4Considering the options for split payments
Delivering split payments
Split payments in Scotland
60.Universal Credit is a reserved responsibility of the UK Government. However, the Scotland Act 2016 gives the Scottish Government some powers to change UC payment arrangements.144 These include:
- the option for UC payments to be made twice a month rather than monthly;
- the option of the UC housing element to be paid directly to social and private sector landlords;
- the power to vary the amount of housing costs paid to people in receipt of UC; and
- the power to split payments between members of a household.
61.In June 2017 the Scottish Government made regulations to introduce the first two flexibilities listed above. These came into effect in October 2017.145 In April 2018, the Scottish Parliament passed the Social Security Scotland Act 2018. This required the Scottish Government to make regulations to introduce split household payments by default. If such regulations are implemented, UC payments to Scottish claimants will be automatically split, unless claimants opt to receive a single household payment.146 The Scottish Government has yet to decide precisely how it would like payments to be split.147
Box 1: The Scottish Government’s powers to adjust UC
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Under the Scotland Act 2016, Scottish Ministers must consult the UK Secretary of State on the practicability of their proposed social security regulations. These regulations are the means by which the Scottish Government can vary UC payment arrangements in Scotland. While the Scottish Government is responsible for the policy, the DWP is responsible for delivering the practical change. If the UK Secretary of State is not satisfied that it is practical to implement the change by the date in the regulations, they can amend the start date through further regulations. The UK Secretary of State can therefore control the timetable for the introduction of split payments in Scotland. |
Source: Scotland Act 2016, Section 30
62.The Minister said DWP remains “open minded” to the possibility of default split payments elsewhere in the UK and is closely monitoring Scotland’s progress in this area. He cautioned, however, that complexities arise in relation to both how claimants are split—the amount received by each partner—and the capacity of the UC IT system to handle routine split payments.148 The Minister told us that if Scottish Ministers can “work their way through (these) complexities”, and the split payment policy “works well” then the Department will consider splitting payments by default.149 The Department therefore maintains that its own approach to more routine split payments will depend on the experience in Scotland.
63.The Scottish Minister for Social Security, Jeane Freeman MSP, told us, however, that the Scottish Government is relying on DWP to enable them to deliver split payments. She told us their ability to make good on their plans is “strongly dependent” on DWP “making significant changes” to the existing IT system. Successful implementation hinges on what the Department deems “technically feasible”.150 In order to use their regulatory powers to introduce split payments, Scottish Ministers must consult the Secretary of State to agree a delivery date (see Box 1, above).151 The Scottish Government must also pay the costs of administering split payments, negotiated with DWP.152 Jeane Freeman told us discussions with the Department continue, but no resolution has yet been reached on either cost or IT capacity.153 The Scottish Government told us it is “wholly dependent on the DWP” for delivery of its split payments policy.154
Automation
64.The Department intends to introduce a fully automated national registration and payment system for UC—the “digital service”. Under this plan, claimants will register online and their payments will be calculated automatically each month, using data from the HM Revenue and Customs Real Time Information system. The Department has struggled with automation, which is crucial to UC achieving the efficiency savings the Department hopes to deliver.155 In April 2018 89% of claims in payment were calculated automatically.156 In June 2018, the National Audit Office reported that the Department’s “agile” approach to IT and administrative systems management had enabled it to incorporate changes as the programme rolls out and it learns about what works—and what does not. These changes, and further additional functionality, are the source of multiple delays to UC’s roll out, which is now not scheduled to be complete until 2024.157
65.Split payments currently require manual intervention from Work Coaches. Neil Couling told us that extending this system would undermine parts of the UC IT system that will enable it to run efficiently.158 Delivering split payments on a routine basis would therefore require the Department to develop the ability to automate them. Neil Couling told us that DWP is prioritising the APAs with the highest volumes—such as managed payments to the landlord—to automate first. Because there are very low volumes of split payments, they have not been prioritised for automation, and will not be “anytime soon”.159 There are low volumes of split payments, however, because they are a discretionary exception, offered only in very exceptional circumstances.160 Demand would of course be very high if they were offered as default. Neil Couling told us that automation would be technically possible if sufficient demand was evident.161
66.Scotland is convinced of the merits of splitting payments by default. Its ability to do so, however, hinges on DWP adapting its IT and administrative systems. Automation of payments is central to Universal Credit achieving its efficiency objectives. DWP should view Scotland’s intention to introduce split payments as an opportunity. It offers a chance to “test and learn” the different possible approaches to introducing split payments, and to assess whether the introduction of split payments brings benefits for claimants. DWP should engage positively and quickly with the Scottish Government to cost and negotiate the IT changes needed to roll out split payments. We recommend the Department commit in response to our report to providing regular updates on its progress negotiating automation of split payments with the Scottish Government. This will provide a clearer understanding of the challenges, costs and feasibility of splitting payments by default.
The split between partners
67.Although the Scottish Government has made regulations to enable it to introduce split payments, it has not yet reached a decision on how payments will be split. The Scottish Minister explained that the idea of splitting payments between members of a household had been very popular in their consultation. 78% of individual respondents, and 99% of organisational respondents supported the principle.162 She explained, however, that:163
Views vary on how it might work in practice. For example, whether payments should be split 50:50 or by entitlement to a qualifying benefit. We are currently working through the implications of different options to ensure there will be no unintended consequences.
Women’s Aid similarly identified a range of different ways that payments might be split between partners, but no clear preference for any one of these. When respondents were able to choose multiple options from a list:164
- 59% felt that all Universal Credit should always be paid to the mother;
- 50% felt that Universal Credit amounts related to children should be paid separately to the rest of the award—for example, being paid with Child Benefit;
- 37% felt that elements related to housing should be paid separately from the rest of the award;
- 22% felt that payments should be split equally between partners who have a joint claim.
Splitting proportionally
68.The Department told us that automating split payments would require it to make a policy decision on what proportion of the UC award should go to each partner.165 The Minister said that a 50:50 split—the “most obvious” solution—would risk “creating unfairness”. He gave the example of a couple where one member has responsibility for paying childcare costs. Here, it “would be difficult to apply a 50:50 rationale for splitting the payment”. This may reflect the lack of enthusiasm for such a split in Women’s Aid’s survey. He suggested an even split could also prompt some individuals to “consider the payment as “my 50%” or “my money”. They might then fail to consider the household’s financial obligations jointly.166
69.Other witnesses told us that a 50:50 split would prompt new, more equal financial norms within couples.167 Women’s Budget Group said an even split would:
Give a clear signal of equality between partners, would enable each to develop and practice financial capability (one of the government’s aims) and be consistent with the dual nature of joint claims as having individual as well as joint responsibilities.168
Marilyn Howard said an equally split payment would highlight to claimants that they have “individual responsibilities—both to meet benefit conditions and to meet household budgeting” requirements. This would “counteract” the regressive concept of a “head of household”.169 Neil Couling told us a 50:50 split between both members of the couple would be the most feasible technically.170
70.We heard that, at the moment, split payments are rarely divided 50:50. Neil Couling gave the example of a claimant who is an alcoholic, and spending the entire family payment on alcohol. Here payments might be split 80:20 or 90:10, with the larger portion going to the main carer.171 This is because when one partner withholds or mismanages funds, the extra monthly amount for children might not reach children it is there for.172 The Child Poverty Action Group told us it is more likely main carers will ensure income is used to provide for their children.173 Therefore there is a case for splitting payments so that the main carer receives the bulk of the award. Witnesses suggested that in couples with children, child-related amounts of UC should always go to the main carer.174 Survivors of domestic abuse also told us that they valued in the legacy system the certainty of having certain benefits paid to them as main carer. This ensured a source of independent income, however limited.175 The Department said identifying the main carer could introduce discrimination into the system.176 Witnesses highlighted, however, that the UC online system already requires households with children to nominate a main carer.177 The Department told us a split based on caring responsibilities is possible.178
Splitting by entitlement
71.Rather than settling on an arbitrary proportion of the UC award for each partner to achieve, payments might instead be made by entitlement to each UC component. This would overcome the risk of an unfair split in households where one partner is disabled, a carer, or has responsibility for paying childcare and related costs.179 The Minister told us that the way UC awards are calculated means that the idea that the UC payment has separate “elements” and can be paid in this way is a “misconception”. He continued:
Whilst there are different elements in the determination of a gross entitlement, UC is paid as one single payment whereby income is assessed against the total.
The Minister told us that, for this reason, “it is not possible to untangle all of that design to construct a split payment policy” based on elements.180
72.Witnesses argued, however, that individual elements are already used in calculating UC awards. The Women’s Budget Group explained that the Department considers individual circumstances and actions in some cases. For example, when one member of a couple is sanctioned, up to 50% of the couple’s standard personal allowance is deducted—as opposed to up to 100% of an individual’s standard personal allowance.181 Fran Bennett added that the existence and volume of Alternative Payment Arrangements in which housing costs are paid direct to landlords “demonstrates that it is feasible” to separate out a component of Universal Credit.182 We have set out how such an arrangement might work, including its interaction with the Universal Credit earnings taper, in Box 2 and Chart 1.
Box 2: Splitting payments by entitlement
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All Universal Credit claimants receive a standard allowance set at a standardised rate.183Couples receive a joint standard allowance. Claimants may then receive extra “amounts” on top if their allowance for children; a disability or health condition that prevents them from working; if they are a carer, or if they need help paying housing costs. This allowance and any extra amounts are combined into the single household payment. This is the “gross entitlement” to UC.184 In couples, the joint allowance and extra amounts—regardless of which partner is entitled to the extra amounts—is combined into the single monthly payment, paid into one account. A split by entitlement might mean that if the criteria for eligibility for a particular component is fulfilled by one half of the couple, they would be paid that amount from the gross entitlement. For example, disability amounts could go to the disabled partner and caring amounts to the caring partner. Child-related amounts could go to the main carer. UC is paid to claimants both in and out of work. As such, there is an earnings taper which applies to all earnings exceeding the work allowance, if applicable.185 The rate is currently 63%: for every £1 the claimant earns, their UC is reduced by 63 pence. The taper is currently applied to the entire gross entitlement; money is not deducted specifically from the standard allowance or the extra amounts. Any system for splitting by entitlement would need to account for the taper, without introducing complexity that would make it harder for claimants to see how their UC awards change in response to their earnings. Where currently the taper is applied to the entire gross entitlement of UC, it could be instead applied to each amount. Each individual component would be reduced when claimant earnings increase sufficiently for the taper to apply (see Chart 1). This would mean all elements reduce in proportion to their share of the gross entitlement. If the taper were to be adjusted this way, UC payments could be split by entitlement. The overall amount that a household receives as their earnings increase would be unaffected relative to the existing system. |
Chart 1: The Universal Credit taper in an entitlement-based split
73.Given the wide range of options for splitting payments and lack of evidence or consensus over which would work best—for DWP and claimants—there may be a case for trialling different approaches. In light of Scotland’s commitment to allowing each member of a couple to receive separate payments of UC, the Women’s Budget Group recommended DWP should:
Support the Scottish Government to test out different approaches to delivering separate nomination and payment in Scotland. Negotiations between the DWP and Scottish Government could then include plans to test out and evaluate different approaches and for using evidence from such piloting to make decisions in the future about what form a separate payment approach could take.186
74.Splitting Universal Credit couple payments by default could provide some protection for victims of domestic abuse. But doing so is complicated. Payments could be configured in multiple ways—from a simple 50:50 split to more complex calculations. The capacity of Universal Credit’s systems to accommodate any of these possibilities remains unknown, and there is no clear consensus on which would work best for claimants. Scotland offers an excellent chance to “test and learn” about what might work. The Department should seize the opportunity.
75.We recommend the Department support the Scottish Government to scope out and, if appropriate, support them to pilot different approaches to split payments in Scotland as soon as possible. This might include proportional and entitlement-based models. To ensure lessons are learned from the Scottish experience the two Governments should agree to co-commission and publish a full, independent evaluation of the pilots. In response to this report, the Department should tell us when this work will begin, and set out a clear timetable. It should also provide quarterly updates to Parliament on the progress of these pilots. When the final evaluation report is published, the Department should give careful consideration to whether, on the basis of the evidence, there is a case for splitting payments by default in the rest of the UK.
76.Implementing and evaluating split payments in Scotland will necessarily take time. In the interim, the Department should ensure that throughout the UK, Universal Credit serves, as best possible, all parties it is intended for. We recommend that where claimants have dependent children, the entire UC payment should be made to the main carer by default. Where alternative split payment requests are permitted, the higher proportion of the split payment should remain with the main carer other than in exceptional circumstances.
77.The Government aspires, through Universal Credit, to create a new, modern welfare system. The Prime Minister has also issued a rallying call to tackle domestic abuse. All Departments have a part to play in meeting this objective. DWP alone cannot prevent abuse, but it can ensure that it is offering the best possible support to survivors.
144 Scotland Act 2016, Section 30
145 Regulations for direct housing and more frequent payments The Universal Credit (Claims and Payments) (Scotland) Regulations 2017 (SI 2017/ 227)
146 Social Security (Scotland) Act 2018, section 94
151 Scotland Act 2016, Section 30
152 Scotland Act 2016, Section 30
155 Work and Pensions Committee, Universal Credit Project Assessment Reviews, Fifth Report of Session 2017–19, HC 740, 8 February 2018
157 NAO, Rolling out Universal Credit, June 2018, p.6
160 See Chapter 2
162 Scottish Government, Analysis of written responses to the consultation on social security in Scotland, February 2018, p.18
164 Women’s Aid, Unequal, trapped and controlled, p.49
165 Q538 (Neil Couling), Letter from Minister for Family Support, Housing and Child Maintenance to Committee Chair, 15 May 2018
166 Letter from Minister for Family Support, Housing and Child Maintenance to Committee Chair, 15 May 2018
167 Women’s Budget Group (UCR0227), EHRC (UCR0231), Q527 (Marilyn Howard), Q446 (M), Women’s Aid (UCR0225)
172 Engender and Scottish Women’s Aid (UCR0224), Child Poverty Action Group (UCR0233) Women’s Aid (UCR0225), Surviving Economic Abuse (UCR0230), Refuge (UCR0234)
173 Child Poverty Action Group (UCR0233). See also, Engender and Scottish Women’s Aid (UCR0224), Women’s Aid (UCR0225), Surviving Economic Abuse (UCR0230), Refuge (UCR0234)
174 Women’s Budget Group (UCR0227),Engender and Scottish Women’s Aid (UCR0224), Winvisible (UCR0226), Fran Bennett (UCR0222), Women’s Budget Group (UCR0215), Child Poverty Action Group (UCR0233)
175 Q454
176 Letter from Minister for Family Support, Housing and Child Maintenance to Chair of the Committee, 15 May 2018
178 Letter from Minister for Family Support, Housing and Child Maintenance to Chair of the Committee, 15 May 2018
179 Engender and Scottish Women’s Aid (UCR0224), Women’s Budget Group (UCR0115), Women’s Budget Group (URC0227). See also Fran Bennet (UCR0222), Women’s Aid (UCR0225)
180 Letter from Minister for Family Support, Housing and Child Maintenance to Chair of the Committee, 15 May 2018
183 The standard allowance for singles under 25 is £251.77. For couples under 25 it is £395.20 for both. The standard allowance for singles over 25 is £317.82. For couples over 25 this is £498.89.
184 Letter from Minister for Family Support, Housing and Child Maintenance to Chair of the Committee, 15 May 2018
185 The work allowance is the amount that a claimant can earn before the taper applies and their UC award starts to reduce. Claimants with children or a disability preventing them from working may be eligible for a work allowance of £198 (if their Universal Credit award includes housing support) or £409 (if it does not).
Published: 1 August 2018