Benefit sanctions policy beyond the Oakley Review - Work and Pensions Contents

3  The evidence base for sanctions policy

The success of "active" unemployment benefit regimes

42. DWP was adamant that "active policies work" in relation to unemployment benefit systems. It also emphasised that most developed countries attach quite strict work conditions to the receipt of unemployment benefits, and that financial sanctions "for refusing job offers or failing to participate in activities to help them into work [are] the norm."[39]

43. A number of witnesses agreed that the general approach had been shown to be relatively successful.[40] Tony Wilson of the Centre for Economic and Social Inclusion (Inclusion) told us that there was "robust" international evidence that active, conditional unemployment benefit systems, backed up by financial sanctions, are "more effective than the alternatives."[41]

The part played by financial sanctions in successful active benefit regimes

44. However, expert and academic witnesses reported that the international evidence on the specific part played by the application, or deterrent threat, of financial sanctions in successful active regimes was more nuanced and far from clear-cut. The joint university Welfare Conditionality research project told us that the current academic evidence "does not enable one to untangle the relative impacts of the job-search conditions themselves, the sanctions regime that enforces them, and any accompanying forms of support."[42] Evidence from the University of Oxford and the London School of Hygiene and Tropical Medicine (LSHTM), which undertook a comparative analysis of the social security sanctions systems applied in the EU and USA, indicates that they have variable effectiveness in getting claimants back into work, and that the UK's system was one of the most punitive.[43]

45. Inclusion's analysis was that:

There is some evidence that [sanctions] may increase the likelihood of entering employment, but it often appears to be poorer quality employment, temporary employment or unstable employment. There are very clear offsetting negative impacts, which are likely to outweigh any small, marginal positive impacts.[44]

This is borne out by a number of academic sources, including a comprehensive review of the international evidence published by the Joseph Rowntree Foundation in 2010.[45]

46. While almost all witnesses accepted that a set of basic entitlement conditions, and an accompanying system of disallowances, was necessary in any unemployment benefit regime, some believed that active regimes could operate, or even be enhanced, without the application of financial sanctions to enforce the wider range of conditionality.[46]

47. The Public and Commercial Services Union (PCS), which represents DWP staff, believed that very stringent and wide-ranging conditionality left claimants feeling that "the smallest misdemeanour will result in them being sanctioned". Its view was that this adversely affected the necessary relationship of trust between JCP Work Coach and claimant.[47]

48. However, DWP insisted that sanctions were an important and necessary part of the overall system. Chris Hayes pointed to research by the Organisation for Economic Co-operation and Development (OECD), which found that "having a credible benefit reduction leads to increased work search and an up to 50% increase of flow into employment because of that work search."[48]

49. Earlier in this Parliament, after considering DWP's plans for conditionality within Universal Credit, we came to the view that sanctions were necessary, but with important caveats about the way in which the system ought to be applied:

Sanctions are a necessary and important part of the benefits process, but there is little evidence that they strengthen work incentives on their own. The effectiveness of the new regime is likely to depend heavily on the quality of the face-to-face support provided by DWP through Jobcentre advisers. Sanctions must be used by DWP staff primarily as a deterrent and a last resort.[49]

However, with the emerging evidence of the application and effects of sanctions, our view is now more nuanced.

50. A range of witnesses to this inquiry emphasised the importance of balancing stricter conditionality with more intensive employment advice and support. Some believed that a proper balance was not currently being achieved.[50] We were concerned that support for claimants was likely to reduce or stop during a sanction period, as the claimant might stop engaging with JCP or the contracted provider. The Minster insisted that sanctioned claimants received "extra support", but she was unable to describe the types of additional help they typically receive.[51]

51. We agree that benefit conditionality is appropriate and necessary but reiterate our view that it is important that conditionality is balanced by effective employment advice and support for claimants. We recommend that DWP ensure that the relevant guidance to JCP Work Coaches includes that sanctioned claimants should be offered additional, tailored support, to help them meet their benefit conditions and improve their employment prospects, including attending a specific meeting after a sanction has been applied to discuss how to improve compliance and ensure that the Claimant Commitment fairly reflects the individual's needs and abilities.

Recent policy development

Welfare Reform Act 2012: a clearer system of longer fixed-period sanctions

52. Prior to the coming into force of Section 46 of the Welfare Reform Act 2012 (WRA 2012) in October 2012, JSA claimants could be sanctioned for periods of between one week and 26 weeks, as prescribed by DWP.[52] The Department believed that, under this system, it was "not always clear what level of sanction will be imposed for any particular failure."[53]

53. The WRA 2012 more clearly set out fixed period benefit sanctions which would be applied for the range of claimant failures, and introduced a system of escalating sanction periods for repeat failures on the part of the claimant. JSA sanctions are now applied according to the seriousness of the infraction, as follows:

·  Low level failures, for example missing an appointment, can result in a four week cessation of benefit payment, or 13 weeks for a repeat failure within a 52 week period;

·  Intermediate failures are more general failures to actively seek work or be available for work and result in JSA claims being closed. If claimants re-apply, no benefit is payable for four weeks after a claim following a first failure and 13 weeks after a second or subsequent claim where the most recent closure of claim was within a 52 week period; and

·  High level failures, including failure to accept a reasonable job offer, result in a sanction of: 13 weeks for a first failure; 26 weeks for a second failure within 52 weeks of the first; and 156 weeks (three years) for a third failure within 52 weeks of the most recent failure.[54]

We examine the types of claimant failures, and official data on the number of sanctions applied in each of the categories since the new rules came into force, in more detail in chapter 5.

54. Chris Hayes told us that the new system was intended to be more "credible", in line with the OECD findings mentioned above.[55] The Minister emphasised that the Government's intention was to establish a fairer and more consistent approach, in which claimants "would know what the sanction would be".[56] The Department also pointed out that the WRA 2012 changes had halved the maximum sanction period for a low-level failure, from 26 to 13 weeks. It also emphasised that by the end of June 2014, by which point there had been a total of 1,444,411 adverse decisions under the new regime, only 1,767 people had received the maximum three year sanction.[57] This had increased to 2,048 by September 2014, by which point there had been 1,562,893 adverse decisions.[58]


55. Universal Credit Regulations allow for a system of in-work conditionality, in which very low-paid claimants may be required to take steps to increase their earnings. The Department has not yet decided exactly how Universal Credit in-work conditionality will operate. It began testing different approaches in 2014, and will continue to do so this year; the necessary Regulations to allow for a range of further pilots were made in January 2015. The pilots will test approaches which focus on: additional support for claimants; the role of employers in driving pay progression; the impact of conditionality; and additional "financial levers, over and above the inherent incentives in Universal Credit". Claimants taking part in the pilots who fail to comply with the requirements without good reason will be subject to the normal sanctions regime.[59]

56. We recommend that the Government does not proceed with in-work sanctions beyond the existing pilots until robust evidence is available from the pilots to demonstrate that in-work conditionality can be effectively applied.

Evidence on the efficacy and impacts of the current regime

57. Expert witnesses, including Matthew Oakley, were concerned that the potential for longer minimum sanction periods had been introduced without any apparent evaluation by DWP of its likely impacts on claimants. Other witnesses noted a lack of evidence that the application, or deterrent threat, of longer sanction periods is any more effective than that of shorter ones.[60] Steve Hughes of Policy Exchange, which has been an advocate of stringent conditionality, noted that DWP's Impact Assessment of the new sanctions regime stated that "it is not possible to quantify the behavioural impacts".[61] Tony Wilson described this area of policy as an "evidence-free zone".[62]

58. We wanted to know what evidence the Department had considered on the likely wider impacts on claimants of minimum sanction periods of four weeks before implementing the WRA 2012 changes. The Minister could only point us to evidence for the efficacy of the overall approach.[63] Chris Hayes reiterated the point that it was important for any sanctions regime to be "credible", and was satisfied that the WRA 2012 changes achieved this. He told us that the UK was around "mid-table [of OECD countries] in terms of [the severity of] its overall conditionality regime." He noted that the three-year sanction was "not unique", and emphasised that in Germany an indefinite sanction could be applied in certain circumstances.[64]

59. There is evidence that active and conditional unemployment benefit regimes, in which financial sanctions play a part, are relatively effective, but there is very limited evidence, from the UK or overseas, on the relative impacts of the three parts of the overall approach: the benefit conditions themselves; the accompanying employment support; and the application, or deterrent threat, of financial sanctions. We accept that any sanctions regime must be "credible" if it is to influence claimant behaviour; however, it is not possible from the available evidence to come to a view on the relative efficacy and impacts of longer minimum sanction periods compared to shorter ones. We believe that it is important that the Government conduct evaluations to enhance the evidence base in this policy area, to demonstrate that the use of sanctions is not purely punitive.

60. We recommend that DWP evaluate, by testing different approaches, the relative impacts on movements off out-of-work benefits and into work of: benefit conditions themselves; the level of accompanying employment support; and the application, or deterrent threat, of financial sanctions. We further recommend that DWP evaluate the efficacy and impacts of four-week minimum sanction periods, as introduced following the Welfare Reform Act 2012, compared to minimum sanction periods of one week.

Impacts on benefit off-flow and the destinations of claimants

61. There is clear evidence that benefit sanctions tend to increase exits from benefits—known as benefit off-flow; however, the destinations of claimants who leave benefit following a sanction, and the wider social impacts, are less well understood. There are concerns that sanctions might lead to a range of unintended consequences, including severe financial hardship and associated wider social impacts.[65] We consider the system in place to prevent severe hardship in chapter 7.

62. Recent research by the University of Oxford and LSHTM examined official data on sanctioning rates, employment rates, and benefit off-flow in the period 2005-2014 across 375 local authority areas in the UK. The study found no relationship between local sanctioning rates and employment rates. It found a strong relationship between sanctioning rates and off-flow, and that this relationship had become stronger since 2011 (taken to be the point at which there was an escalation in conditionality brought about by the introduction of the mandatory Back to Work schemes, followed by the WRA changes in 2012). In the period 2011-2014, the study estimated that for every 100 JSA sanctions applied there was an associated off-flow from JSA of 42.4 persons. It claims that only about 20% of those leaving benefit following a sanction reported having found employment. [66]

63. One of the potential weaknesses in the above study was the difficulty in tracking the outcomes of individual claimants or cohorts of claimants. We noted this issue in our January 2014 Report on JCP. Since 2011 JCP's primary key performance indicator has been off-flow from benefit at the 13th, 26th, 39th and 52nd weeks of claims. Previously JCP's performance had been measured against a range of performance indicators, including off-flows from benefit into employment. From 2009 DWP no longer required JCP staff to record the reason a claimant left benefit. [67] A reason for leaving benefit, including where the claimant entered work, is recorded in only around 55% of cases. The Oxford/LSHTM study concluded that "there is a clear need to develop better monitoring systems for tracking what happens to persons who exit unemployment benefits."[68] This accords with the conclusions in our January 2014 Report.

64. The Minister strongly disputed the Oxford/LSHTM study's conclusions; she believed that the researchers had "reached a conclusion […] they wished to come to." She argued that official data on economic inactivity suggested that there had not been an increase in the number of people exiting benefits without finding work; she emphasised that official labour market data show that the number of economically inactive people has fallen by around 400,000 since 2010.[69] It is a concern that the Minister provided evidence to us on destinations of JSA, Income Support and ESA claimants from 2011, that pre-dated the new sanctions regime (NSR) introduced in 2012, in an attempt to challenge the findings of the University of Oxford/LSHTM study on the effects of the NSR on getting JSA claimants off-flow.[70] This was regrettable.


65. Chris Hayes pointed out that the introduction of Universal Credit, because it is paid to claimants both out of work and in lower paid work, afforded considerable opportunities to improve the tracking of claimants' movements into employment and progress in work. The key to this was the utilisation of HMRC's real-time information (RTI) on PAYE income, which enables DWP to track claimants' entries into salaried employment and their earnings progress. As Universal Credit is implemented over the next few years, benefit off-flow will cease to be a coherent measure of JCP's performance. Mr Hayes told us that the Department was using three separate measures of JCP's performance under Universal Credit: movements into work from no work; sustainment in employment over a six-month period; and progress in work over a longer period.[71]

66. Recently published research emphasises the importance of developing more effective systems for monitoring the destinations of claimants leaving benefit in general and, in particular, the destinations of claimants leaving benefit following a sanction. The introduction of Universal Credit affords the Department considerable opportunities to develop new and more effective systems. We recommend that DWP develop systems, using RTI data, to track shorter and longer term employment outcomes and earnings progress for sanctioned benefit claimants within Universal Credit, as part of its ongoing evaluation of the efficacy and impacts of benefit sanctions policy.

39   DWP (SAN0142) Back

40   See, for example, Q23 [Matthew Oakley]; Q24 [Tony Wilson] Back

41   Q24 Back

42   Welfare Conditionality: Sanctions, Support and Behaviour Change Project (SAN0054) Back

43   Loopstra, R, Reeves A, McKee, M, and Stuckler, D, Do punitive approaches to unemployment benefit recipients increase welfare exits and employment?, University of Oxford, Sociology Working Paper No. 2015-1, January 2015 Back

44   Q24 [Tony Wilson] Back

45   Griggs, J, and Evans, M, Sanctions within conditional benefit systems: A review of evidence, Joseph Rowntree Foundation, December 2010 Back

46   See, for example, Dr David Webster (SAN0110) and Q46; Public and Commercial Services Union (SAN0109) Back

47   Public and Commercial Services Union (SAN0109) Back

48   Q189 Back

49   Work and Pensions Committee, Third Report of Session 2012-13, Universal Credit implementation: Meeting the needs of vulnerable claimants, HC 576, para 183 Back

50   Kirklees Financial Inclusion Steering Group (SAN0065); YMCA (SAN0066); Centre for Economic and Social Inclusion (Inclusion) (SAN0143) Back

51   Qq197-200 Back

52   Jobseekers Act 1995, section 19 Back

53   DWP Impact Assessment, Conditionality Measures in the 2011 Welfare Reform Bill, October 2011 Back

54   Welfare Reform Act 2012, sections 26-7; 46; For a summary of the changes see also, CPAG, Regime change: sanctions and the law on claimants, October 2012 [accessed 25 February 2015] Back

55   Qq189-90 Back

56   Q215 Back

57   DWP (further supplementary evidence) (SAN0163) Back

58   DWP, Jobseeker's Allowance and Employment and Support Allowance sanctions: decisions made to September 2014, 18 February 2015, table 1.7 Back

59   The Universal Credit (Work-Related Requirements) In Work Pilot Scheme and Amendment Regulations 2015 Back

60   Q21 [Matthew Oakley]; Oxfam GB (SAN0088); Inclusion (SAN0143) Back

61   Q135; DWP, Conditionality Measures in the 2011 Welfare Reform Bill: Impact Assessment, October 2011 Back

62   Q24 Back

63   Qq182-86 Back

64   Q190 Back

65   See, for example, Joseph Rowntree Foundation, Welfare sanctions and conditionality in the UK, September 2014 Back

66   Loopstra, R, Reeves, A, McKee, M, and Stuckler, D, Do punitive approaches to unemployment benefit recipients increase welfare exit and employment? A cross-area analysis of UK sanctioning reforms, University of Oxford, Sociology Work Paper No. 2015-1, January 2015 Back

67   JCP Report, paras 102-104 Back

68   Loopstra, et al, Do punitive approaches to unemployment benefit recipients increase welfare exit and employment? A cross-area analysis of UK sanctioning reforms, University of Oxford, Sociology Work Paper No. 2015-1, January 2015 Back

69   Q238 Back

70   See, for example, Qq229-31 Back

71   Qq268-70 Back

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Prepared 24 March 2015