, especially in families with children. We are not aware that the gender implications of monthly payment have been investigated in detail.

2.3 The government has to its credit said it wants UC design to be user-centred, and is investigating claimants’ views (DWP Research Report 799, 2012). A significant proportion see monthly payment as posing a risk to their financial security; exercise control over their money now in part by budgeting weekly; and value more frequent payment of benefits. This report suggests information, budgeting tools etc. are unlikely to be enough to resolve these issues. Many families also have no savings to fall back on.

2.4 The quantitative survey of claimants likely to be affected by UC (DWP Research Report 800, 2012) included a chapter on budgeting (albeit unfortunately based only on the main claimant). Only 1 in 10 thought monthly budgeting would make things easier. One in 2 of those budgeting their money did so weekly (the commonest period) or more frequently. Two-thirds of the total sample ran out of money before the end of the week/month always, most of the time, more often than not or sometimes. 42 per cent in total said monthly payment would make budgeting harder (with higher percentages in all out-of-work groups). Most who said the changes would make it harder to budget were unable to specify anything that would help.

2.5 The government says monthly payment in arrears reflects the world of work. But its figures show only some 1 in 2 earning £10,000/year or less are paid monthly. Jobs available to claimants, and the ‘mini-jobs’ UC may encourage, may not be monthly paid. A minister described the aim as ‘to reflect … experience … working full time’; [1] but many work part time, and the labour market is increasingly flexible. Many couples have both partners in work, and many low-income workers also receive benefits/tax credits. So one monthly payment will not smooth the path into work, or reflect the world of work, for many.

2.6 The government argues that monthly payment will encourage claimants to take personal responsibility for their finances, and to budget on a monthly basis, which could save them money (eg by direct debits). Some people always budget better; but people on low incomes already have to exercise responsibility every day just to survive. Currently, however, they can take advantage of frequent payments of different benefits; many ‘juggle’, prefer weekly budgeting, and find labelling of benefits helpful in allocating spending. Some operate in cash entirely, or largely; they may not want bank accounts (in part because of penalty charges); and banks may not be keen on their business. They may prefer to keep more control and flexibility than they feel is possible with direct debits etc. (as revealed in the user-centred design testing), in part because unexpected events necessitate frequent rapid readjustment.

2.7 The government is exploring how to help those who find monthly payment problematic. However, financial products like jam jar accounts are unlikely to suit everyone - or be free. Many claimants may not ‘successfully transition to monthly budgeting’. And the user-centred design testing suggested those at greatest risk may make least use of any help.

2.8 There is a real danger that the smooth introduction of UC will be threatened by focusing on monthly payment as the norm. UC risks being bogged down in labour-intensive discretionary staff decisions on exceptions, as cases will be ‘assessed on their individual merits’ (with guidance, not regulations), and need monitoring as only temporary expedients. Or a ceiling on numbers may result in more widespread financial hardship, and the UC system being overwhelmed with applications for loans, risking its operation and reputation.

2.9 We suggest those wanting more frequent payment (eg twice monthly) should be able to choose it. This would not create significant additional costs. And a minister confirmed (in the context of split couple payments) that ‘if we find that we need to make more splits than anticipated the computer system will allow us to do that. We are designing that in’. [2]

2.10 It is important to work with the grain of how low-income people manage their money. As the government does not wish to label claimants as financially incapable it will move them to monthly payment as fast as possible. But this is not primarily about financial (in)capability (or claimants adapting to the way benefits are paid now), but about the demanding exigencies of living on a low income - and the (gendered) implications if these are not taken into account.

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3. Payment to joint claimants

3.1 UC claims will be made by a couple jointly, and there will be a single monthly payment to one account they nominate - or if not, the Secretary of State may nominate one. The government is prepared to make (limited) exceptions, to split the payment between the couple (where this is considered to be in the interests of the claimant/family). Splitting payments is often discussed in the same breath as exceptions to monthly payment, or housing benefit paid to claimants; but it raises different issues.

3.2 Split benefit payments can be made now; but their number is apparently unknown. We believe insufficient thought has gone into situations in which split payments may be needed.

3.3 However, our main focus here is not exceptions, but our proposal that couples’ choice should be expanded to include the possibility of paying a percentage of UC into 2 accounts.

3.4 Our concerns about payment of UC to couples are set out in our briefings, so this is a summary only. The single UC payment is more significant because benefits/tax credits are being combined. Lack of financial independence can delay or prevent escape from domestic abuse. But we are also concerned about concentrating financial resources and power in one partner’s hands more generally. Arguments made before against paying all benefits/tax credits to one partner included: paying money for children to the ‘main carer’; inconsistency in terms of ‘rights and responsibilities’ if only one partner receives benefit; and the likelihood of a more equal relationship if both partners have some income.

3.5 This is relevant to both sexes, but especially women. Women are more likely to be economically dependent, and subject to financial and other abuse. In our research with low/moderate-income couples, women in particular valued ‘not having to ask’ for money. [3] They are also more likely to have an independent account.

3.6 There are several reasons why evidence from claimants on this is not as readily available. Sometimes the single payment for couples is conflated with the idea of combining benefits, muddying the issues. More broadly, individuals may present their life as a couple positively - whilst expressing concern about others.

3.7 The evidence from the quantitative research on the impact of UC on claimants likely to be affected should therefore be read with caution. In addition, the chapter on budgeting was based only on interviews with the ‘main claimant’ in couples, [4] omitting their partner’s views. There were virtually no questions about how couples manage their money, or which account would be chosen for UC if not a joint account. The question about a single UC payment was asked of single as well as partnered people; and it is unclear how many were currently receiving several benefits/tax credits. So it is hard to interpret answers given by 55% (this would make no difference), or by 20% (this was already the case). The user-centred design testing focus on claiming, not payment, meant it did not investigate this issue much either.

3.8 While combining benefits may be key to UC design, paying it into one account is not. A single payment of UC was originally said to mimic wages; but many couples have two earners now, and unlike UC wages are not jointly owned or assessed. It was suggested that, just as someone can choose an account for their wage, so couples can choose an account for UC. But this confuses an individual earner with two partners in a couple claiming UC.

3.9 The government says only 7% of cohabiting and 2% of married couples have completely separate finances. This seems to come from the Families and Children Study, and families with children are more likely to have joint finances. But its relevance is anyway unclear. The government has also said it is for couples to decide how to manage their finances. But the relevance of this is also unclear. Deciding whether to pool resources and how to deal with them is a different issue from who receives them initially.

3.10 The discussion should instead be about whether a single UC payment can ensure access to resources for both partners and encourage an equal relationship. The government recognises that ‘particularly in low-income households … men sometimes benefit at the expense of women from shared household income’. [5] And in the original Equality Impact Assessment, it undertook to consider the potential impacts of paying UC to one partner; we are unclear how or to what extent it has carried this out. Equality in sharing resources and financial decision-making cannot be assumed for all. And joint accounts cannot guarantee this. They are a symbol of marital togetherness, and many couples have them; but they are not appropriate for all, especially because they involve joint liability. Solving this via special financial products may not be possible, especially for people on low incomes. So for some couples, neither one person getting all the UC nor a joint account may be suitable.

3.11 The government’s central goal for UC is to encourage people into work. But personalised individual conditionality does not fit well with a system in which one partner receives no benefit. The government says that ‘both members of the couple play an equal part in the claim’; but this is not the case if only one gets the payment.

3.12 The government is keen on all adults acquiring financial capability; paying all the UC to one partner in couples would seem to make this less likely.

3.13 Couples often use a mix of income streams, and joint and individual accounts, to cope with the complexity of modern family life, especially when (in remarriage/repartnering) one or both partners have commitments to previous families. And recent research suggested that an imbalance of power or control of financial matters could cause relationship problems, and this could be related to gender role expectations - though lack of adequate finance was the commonest cause. [6] Only one partner receiving UC is less likely, in our view, to provide a stable basis for committed coupledom.

3.14 The government wants UC to be workable; so it needs to ensure that the arrangements work for all families - including those just getting together, splitting up, or cohabiting - not just long-term married couples.

3.15 Clearly, by acknowledging the need for exceptions, the government recognises a single UC payment is not always appropriate, and allowing a split is compatible with its goals for UC. We suggest this should be expanded to include giving couples the choice of splitting the payment between them/between accounts. During Lords Report stage (23.1.12), the minister made clear the government was more prepared to consider expanding choice in terms of couples splitting payments by percentages than dividing UC into its elements, and confirmed the technology did not prevent this.

3.16 Allowing couples to choose to split UC reflects the world of work and real families today, when most individuals have one or more income sources each, often including wages but also benefits/tax credits. It could also encourage discussion within the couple about what UC is meant to cover, and about financial distribution and decision-making. It would also demonstrate that UC is flexible enough to suit the various ways couples today choose to organise their lives and finances. If both UC payments were reduced simultaneously with wage increases, couples could see the impact of their decisions about work as clearly.

3.17 Giving choice to couples risks the stronger partner dominating. But that potential is there already. And exceptions, with the Secretary of State sanctioning splitting when necessary, would of course need to be retained. However, in our view this by itself is too unwieldy and labour-intensive a mechanism to encompass the variety of cases in which couples might prefer to split UC.

3.18 Finally, on a related issue, we are very pleased that the government appears to have taken at least an interim decision not to pay contributory benefits and UC together. The possibility had been mooted that the contributory benefit of one partner in the couple could be paid to the other partn er if they were the UC payee. This is not consistent with contributory benefits belonging to individuals. We would urge that this should be ruled out for the longer term as well.

8 August 2012

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[1] Parliamentary UnderSecretary of State for Work and Pensions, House of Commons Hansard , 9.5.12, col. 123.

[2] Lord Freud, House of Commons Hansard , 23.1.12, col. 909.

[3] Qualitative research for Within Household Inequalities and Public Policy (Gender Equality Network: www.genet.ac.uk), funded by the Economic and Social Research Council, carried out with Sirin Sung.

[4] This was based on a hierarchy of benefits, and whether the y made the claim.

[5] House of Commons Hansard , Written Answers 14 March 2011, col, 126W.

[6] Ramm, J. et al. (2010) Relationship Difficulties and Hel-seeking Behaviour , Research Report DFE-R018, London: Department for Education. (Th is was a representative sample of couples in long-term relat ionships , interviewed in 2002-03.)