On 25 October 2019, the Work and Pensions Committee published its Second Report of Session 2019–20, (HC 83). On 11 February 2021 we received the Government Response to the Report, which is appended below.
The Government notes the predecessor Committee’s second report of session 2019/20, following the Committee’s inquiry. The Government remains firmly committed to supporting all claimants of Universal Credit and ensuring that everyone can access the support that they need. In 2019/20, we spent over £225bn on welfare, including over £95bn on working age benefits.
The Committee’s initial Terms of Reference set out three issues: the wait for the first Universal Credit payment, sanctions, and deductions. The Department has provided comment to the Committee on these areas before responding to the Committee’s specific recommendations, which forms the content of the remainder of this memorandum.
Advance payments are available to claimants in need of urgent financial help to support them through to their first Universal Credit payment. Nobody has to wait for a payment in UC. Claimants who require an advance will have their UC award spread across thirteen payments in a year rather than twelve. From October 2021, we will give claimants the option to spread twenty-five payments over twenty-four months. For claimants who find themselves in unexpected hardship, the impact of taking an advance on the spreading of UC payments can be deferred for up to three months.
As of 22 July 2020, a two-week run-on of Income Support, income-related Employment and Support Allowance and income-based Jobseeker’s Allowance has been available for all claimants whose claim to UC ends entitlement to these benefits. This is to provide more support for claimants moving to UC, and is in addition to the Transition to UC Housing Payment, a two-week extension of Housing Benefit.
Our payment timeliness remained high throughout 2020 at over 90%, despite the covid-19 pandemic. This is an improvement from the March 2019 figures referred to in the Committee’s report. In many cases where full payment is not made on time, it is due to unresolved issues such as claimants not accepting their Claimant Commitment or passing identity checks, or having outstanding verification issues, such as housing costs and self-employed earnings.
The Claimant Commitment is the contract between the claimant and the Department. They are co- produced by our Work Coaches and our claimants; and are underpinned by the individual’s circumstances, while also laying out expectations in relation to work search and preparation requirements. They help Jobcentre managers to proactively engage with our claimants to build their skills, increase their confidence and speed up their return to employment. Claimant Commitments are regularly adjusted to ensure they remain fair, reasonable and take account of an individual claimant’s circumstances or health condition.
The Terms of Reference in the Committee’s report highlighted sanctions as a possible factor and suggested that they are more of an issue under Universal Credit, as sanctions are being applied at a higher rate and for longer than on legacy benefits.
The Department has been clear that the use and incidence of sanctions cannot be compared between Universal Credit and the legacy system as they operate differently. In Universal Credit, sanction rates have been falling steadily. In February 2020, before the first lockdown, only 2.04% of Universal Credit Full-Service claimants who were subject to Claimant Commitments had a reduction in payment due to a sanction. At that time, this was the lowest on record. Following the gradual reintroduction of the Claimant Commitment in August 2020, the Universal Credit sanction rate remains at an all-time low of 0.35%.
The duration for fixed sanctions are now the same in Universal Credit and legacy benefits. To clarify, the duration of sanctions can be either fixed (where the duration is fixed to four weeks, three months or six months, depending on the type and the number of previous failures) or open-ended (made up of an open-ended period from the time of the failure until the claimant re-complies, and can have a fixed period added of seven, fourteen or 28 days depending on previous failures). Furthermore, in November 2019, the Department reduced the maximum length of fixed sanctions from three years to six months for a single high-level sanction.
Sanction reductions are calculated with reference to the Universal Credit standard allowance only. This ensures that even when claimants are undergoing sanctions, they will continue to receive other elements of their Universal Credit award they are entitled to, such as housing and children elements. Additionally, hardship payments are available to eligible claimants who may face hardship following a sanction. Claimants are able to apply for a hardship payment from the first assessment period during which a sanction reduction applies. In Universal Credit, hardship payments are recoverable. However, for claimants who move into work and get paid over the Conditionality Earnings Threshold, recovery is paused. If these earnings are sustained for six months, any outstanding hardship recovery at this stage will be written off, provided they have no outstanding sanctions at this time.
Budgeting support is also available for anyone who needs extra help. The change of the deduction limit from 40% of the UC standard allowance to 30%, effective from October 2019, also supports claimants to better manage their finances. The deduction limit is set to further decrease, to 25% by October 2021.
The Government believes 25% strikes the right balance; the need to ensure claimants are left with more Universal Credit in payment for daily expenditure, whilst protecting claimants from creditors, and safeguarding the public purse. Our deductions policy is designed to protect vulnerable claimants by providing a last resort method for arrears of essential services (for example rent or payments to gas or electricity companies) which might otherwise result in those services being cut off. Once introduced, the Department will monitor the effect of this change as we are committed to ensuring our services and processes meet the needs of all those involved.