3Universal Credit
25.The DWP’s key reform, Universal Credit (UC), will replace six benefits with a single monthly payment.43 It is currently being rolled-out, largely for those JSA claimants who are single, and three Jobcentres are operating the digital service.44 The DWP expects UC to simplify the benefit system and make it less open to mistakes. In this chapter we examine the opportunities for UC to improve benefit delivery.
Opportunities for Universal Credit
The housing element
26.Housing benefit (HB) will eventually be replaced by the housing element of Universal Credit, and will be paid directly to the tenant. This housing element is likely to be a large component of a claimant’s monthly benefit income, so inaccuracies can cause real hardship.45 If too little is paid, a claimant may be unable to meet their housing costs and may incur debt with their landlord.46 If too much is paid, then this money is deducted from subsequent payments, resulting in a lower amount each month until the overpayment is recovered.47 UC offers opportunities to increase the accuracy of the housing element, and improve the experience for claimants. We were told that, currently, local authorities may take some time to get a claimant’s HB back to them if they suddenly leave work, whereas under UC it is “automatically reset”.48
27.HB is currently managed by local authorities. Sarah Seeger, Head of Customer Accounts at Curo, a housing association, described how an established relationship with the local authority helped resolve HB issues:
Where we have a problematic Housing Benefit claim, we have a longstanding relationship with the local authority and they will engage with us in conversations about claims so that we can understand what may have gone awry and work with the claimant to get that sorted out.49
She said her experience with UC was “very different”, involving calling a generic service centre and only reaching housing specialists after a “lengthy escalation process”.50
28.Sarah Seeger suggested a “landlord portal” would save a lot of time by allowing landlords to deal with simple enquires. The National Housing Federation said that a landlord portal should “allow a two-way flow of information between landlords and the DWP”, and be trialled before digital expansion.51 Lord Freud said that it was “absolutely right”52 for the Department to consider a landlord portal, or something similar, and that data sharing with housing associations was “a matter of real importance”.53 We note that, in response to Paul Gray’s independent review of Personal Independence Payments, the Department agreed to explore a “digital solution”, which would allow claimants to track a PIP claim online.54
29.The DWP is already exploring options for online resources in the digital service and Universal Credit is still in the ‘test and learn’ stage. Now is therefore an opportune time for the Department to develop other online tools, such as a landlord portal for the housing element. We recommend the Department trial a landlord portal in an area where the digital service is operating.
Personal Budgeting Support
30.Under UC, most households will receive a single, monthly benefit payment, including, where applicable, a housing element. The aim of the monthly payment is to replicate payment of wages and therefore ease the transition from benefits into work.55 It is, however, a major change for many households used to dealing with a large number of smaller payments with HB paid directly to their landlord. Personal Budgeting Support (PBS) has two elements: Alternative Payment Arrangements (APAs) and money advice.
Alternative Payment Arrangements
31.Alternative Payment Arrangements (APAs) allow the housing element of UC to be paid directly to the landlord, split between partners, paid more regularly than once a month, or a combination of those things. They can be requested by the claimant, their representative or the landlord.56
32.Housing association representatives told us that the introduction of APAs has been “positive” and welcomed the ability to have rent paid directly to them.57 We heard, however, a number of concerns relating to APAs, including:
- the requirement for a tenant to have built up rent arrears;58
- cancellation of APAs without review;59
- lack of awareness among Jobcentre staff of personal characteristics such as addiction or a mental health condition, known as tier 1 criteria, that may indicate a highly likely or probable need for an APA;60 and
- payment defaulting back to the claimant in error.61
33.Where a tenant has built up rent arrears, the housing association can request a Third Party Deduction (TPD) to reduce the outstanding debt. These deductions come off a claimant’s subsequent benefit payments. Peter Hughes, Group Manager at Wigan and Leigh Homes, said that in some cases up to £1,300 worth of rent arrears were generated by an individual before an APA was put in place.62 He added that some APAs were subsequently reviewed and cancelled without the landlord or the claimant being made aware and so the reduction of arrears ceased without warning.63
34.Rent arrears are not just a problem for landlords but have a detrimental impact on the lives of individual claimants. If they are unable to manage a large lump sum for rent then it can get swallowed up “by their associates, by their chaotic lifestyle or on other debts […] leaving them with a debt that they cannot afford to pay back”.64 Furthermore, the deductions for TPDs are usually set at 20% of the payment, which the National Housing Federation said had “caused hardship amongst tenants”.65
35.Alternative Payment Arrangements (APAs) are an important backstop to protect claimants who will struggle to manage a single monthly benefit payment. We recommend the DWP review its guidance, and application of that guidance, to ensure that (a) there is no requirement for a claimant to have built up rent arrears before an APA can be put in place; and (b) no APA can be cancelled without ensuring the claimant is aware of the change.
Money advice
36.The money advice element of PBS can be offered online, over the phone or delivered by external organisations.66 Stakeholders welcomed the introduction of PBS money advice but raised concerns that uptake has been lower than anticipated.67 Clarissa Corbisiero-Peters, Head of Policy at the National Housing Federation, said that money advice was either “not offered or understood that it is offered”.68 Sarah Seeger referred to survey evidence that only a quarter of UC claimants realised they had been offered support.69
37.We also heard that the delivery of PBS money advice could be “impossibly slow”70 and “condescending”.71 Rhiannon Simms, Policy Co-ordinator at Citizens Advice Scotland, said that, in order for PBS to be delivered effectively, there needs to be proper assessment of a claimant’s circumstances and needs. She said that the current process lacked “proper care and attention”.72 The Money Advice Service said that, whilst many claimants keep track of their finances, others have little confidence with money management.73 These claimants need support to build their financial resilience and should have access to financial products that help them to budget effectively.
38.The introduction of Personal Budgeting Support (PBS) money advice is a good step towards helping claimants manage their monthly Universal Credit payment. We are concerned, however, that in these early days it is not being delivered as effectively as it should be and uptake is low. We recommend the DWP review the processes for assessing and delivering PBS to ensure claimants are receiving the support they need to manage a single monthly payment. We further recommend that DWP conduct a study of the best way to encourage claimants to use the financial products available in order to manage their budget.
Initial Universal Credit payment and “passported” benefits
39.Witnesses told us of a “built-in delay” of “around 6 weeks” from application to receipt of an initial monthly UC payment. 74 In addition to the monthly cycle, the DWP has introduced an extra seven-day waiting period before a claim can be made. Ostensibly, this is to help claimants focus on looking for work during that initial week,75 but some organisations have branded it an “inequitable extra delay” and “a real concern”.76A delay to the initial UC payment will also delay access to “passported” benefits such as free school meals and free prescriptions. We were told of individuals who received fines of up to £170 for claiming free prescriptions as they were not eligible in the weeks before their first UC payment.77
40.We heard that initial UC payment delays can only be managed if claimants have savings or a redundancy payment from their last employer.78 While some claimants will have such funds, others will not: for example if they were paid weekly rather than monthly,79 or if they have been released from prison.80 Carmel Keddy, from Derbyshire County Council, told the Committee that the first payment “cannot cover the six weeks previous and the four weeks going forward”.81 As a result, she said that the situation could push claimants into debt as they were “starting with zero so six weeks down the line they have got a hell of a lot less than zero”.82
41.It is too early fully to assess the impact of the five to six week wait claimants have for their first Universal Credit (UC) payment. We are concerned the DWP has not properly considered households who have no savings or a final paycheque to fall back on. We will continue to monitor the effects of this built-in delay and return to it when we examine UC in more depth.
The limitations of Universal Credit for improving benefit delivery
42.Ministers expect UC to result in a simpler and more efficient benefit system less prone to claimant or administrative error. By using HMRC real-time information on income tax data, the DWP expects “far more timely information to get the figures right”.83 There, are however, limitations to the improvements to benefit delivery that can be expected of UC.
43.First, the DWP do not project the rollout of UC to be accompanied by a large reduction in fraud and error. The NAO reported that the DWP expects the full implementation of UC alone to reduce overpayments by £0.5 billion a year.84 The DWP’s preferred fraud and error measure shows a steady projected reduction in total overpayments over the next five years, from 3.5% of benefit spending in 2014–15 to 2.6% by the end of this Parliament. This primarily reflects the phasing out of in-year overpayments, whereby tax credit entitlements are estimated at the beginning of the financial year and finalised later, as real-time information is used in UC. The DWP told us that “overpayments are an inherent feature of tax credits” as, in that system, “benefit payment does not reflect the claimant’s circumstances at the point it is paid”.85 Both HMRC and the NAO, however, do not regard such payments as error.86 Once they are excluded, overpayments due to fraud and error are projected to be largely flat over the period, rising slightly from 2.5% of benefit spending in 2014–15 to 2.6% in 2020–21 (Figure 3).
Figure 3: Forecast fraud and error in DWP and HMRC, 2013–14 to 2020–21
The removal of tax credits in-year overpayments is the main driver in reducing DWP’s definition of fraud and error
Source: National Audit Office analysis of Department for Work & Pensions and HM Revenue & Customs data on long-term forecasting of benefits and credits overpayments, Fraud Error and Debt Steering Group, April 2015.
44.Second, UC will not be fully implemented for several years and has been subject to repeated delays. In November 2015 Office for Budget Responsibility (OBR) economic forecasts noted the DWP has “decided to slow the pace of natural migration” to UC of claimants with new or changed circumstances.87 The OBR also incorporated a further 6-month delay in their “forecast judgement” assumption about UC noting “considerable uncertainty remains over the ‘managed migration’ phase” of transferring existing claimants88 (Figure 4). These are the latest in the string of delays that led our predecessor Committee to express concerns about the DWP’s ability to realise its rollout timetable.89
Figure 4: Successive revisions to the Universal Credit rollout assumption
The OBR forecasted a further six-month delay to the UC rollout.
Source: Office for Budget Responsibility, Economic and fiscal outlook, November 2015.
45.Lord Freud attempted to reassure us that the bulk of “legacy” cases, people on benefits that will be replaced by UC, would be transferred to the UC system “by the end of this Parliament or end of 2020.”90 He argued that this meant that resolving benefit delivery problems on legacy benefits should not be prioritised:
The reality is we are talking about the problems of some dying legacy benefits, which, frankly, by the time you have done all the work to adjust, you would have been better off putting that energy into getting UC working as slickly as you possibly can.91
46.The NAO has warned that the DWP should not neglect levels of fraud and error in legacy benefits.92 But recent estimates show that between 2013–14 and 2014–15, the level of fraud and error overpayments in Jobseekers Allowance increased from 3.9% to 5.1%; and underpayments increased from 0.4% to 1.1%.93 Even assuming the DWP’s latest UC timetable is correct, some existing claimants face another 4–6 years in the legacy system. It is to that system that we now turn.
47.The six “legacy benefits” scheduled to be replaced by Universal Credit will be with us for many years yet. Ensuring they are delivered in an accurate and timely fashion should not be neglected in the meantime.
43 Income Support, income-related Jobseeker’s Allowance and Employment and Support Allowance, Housing Benefit, Working Tax Credit and Child Tax Credit
44 Croydon, Sutton and London Bridge. Jobcentres with the UC digital service are taking cases for all types of benefit claim in certain postcode areas.
51 Ibid
53 Ibid
54 DWP, Government’s second response to the Independent Review of the Personal Independence Payment Assessment, Cm 9159, November 2015 p.14
56 APAs can also allow a claimant to have multiple payments over the month or allow a split of payment between partners. DWP, Personal Budgeting Support and Alternative Payment Arrangements: Guidance, p.7
63 Ibid
71 Ibid (Clare Jephcott)
74 National Housing Federation (BFD1080), Financial Action and Advice Derbyshire (BFD0164); and DWP, Universal Credit: what you’ll get, https://www.gov.uk/universal-credit/what-youll-get
79 Citizens Advice, Waiting for Credit: The delivery of Universal Credit as experienced by Citizen’s Advice clients in England and Wales, p.8
84 Department for Work and Pensions, Annual Report and Accounts 2014-15, Report by the Comptroller and Auditor General, p. 98, para 29.
86 See reference 13.
87 OBR, Office for Budget Responsibility: Economic and fiscal outlook, Cm 9153, November 2015, p.136
88 Ibid, p.137
89 Work and Pensions Committee, Universal Credit implementation: monitoring DWP’s performance in 2012-13, Session 2013-14, HC 1209, 2 April 2014.
90 Q228 Ibid
91 Q196 Ibid
© Parliamentary copyright 2015
Prepared 18 December 2015