126.Professor Michael Adler told us that “being sanctioned is not necessarily the end of the line”, as claimants could apply for a hardship payment. This is a reduced rate payment, usually 60% of normal benefit rate, to those deemed at risk of severe financial hardship following a benefit sanction. Independent decision-makers consider whether someone should receive a hardship payment. Their decision depends on whether the person meets certain criteria, including if they have access to any other financial support and there is substantial risk that their household would be left without essential items, such as food, clothes and heating were a payment not made.
127.Different rules apply to JSA, ESA and UC. The main difference is that under UC hardship payments must be repaid, albeit without interest, which was criticised by much evidence to our inquiry. The Scottish Association for Mental Health told us it saw “no rationale for hardship payments to be repayable”. Dr David Webster said repayments were “a tall order when their very payment indicates that the claimant has nothing left”. And Citizens Advice argued that repayments created additional financial pressure, which may “distract [claimants] from looking for work or regaining financial stability after a sanction”. But the Minister said the rationale was twofold: to ensure fairness between those who received a hardship payment and those who did not; and to incentivise claimants into work, as repayments were written off if the claimant sustained employment for 26 weeks above an earnings threshold.
128.The repayment of hardship payments is capped at 40% of the claimant’s UC standard allowance. But the National Association of Welfare Rights Advisers, a professional body, told our inquiry into Universal Support that debts, including hardship payments, “are generally recovered at the maximum allowed”. Their members found that the 40% rate was applied “too often without consultation with the claimant about whether they can afford it”.
129.40% is the same amount by which a claimant’s benefit is reduced when they have been sanctioned and are in receipt of a hardship payment. Dr David Webster said “this means that for claimants receiving hardship payments, UC sanctions are in effect 2.5 times as long as their normal length” (see the figure below). CPAG was also concerned that the recovery of hardship payments would put people off applying for them in the first place, which was the case for Samantha. She told us that while she initially applied for a hardship payment, she saw it as “just more debt” and became anxious about the size of repayment deductions. For that reason, she did not apply in subsequent months.
130.The Department’s evidence to our Universal Support inquiry said that the repayment caps reflect the need to balance the cost of recovery with affordability. But the Minister told us that the motivation behind recovery of hardship payments was not financial. In fact, he confirmed in his letter of 4 September 2018 that there had been no assessment of departmental savings resulting from the policy.
131.Hardship payments are made to those who would otherwise be left with nothing. A claimant who has lost 100% of their standard allowance because of a sanction can receive 60% of that allowance as a hardship payment. In effect, this is a reduced rate sanction of 40%. We understand the Government’s rationale for recovering this money. But as this is apparently not financially motivated, and the people repaying hardship payments are necessarily on the brink of poverty, we struggle to see how a repayment cap as high as 40% is justified.
132.We recommend that the Government issue revised guidance to all work coaches, and if necessary amend regulations, to ensure recovery of hardship payments is only ever at a rate that is affordable for the claimant, no matter how low, with the default being 5% of the claimant’s standard allowance. This action is needed in addition to, not instead of, the longer-term review of recovery caps recommended in our report on Universal Support.
268 Professor Michael Adler
269 House of Commons Library, , November 2015
270 See for example: Citizens Advice Scotland , Scottish Association for Mental Health , Citizens Advice , Crisis , Child Poverty Action Group
271 Scottish Association for Mental Health
272 Dr David Webster
273 Citizens Advice
275 National Association of Welfare Rights Advisers
276 National Association of Welfare Rights Advisers
277 Dr David Webster
278 Child Poverty Action Group
279 Samantha , Q88
280 , 23 June 2018
282 , 4 September 2018
Published: 06 November 2018