Welfare safety net Contents

Conclusions and recommendations

Introduction

1.People and organisations rarely approach select committees—or their MPs—when everything is going well. Even allowing for that, the contrast between the Department’s characterisation of poverty and hardship since 2010, and the evidence we have heard repeatedly across multiple inquiries, from front-line organisations and claimants, is stark. It is difficult to avoid concluding that the Department lacks the tools and insight fully to understand and evaluate the impact of its reforms on some of the most vulnerable people it supports. (Paragraph 8)

Levels of poverty and destitution

2.How poverty is measured matters: the measurement itself defines who is “poor” and therefore who might be helped. Financial resources are important, but the Government’s existing official measures focus on one side of the profit and loss account: household income. They make no allowance for the inescapable costs that different households face: from childcare, to housing, to debt repayments, to the costs of having a long-term health condition. All of these costs mean that households with the same incomes can find themselves in very different financial positions. Failing to consider inescapable costs—the other side of the account—results in a skewed understanding of who is “in poverty”, who is vulnerable to poverty, and how those households should best be helped and supported. (Paragraph 18)

3.By including “inescapable costs” in its calculation, the Social Metrics Commission’s measure goes some way to addressing these weaknesses. We commend the Department for its decision to adopt and develop the Social Metrics Commission’s measure. (Paragraph 19)

4.Clear metrics ensure that Government is held accountable for its spending decisions. Yet the multiple different measures of poverty in use within and outside Government mean there is no such direct and effective accountability for social policy choices. Without a clear, agreed and central measure it is difficult to track trends in poverty over time, and still more so to understand how government policy helps or hinders poverty rates. (Paragraph 24)

5.The Department has agreed to develop and publish experimental data based on the Social Metrics Commission’s measure, from mid-2020. But it intends to do so alongside its existing poverty data—and for those data to remain the “official” measure of poverty. The Commission’s measure offers the prospect of an improved, nuanced understanding of who is in poverty, and how they can best be helped. Adopting it as a central measure would also protect the Department against claims that it picks and chooses which poverty data to use in response to different issues. We recommend that Government adopts the Social Metrics Commission’s metric as its official, central measure of poverty. It should continue to collect its existing poverty data alongside this, to maintain a long-term dataset. We recommend that Government adopts the Social Metrics Commission’s metric as its official, central measure of poverty. It should continue to collect its existing poverty data alongside this, to maintain a long-term dataset. We also recommend the Department provides us with an update on the progress of its work developing the Social Metrics Commission’s measure by the end of 2019. (Paragraph 25)

6.The Government measures poverty in multiple different ways: its transparency and accountability would benefit substantially from adopting a central measure. Other stakeholders gather and publish data on wider, connected issues, including destitution, hunger, homelessness, life chances and living standards. Some of the most striking and concerning evidence we have received is from and about people who are “destitute”. But the Government does not currently measure, or even define, “destitution” officially. The Commission’s approach shows that it is possible to take the debate away from arguments about terminology, towards a more constructive approach to tackling major, sustained hardship. (Paragraph 28)

7.We recommend that the Department develop a measure of “destitution”. This should build on the Social Metrics Commission’s approach, establishing an independent commission to come up with a common, widely-accepted understanding of destitution and how it can be measured. (Paragraph 29)

8.The Social Metrics Commission believes debt repayments should be included in the “inescapable costs” that affect household income. We agree. Debt repayments—including of debts to Government—can push people into a spiral of poverty, hardship, hunger and destitution from which it is difficult to escape. Without a good understanding of household debt, the prospect of well-targeted policies that help households alleviate and manage that debt is remote. But the data DWP collects on claimant debt is piecemeal, and not suitable for use with the Commission’s measure. We recommend the Department introduce questions on household debt to the Family Resources Survey for 2020/21, so that it can include debt repayments in its calculation of the inescapable costs that households face. (Paragraph 32)

9.The Department’s decision to reduce the maximum deduction cap in Universal Credit from 40% to 30% is a small step in the right direction. But if the Department continues to set deductions at the highest possible rate—without due consideration for claimants’ circumstances—it will continue to drive claimants into severe hardship. We have previously recommended that the Department introduce a flexible, discretionary approach to debt collection that takes affordability of repayments as its starting point, and that it takes steps to better understand the impact of deductions on claimant incomes and debt. We reiterate both of these recommendations, and further recommend the Department assess the impact of reducing the maximum deduction cap to 20%. (Paragraph 34)

Drivers of poverty amongst different groups

10.Pensioner poverty has fallen in the last two decades. That is thanks, in part, to successive governments agreeing the scale and nature of the problem, and taking concerted action to fix it. But the Government cannot afford to be complacent. Set against this success are concerns over older peoples’ financial resilience, and questions about whether policies that have delivered real improvements in poverty rates are sustainable. We intend to return to these issues in our future work. (Paragraph 41)

11.Disabled people are at higher risk of falling into, and becoming trapped in, poverty than non-disabled people. That is, in part, because disabled people frequently face additional living costs. These range from basic essentials like food and fuel, to the costs of the adaptations and support that are needed to make society accessible. Disability benefits such as PIP are intended to help cover those costs and ensure that disabled people can participate in the economy and society on an equal footing. But benefit rates often fall short of the real costs of disability—and for many disabled people, boosting income through work can be difficult or impossible. (Paragraph 47)

12.We recommend that the Department commission an independent survey of the additional costs of disability and long-term health conditions. This should be developed alongside its new poverty measure as a means of understanding where benefits are falling short, and informing policy to address poverty amongst disabled people. (Paragraph 48)

13.The Department says that some of the most severely disabled people will receive more support under the current welfare system than they would have before 2010. But it has come at the cost of support for people with conditions that, while not the “most severe”, can still have a substantial impact on their day-to-day lives and living costs. This includes people in the ESA WRAG group and Universal Credit equivalent. These claimants have also been subject to freezes and reductions in the generosity of benefits they are entitled to—despite the Department itself finding them not “fit for work”. (Paragraph 49)

14.Universal Credit claimants are required to pay for childcare upfront, and claim the money back from DWP. Initial costs, including deposits, can run to hundreds of pounds: costs that may be prohibitive for people with no savings or immediate income. The Flexible Support Fund can be used to meet these costs, but the Secretary of State has admitted that she cannot be confident that the Fund is being consistently used for its intended purposes. The Department’s announcement that it will publish annual data on the Fund is very welcome, and will be helpful in understanding how the Fund is being used. But it will not, in itself, ensure that it is being used correctly. (Paragraph 57)

15.Universal Credit allows working parents to claim back up to 85% of their childcare costs up to a maximum cap. The Department has agreed to analyse the effect of the maximum caps, which have not been uprated since 2005. This is very welcome. It will not look, however, at the maximum reimbursement rate, which for around 100,000 of the poorest families in the system Universal Credit replaces was almost 100%. That means that some of the households who need support with childcare the most will lose out under Universal Credit. (Paragraph 58)

16.We recommend the Department extend its plans to publish data on the Flexible Support Fund to include research on Work Coach and claimant awareness of the Fund and its uses. The Department should use this opportunity to find out whether current guidance on the Fund is effective, how it can better publicise the Fund, and how it can ensure the Fund is being used to its full potential. (Paragraph 59)

17.Childcare is expensive, no matter who pays for it. But DWP could afford to increase support for the poorest households—and in doing so, offset an inescapable cost of working—if it reduced support to the better off. We have already recommended that it diverts funding from Tax Free Childcare, which can be claimed by households earning up to £200,000, into Universal Credit. The Department says it will not do this, because these households “require the most support in order to return to work or work more”. This is absurd. (Paragraph 60)

18.We recommend the Department reconsiders its decision not to divert funding from wealthier families claiming Tax Free Childcare, into Universal Credit. It should also provide in response to this report any analysis it has carried out to inform this decision, particularly relating to changes to in work incentives for high earners on Tax Free Childcare. (Paragraph 61)

19.As millions more people transfer onto UC, it is essential that payment arrangements do not exacerbate financial control within a relationship. The Government needs to act with urgency to devise a method for splitting payments fairly within a couple and to proceed with it. In the meantime, we recommend that all household Universal Credit payments for couples with children should be to the main carer. The Government has said only that it will “encourage” claimants to take this option. That means it is unlikely to have the wholesale impact the Secretary of State intends, and couples where abuse or coercive control is a problem are unlikely to respond to “encouragement”. We recommend that, while it devises a system for splitting payments, the Department makes all UC payments to main carers by default. (Paragraph 63)

The benefit freeze and up-rating changes

20.The value of benefits, for people in and out of work, has been steadily eroded by uprating changes: the shift from RPI to CPI in 2011, and the 1% limit from 2013. Even without any further changes, this would have contributed to a reduction in financial security for many of the households that DWP supports. This includes people who are wholly reliant on benefits, and people who need benefits to top-up income from low-paid work. (Paragraph 67)

21.Most working-age benefits—including some for people who are too unwell to work—have been frozen since 2015/16. For three years before that, the same benefits were limited to a 1% increase. The Department has already saved £0.9 billion more than it intended via the freeze. Its regrettable decision not to lift the freeze early—and lift 200,000 people out of poverty—means that very disadvantaged people are still losing out. When the freeze ends in 2020/21, a substantial chunk will have been taken out of the incomes of some of the country’s most vulnerable households. Simply lifting the freeze is not enough. (Paragraph 72)

22.The Department has invested £1.7 billion in restoring Universal Credit to its pre-2015 generosity. This is much-needed, but it falls short of the £3.2 billion that was taken out of the system in 2015. Moreover, the additional spending is tilted towards those who are in, or able to move into, work. Investing in Universal Credit work allowances and tapers will offer little comfort to people whose capacity to work is limited (for example, by their health or by the cost and availability of childcare), and who rely solely or largely on benefits to meet the costs of living and keep them out of poverty. (Paragraph 75)

23.The Local Housing Allowance freeze means that there is now a gap between housing benefit rates and rent prices in the private sector in the vast majority of English local authorities. These shortfalls are not trivial. In some areas, families needing a two-bedroom house face a shortfall of over £100 a month. Bridging a gap of this size would be hard enough for many people in work. For people who cannot work, it may be simply impossible. The Secretary of State acknowledged the problem. Her solution—addressing supply and demand—is necessary, but it will take time. Tenants need help now. They are not to blame for a mismatch between supply and demand in the housing market, and should not be bearing the brunt of it. (Paragraph 82)

24.Most benefits for working-age people have been frozen since 2015/16. The outcome is that already low benefit rates have become divorced from the real costs of living. People who cannot boost their incomes sufficiently through work—and who may find that work itself incurs additional costs (such as childcare)—face enormous, on-going challenges in simply meeting their basic day-to-day needs. The welfare safety net is not fit for purpose for people living on the breadline. (Paragraph 89)

25.The Government plans to lift the benefit freeze in 2020/21. That is a necessary first step, but it will not be sufficient to reconnect benefit rates with the cost of living. Nor will it allow those who have built up debts during the freeze to begin to pay them off. (Paragraph 90)

26.Most benefits for working-age people have been frozen since 2015/16. The outcome is that already low benefit rates have become divorced from the real costs of living. People who cannot boost their incomes sufficiently through work—and who may find that work itself incurs additional costs (such as childcare)—face enormous, on-going challenges in simply meeting their basic day-to-day needs. The welfare safety net is not fit for purpose for people living on the breadline. (Paragraph 88)

27.The Government plans to lift the benefit freeze in 2020/21. That is a necessary first step, but it will not be sufficient to reconnect benefit rates with the cost of living. Nor will it allow those who have built up debts during the freeze to begin to pay them off. (Paragraph 89)

28.We recommend that, from 2020/21, the Government should increase the rates of frozen benefits by CPI plus 2%. That would mean that benefit rates would, after 4 years, reach the level at which they would have been set if they had not been frozen. From that point, the Department should commit to uprating benefits at least in line with inflation. (Paragraph 91)

29.We also recommend that the Department unfreeze Local Housing Allowance as planned in 2020/21, and restore rates to at least the 30th percentile of local market rates. Thereafter, the Department should commit to uprating Local Housing Allowance in line with rental prices. (Paragraph 92)

30.We remain of the view that the benefit cap should not apply to people who the Department does not expect to work, including single parents with small children and disabled people. (Paragraph 92)

31.We remain of the view that the benefit cap should not apply to people who the Department does not expect to work, including single parents with small children and disabled people. We recommend that where the benefit cap does apply, it should be unfrozen and uprated in line with inflation. (Paragraph 93)

32.These measures, while necessary in the short term, will not address the fundamental problem: that benefit rates and caps have been set without reference to real household costs—the amount of money that people actually need to live on. We recommend that the Department produce a medium-term plan for linking the rate at which benefits are set with the real cost of living. It should set out how it plans to identify a method for doing this, and how long it expects this work to take. (Paragraph 94)

Impact and accountability

33.DWP’s decisions have a direct impact on the incomes of millions of people. Universal Credit (and the changes to it since impact assessments were published in 2011/12) may be the highest profile of these decisions, but many hundreds of thousands of people if not more will be coping with multiple changes to the benefits they receive. DWP says it does not conduct cumulative impact assessments because they do not look at the effect of reform on behaviour. It also says that it has a transparent evaluation strategy for Universal Credit. But we are not convinced that these arguments justify a lack of transparency or understanding of the cumulative effect of reforms on households’ incomes. (Paragraph 101)

34.We recommend the Department publish an updated impact assessment of Universal Credit, taking into account policy changes since 2011/12. It should illustrate this with anonymised case studies and worked examples which demonstrate the impact on individual claimants with a range of different circumstances. We also recommend that the Department commission and publish a cumulative impact assessment on the effect of welfare reform since 2010 on claimant incomes. This should set out clearly the impact on incomes of people with protected characteristics (for example, health/disability, gender, and age). (Paragraph 102)

35.The Social Metrics Commission’s approach to measuring poverty—which the DWP has adopted—is underpinned by a conviction that “what gets measured gets done”. That also applies to the service that claimants receive from DWP. The Department is clear about what it expects from claimants, but vague about what claimants can expect from it in return. It lacks any kind of publicly available, measurable targets for its own performance. Unless the Department defines what is “acceptable” and measures whether that is being achieved, it cannot confidently claim to be delivering a consistently high-quality service. (Paragraph 108)

36.Without clear, measurable standards of service, claimants have little way of understanding whether the service they have received from DWP is acceptable. The Department also lacks the tools to understand whether it is consistently delivering a good service—because it has not defined what “good” is. We, the National Audit Office, and the Social Security Advisory Committee have all repeatedly asked the Department to do this. The Department, reasonably, wants to maintain flexibility in the service it delivers to claimants. But that applies equally to other public services such as health and education, where standards are independently monitored and measured. DWP, and Jobcentre Plus, is not a special case. (Paragraph 115)

37.We recommend the Department work with its stakeholders including claimants and delivery partners, including Citizens Advice, to establish suitable performance measures for its working-age benefit delivery and to implement these. The measures should be published and accompanied by clear targets, and monitored initially by an internal review body and external advisory board. We recommend that alongside this the Department scopes whether there is a case for establishing an independent regulator for working age benefits and services. It should set out an interim assessment in response to this report. (Paragraph 116)

Conclusion

38.The welfare safety net is about more than income, and more than DWP’s policies. But the DWP has a vital role to play in maintaining its integrity, simply because its decisions affect the incomes of so many households. Successive Governments have made huge savings from almost a decade of changes to uprating policies and freezes. The corollary, however, is an increasingly patchy safety net, which is failing to support some of those who need it most. The Department has made an important first step in committing to measure poverty differently. It must now stand ready to act on what it will find. (Paragraph 117)





Published: 31 July 2019