Welfare Reform and Work Bill

Written evidence Zacchaeus 2000 Trust (Z2K) (WRW 08)

Introduction

The Zacchaeus 2000 Trust (Z2K) is a London-wide anti-poverty charity that promotes the improvement of living conditions on the basis of economic and social justice, and by direct engagement with the lives of the poorest and most vulnerable. In 2011, we established the NextDoor service to help those threatened with homelessness as a result of the Coalition Government’s cap on Local Housing Allowance (LHA) and the subsequent £500 Benefit Cap. In 2013, we set up NextDoor Plus to provide support for families forced to move home.

Overview of the Bill

Z2K is opposed to several measures in the Welfare Reform & Work Bill as we believe they will either result in already low-income households being made worse-off financially or in some cases made homeless. We disagree with the four-year long freeze on Child Benefit and Child Tax Credits, and the restriction on Child Tax Credits and Universal Credit to a maximum of two children. We are also opposed to the cut in the level of Employment & Support Allowance for those in the Work Related Activity Group and the four-year freeze on Local Housing Allowance rates of Housing Benefit for those living in the private rented sector, as this will increase the number of households forced into rent arrears.

However, Z2K’s over-riding objection to the Bill is the provision in clause 7, lowering the Benefit Cap to £23,000 a year in London (and to £20,000 outside London). In our experience of helping hundreds of those affected by the current £26,000 a year cap over the past two years, this policy has a devastating impact on the lives of some of London’s poorest families. In particular, despite ministerial claims to the contrary, we have seen many families accrue such high levels of rent arrears that they end up losing their home.

The refusal of DWP to publish an Impact Assessment of the reduced £440 cap at the same time as this Bill, means that ministers have yet again failed to provide any substantive evidence on which their policy can be judged objectively. At this stage, we do not even know for certain how many households will be affected. However, the National Housing Federation estimates that as many as 205,000 households could be affected [1] and leaked DWP papers suggest that at least 40,000 more children will fall below the poverty-line.

Z2K’s briefing therefore sets out the real impact of the current £500 a week Benefit Cap, including examples of families who have been hit by it. Many of those households will be hit again, along with tens of thousands more mothers with very young children, full-time carers, disabled claimants and those deemed too ill to work. The cap results in vulnerable families facing an almost impossible choice between feeding and clothing their children, heating their homes and paying the rent.

Clauses 7 and 8 should be deleted from this Bill.

Summary: what is wrong with the cap?

Z2K is opposed to the Benefit Cap on a point of principle. We believe that low-income households should receive the benefits to which they are entitled, and not have them artificially restricted by a cap. However, the policy also fails the tests ministers themselves have set for it. None of their claims stand up to serious scrutiny.

"It incentivises people to move into employment"

The reality is that the vast majority of those affected by the cap are not in a position to move into employment. DWP’s own figures show that 77 per cent of capped households are in receipt of a benefit which means they are not currently expected to work. Those remaining claimants who are expected to work already face benefit sanctions if they are not deemed to be looking for work sufficiently hard enough. The Benefit Cap has not been shown to have anything more than a marginal impact on claimants moving into work.

"It’s about making sure families on benefits don’t earn more than those working"

DWP said that the original £26,000 per year cap was set at that level because it reflected average earnings and was supposed to mean that no unemployed household would receive more in benefits than a working counterpart. In reality, even before the cap, no unemployed household could receive more than a working one in the same circumstances. This is because a family earning £26,000 would actually be entitled to around £14,000 in benefits, including Child Benefit, Working Tax Credits and Housing Benefit. Clause 8 of the Bill removes all mention of the cap being set by reference to average earnings.

"The Benefit cap saves money"

The £500 a week cap was originally said to save £270 million a year. It is now admitted, however, that the figure is less than half of that. We are therefore sceptical of the Prime Minister’s claim that lowering the cap will save a further £135 million a year. Given past practice, this figure will take no account of the additional costs to local authorities of having to deal with the thousands of families who will be made homeless as a result of this policy.

"The lower cap will not cause homelessness"

Analysis by housing solicitor Giles Peaker [2] has shown that at a reduced cap of £23,000 a two parent household with three children would not receive enough Housing Benefit to cover the rent for a three-bedroom social property. For "Affordable Rent" homes, he calculates that even a household of two parents with two children would not be able to cover the rent for a property of two bedroom or more.  No adequately-sized private rented sector home in London would be affordable to a capped two parent household with two children.

Household Benefit Cap

DWP initially suggested that this cap of £350 a week for individuals and £500 a week for families with children would impact upon an initial group of around 67,000 households. However, by the time its Impact Assessment was published, DWP estimated, that around 56,000 households losing an average of £91 a week from their Housing Benefit – almost £5,000 a year. These 56,000 households were thought to include around 180,000 children. DWP claimed the Benefit Cap would save the Exchequer around £270 million a year. [3]

By the time the cap began to come into effect in April 2013, the total number of households affected had been revised down again to 40,000. Work & Pensions Secretary, Iain Duncan Smith MP, claimed that this reduction was actually a consequence of the cap saying,

"Already we've seen 8,000 people who would have been affected move into jobs. This clearly demonstrates that the cap is having the desired impact." [4]

The UK Statistics Authority was asked to investigate the validity of this claim. It concluded,

"the statement attributed to the Secretary of State is unsupported by the official statistics published on 15 April 2013. The release Ad hoc statistics on Job Centre Plus activity, from which the 8,000 figure is drawn explicitly states that the figures are not intended to show the additional numbers entering work as a result of the contact."

Latest Statistics

DWP reports that between April 2013 and February 2015, 58,670 households across the UK had their Housing Benefit capped. 94 per cent of those households had dependent children. Of those, 32,675 were single parent families and 22,602 were couples with dependent children. It is not possible to be certain how many children have been affected by the cap so far, but the figure will be at least 150,000. 45 per cent of those affected live in London.

The most recent statistics also show that 23,093 households were still affected by the cap at the end of February 2015. This total included 14,494 single parent families and 7,357 couples with dependent children. 18,756 of those 21,851 families had three or more children – 86 per cent of families currently affected. By its very nature the Benefit Cap discriminates against larger families, especially those with three or more children. The most recent statistics for each London borough are set out in Annex A (page 12)

In London, eviction from a private rented sector (PRS) tenancy is now the largest single cause of homelessness– 39 per cent (in 2010 was 11 per cent). Almost every homelessness organisation in London identifies the LHA caps and Benefit Cap as the main cause of this increase, and yet Ministers simply refuse to acknowledge it.

Z2K’s Experience of the Impact of the Cap

Over the past two years, Z2K has supported nearly 300 London households affected by the Benefit Cap. Many of those households were already affected by the Coalition Government’s initial cap on Local Housing Allowance (LHA), which restricted Housing Benefit payments to a maximum of £400 a week, and left some families facing significant shortfalls in their rent that needed to be made up from Income Support, Job Seekers Allowance or Employment Support Allowance.

In advance of the Benefit Cap coming into force, Ministers argued that households affected by it would take steps to either work enough hours to qualify for working tax credit, renegotiate their rent in situ, or find alternative accommodation. In Z2K’s experience, people in areas of high housing demand are rarely in a position to renegotiate their rents in situ or move easily into employment.

The overwhelming majority of affected households we have seen are families living in the private rented sector. Their homes are expensive because of their location rather than quality. For these families, it invariably proved impossible to negotiate a cheaper rent with their landlord. Our advisors tried to help them find more affordable accommodation, but in most cases it proved impossible to find them a tenancy near their home area sufficiently cheaper that it brought them below the Benefit Cap level.

Z2K helped most of these clients apply for a Discretionary Housing Payment (DHP) to cover the shortfall. While a fair number were initially successful, many were not and these families ended up having to try to make up the difference from other social security benefits. Inevitably, most of those clients were unable to maintain these payments and quickly accrued rent arrears, which resulted in possession action by their landlord.

A significant number of those we helped were eventually evicted and ended up homeless in temporary accommodation (TA) brokered by their local authority (sometimes at a significantly higher cost than their previous rent). Usually, this TA was in another borough, far from the children’s schools and the family’s support networks. Capped families cannot simply move into something cheaper as that would almost inevitably result in the authority deciding to cease its duty and ending their "Reasonable Preference" for social housing.

· Z2K believes homeless households in Temporary Accommodation should be made exempt from the Benefit Cap.

Many of the families we have seen face significant barriers to entering employment. When discussing options with those affected, Z2K caseworkers were usually faced with distressed households who want to work, but were unable to accept low paid and insecure employment because these jobs did not cater for their family’s needs. Mothers explained that the lack of affordable childcare limits the number of jobs they could apply for, which need to be for a small number of hours during school time.

· Z2K believes mothers with young children should be exempt from the Cap

Z2K has also advised many clients on ESA who simply could not work as a result of injury or illness, had been signed off by their GP, and so were not expected to actively seek employment. However, as this was usually only at the lower Work-related Activities level of ESA, they are not exempt from the cap but are rendered incapable of escaping it by moving immediately into work even if any suitable jobs had been available.

DWP’s initial Impact Assessment in January 2012 estimated that 40 per cent of those affected would be in receipt of JSA. However, this figure was revised down to 34 per cent in July 2012, and the actual proportion of those affected in the most recent statistics is around 25 per cent. The remaining three-quarters of those currently affected by the cap are not actually expected to be in work. This is broken down as follows:

· 23 per cent are in receipt of Employment & Support Allowance (Work-Related Activity Group)

· 45 per cent are on Income Support (mostly lone parents with young children)

· 9 per cent in receipt of Carer’s Allowance or other benefits. [5]

The fact that the cap now overwhelmingly impacts on those who are not expected to work is one of its most pernicious features.

"Brenda"

· Z2K believes all those on ESA should be made exempt from the cap

One of the most shocking features of the cap is that it applies to many households in receipt of Carer’s Allowance. This benefit is only paid to those who are looking after a disabled person for more than 35 hours a week on average – effectively the equivalent of full-time employment. Carers also lose their entitlement if they earn more than £102 a week, which makes it extremely difficult to work 16 hours week or more without losing their allowance.

· Z2K believes that those in receipt of Carer’s Allowance should be made exempt from the Benefit Cap

Discretionary Housing Payments

In Parliamentary debates, ministers repeatedly argued that the increased budget for DHPs (£165 million in 2013/14, £135 million in 2014/15 and £125 million in 2015/16) will support those households most affected. However, as the National Audit Office (NAO) reported in November 2012, those DHPs only add up to six per cent of the savings due to be made by the HB reforms and "it is not clear how the current level of funding for DHPs has been determined." [6] When challenged over this shortfall during the debate on the Benefit Cap regulations in 2012, DWP Minister, Mark Hoban MP conceded that:

"…. money should be used to support only those claimants who cannot move immediately into work or more affordable accommodation; it should not be used to meet every shortfall." [7]

In any case, this DHP funding has also been available to those affected by the "Bedroom Tax" and caps on LHA, including the Shared Accommodation Rate, as well as those affected by the Benefit Cap. In fact, DWP itself said that the amount of DHP specifically for Benefit Cap cases would be £65 million in 2013/14 and £45 million in 2014/15.

In practice, the delayed roll-out of the Benefit Cap from August 2013 instead of April 2013, meant that there was a little less pressure on DHPs than anticipated and some authorities were able to substantially meet the shortfalls of many of those affected, thus saving them from falling into rent arrears and facing eviction and homelessness. In some cases, boroughs deliberately under-spent DHP budgets and were allowed to roll funding over into 2014/15 to supplement that year’s pot.

Things were much harder in 2014/15 as the Benefit Cap was in effect for all 12 months of the financial year. Many DHP funding pots were significantly oversubscribed and many authorities prioritised applications from those social tenants affected by the "Bedroom Tax" or homeless households in temporary accommodation. A number introduced extensive conditions on DHP awards. Even those London boroughs that topped up their DHP pot, tended to focus the extra money towards homeless families in an effort to maintain the supply of temporary accommodation. DWP’s own research showed that nearly half of those affected by the Benefit Cap had not heard of DHPs. [8]

The Chancellor confirmed in the recent Emergency Budget that DHP funding will be £800 million over the next five years. This breaks down as a budget of £150 million in 2016/17, rising to £185 million in 2017/18. While we welcome this increase, it is clearly insufficient to support those worst affected by the new cap, particularly given the continuing impact of the Bedroom Tax on council and housing association tenants.

DWP Review of the first year

In December 2014, DWP published its review of the first year of the Benefit Cap. Given the rhetoric that preceded the cap’s introduction, it is not surprising the report concluded that,

"results from the evaluation reports of the Benefit Cap show evidence of behavioural change. The movement into work for those households affected by the Benefit Cap is higher than movement into work by a comparable group of households not affected by the cap." [9]

The statistical basis for this claim that the Benefit Cap has increased the proportion of households moving into employment were the following findings:

· 19 per cent of capped households in the May 2013 cohort were in work after a year compared to 11 per cent for a similar uncapped group.

· After controlling for a range of observable difference between the groups (e.g. number of children) capped households were 4.7 percentage points more likely to enter employment compared to uncapped households.

· Nearly a quarter of capped households in London entered work after a year. This compares with around 13 per cent for those households with benefits entitlement just under the cap level.

· After controlling for a range of observable difference between the groups, London households in scope for the cap in May 2013 were 9.5 percentage points more likely to flow into work after a year than similar uncapped households.

· Lone parents in scope for the cap were 4.9 percentage points more likely to enter employment after a year compared to similar uncapped households.

Z2K is not persuaded these "findings" support the conclusion reached. Firstly, the study does not identify any causal factors that explain why more capped households than uncapped ones are moving into work. Secondly, the proxy used to identify households moving into employment (starting a claim for Working Tax Credits) is at best an inexact measure. But most importantly the numbers of claimants involved is actually rather insignificant in the grand scheme of things. Behind the 19 per cent figure, for example, are just 2,000 families who had someone move into paid work in the 12 months after May 2013.

We have long questioned the role of the Cap as a work incentive when a majority of those affected receive either ESA, Income Support or Carer’s Allowance. Indeed, only around a quarter of capped claimants in July 2014 were claiming JSA and therefore able to work. Unsurprisingly, therefore, it is JSA and ‘other’ benefit claimants that make up a large proportion of the capped claimants who have moved into work, with 28 per cent of JSA claimants finding employment within a year compared to 12 per cent of ESA claimants.

In a press release on 06 November 2014, DWP claimed that, "More than 12,000 households have made the choice to move into work or stop claiming Housing Benefit because of the benefit cap." Again, the UK Statistics Authority investigated. It concluded that,

"the available numerical evidence does not demonstrate a particularly strong causal link between the Benefit Cap and the decisions made by individuals about moving into work …. As a result, our view is that it might have been more appropriate to adopt more cautious wording in the press statement."

Interviews with affected claimants

In addition to its "analysis" of the statistics, DWP commissioned the Cambridge Centre for Housing & Planning Research to undertake in-depth interviews with 50 households affected by the cap. In its summary report, DWP claims that these interviews found,

"half reported that they had looked harder for work, broadened the type of work they were willing to accept, tried to increase their hours of work, or started to look for work in response to the cap." [10]

This research was designed to help understand the impact of the Benefit Cap, but, the author herself makes it clear that "It is not possible to draw robust generalisations from a small sample such as this." [11] Despite this caveat, DWP repeatedly uses the responses to this survey to endorse its view that the cap has improved work incentives.

IPSOS Mori Survey

DWP also commissioned IPSOS Mori to survey over 1000 households affected by the cap in February 2014 (Wave 1). Follow-up interviews were conducted with 468 of those households in August 2014, to determine what changes in their circumstances and attitudes had taken place. DWP’s summary report highlights the finding that the proportion of these claimants looking for work increased from 24 per cent in Wave 1 to 38 per cent in Wave 2. As with the in-depth interviews, however, the researchers added a caveat, stating that,

"it is important to keep in mind that results from wave 2 are based on a specific group of claimants and reflect the characteristics of this group at a specific point in time. They will therefore not necessarily be representative of the entire affected claimant population as reflected by official statistics published on the Benefit Cap." [12]

DWP’s summary downplays this and the revelation that around one-third of those affected told IPSOS-Mori they were spending less on "household essentials". DWP has not commissioned any further research into the health and well-being of affected families.

Moving house

DWP also emphasised the finding that only 14 per cent of those in scope for the cap in May 2013 had moved house, compared to around 11 per cent for a group with benefit entitlement just under the cap level. IPSOS-Mori’s finding that the proportion of affected households saying they were looking to move house actually fell from 42 per cent in Wave 1 (February 2014) to 36 per cent in Wave 2 (August 2014) was claimed to provide further evidence fears of widespread homelessness had proved unfounded.

This figure should come with the same caveat about it being an unrepresentative sample. More importantly, it doesn’t actually identify all moves. Short-distance moves where the claimant stays within the same postcode sector are not counted. This includes families who, in order to stay in the same area, have downsized and therefore overcrowded themselves. The relatively small numbers from this cohort who have moved might be explained by DHPs covering the Housing Benefit shortfall and temporarily forestalling the need to move.

Supreme Court Judgment

In a recent UK Supreme Court judgment, three of the five judges found that the Benefit Cap was not compatible with the UN Convention on the Rights of the Child to treat the best interests of the child as the primary consideration. Two of these three judges also found the cap to be discriminatory against women. In her concluding statement, the Deputy President of the Supreme Court, Lady Hale states that,

"The prejudicial effect of the cap is obvious and stark. It breaks the link between benefit and need. Claimants affected by the cap will, by definition, not receive the sums of money which the state deems necessary for them to adequately house, feed, clothe and warm themselves and their children (paragraph 179)." [13]

Responding to this judgment, Work & Pensions Secretary, Iain Duncan Smith, said, "I am delighted that the country’s highest court has agreed with this government and overwhelming public opinion that the benefit cap is right and fair." This claim is simply untrue. The Supreme Court found the cap is "lawful". If anything, a majority of the Supreme Court found the cap to be neither right nor fair. Lord Carnwath, who accepted the cap is lawful, nonetheless called on the government to review it.

Conclusion

The lower £23,000 a year Benefit Cap in London will simply serve to further impoverish those already affected by the current £26,000 cap, as well as tens of thousands more mums with very young children, full-time carers, disabled claimants and those deemed too ill to work. Clauses 7 and 8 should be deleted from this Bill.

August 2015

Annex A

Number of Households Capped April 2013 to February 2015

Number of Households currently capped (February 2015)

Barking & Dagenham

749

314

Barnet

1,099

381

Brent

2,252

898

Camden

610

263

Croydon

1,007

313

Ealing

1,700

769

Enfield

2,191

761

Greenwich

504

205

Hackney

950

410

Hammersmith & Fulham

661

265

Haringey

1305

462

Harrow

695

239

Hillingdon

599

242

Hounslow

592

220

Islington

626

257

Kensington & Chelsea

652

280

Lambeth

675

263

Lewisham

774

316

Newham

1,144

407

Redbridge

791

304

Southwark

452

205

Tower Hamlets

1,472

650

Waltham Forest

761

318

Wandsworth

876

310

Westminster

1,444

651


[1] http://s3-eu-west-1.amazonaws.com/pub.housing.org.uk/Summer_Budget_2015_-_Member_Briefing.pdf

[2] http://nearlylegal.co.uk/blog/2015/06/an-inconvenient-problem-2/

[3] Impact Assessment for the Benefit Cap (DWP, July 2012)

[4] http://www.bbc.co.uk/news/uk-politics-22462265

[5] Hansard, Written Answers (03 July 2015)

[6] Managing the impact of Housing Benefit Reform (National Audit Office, November 2012)

[7] House of Commons - Second Delegated Legislation Committee, 06 November 2012: Column 26

[8] In-Depth interviews with people affected by the benefit cap (DWP, 2014)

[9] The Benefit Cap: a review of the first year, (DWP, December 2014)

[10] The Benefit Cap: a review of the first year, (DWP, December 2014)

[11] In-Depth interviews with people affected by the benefit cap (DWP, 2014)

[12] Post-implementation effects of the Benefit Cap (Wave 2 survey)

[13] https://www.supremecourt.uk/decided-cases/docs/UKSC_2014_0079_Judgment.pdf

Prepared 11th September 2015