This is a House of Commons Committee report, with recommendations to government. The Government has two months to respond.
This is the report summary, read the full report.
As a result of the Covid-19 pandemic, the past two years have seen unprecedented challenges for the benefits system in Wales. One in five jobs in Wales were in the sectors where most businesses were forced to close or reduce trading, and 474,600 employments were furloughed at some point during the lifespan of the Coronavirus Job Retention Scheme. By April 2021, the benefits claimant count was almost twice the level seen at the start of 2020. The scale of these challenges represented an important opportunity to assess how effectively the benefits system supports claimants in Wales.
In Wales, social security is a reserved competence. However, we wanted to explore whether there are issues which affect Wales disproportionately compared to elsewhere in the UK, and the extent to which any differences present the system as it operates in Wales with greater challenges. We wanted to assess not only how well claimants are supported, but also how effectively the system operates. Most of all we wanted to hear from a wide range of people to help us examine these issues, including claimants, welfare support advisors, academics, think tanks and the Welsh and UK governments.
Specifically, our report covers:
Challenges facing the benefits system in Wales
Our report includes a detailed assessment of the socio-economic and demographic context in which the benefits system operates in Wales and how far this differs from the rest of the UK.
There are some aspects to celebrate: at the time of publication the unemployment rate in Wales was both lower, and falling faster, than the UK as a whole.
However, this must be tempered by the fact that Wales has a higher proportion of long-term unemployed and fewer people employed in professional occupations or higher paid sectors. Wales has the highest poverty rates of all the UK nations. 31% of children live in poverty—71% of those children live in working households. More generally, average hourly earnings are lower in Wales than across the UK.
There are also demographic factors which present Wales with greater challenges than elsewhere. Wales has the highest rate of disability among the UK nations and an older population: more than one in five of residents are aged 65 and over, a proportion that is second only to the South West of England. Finally, we draw attention to the fact that proportionately more people in Wales live in rural areas compared to England. This creates significant challenges with connectivity, not only with broadband coverage but also more limited public transport for claimants who have to attend appointments or work.
Taken together, these dynamics underline the need for the UK Government to be conscious of the Welsh context when deciding welfare policy.
Lessons from the pandemic for the UK social security system
The Covid-19 pandemic placed unprecedented pressure on the social security system in Wales and across the UK. Our report looks at the performance of the Department for Work and Pensions (DWP) and the benefits system in responding to the pandemic, as well as the lessons from the pandemic for the system going forward.
In common with the rest of the UK, the pandemic had an immediate and unparalleled impact in Wales. Yet the benefits system held up. Universal Credit withstood the pressure, partly due to its digital model but also the immense efforts of DWP staff and leadership. We applaud their commitment to supporting so many thousands of people, many of whom were navigating the benefits system for the very first time.
We heard too of the significant impact that the UK Government’s temporary increased support for benefit claimants made during the pandemic. Many submissions described the £20 uplift as a “lifeline” and drew attention to other support the UK Government provided such as the increase in the Local Housing Allowance. However, the praise was tempered by concerns about the impact of the removal or reduction in the extra support.
We acknowledge that the UK Government has difficult choices to make in ensuring the benefits system is financially sustainable, but we believe there needs to be a discussion about how to ensure benefits are adequate, affordable and sustainable. We would, therefore, welcome clarity from the DWP about the metrics it uses to determine the adequacy of benefits and, in light of the expected increases in inflation and the general cost of living, we recommend that the £20 uplift be reinstated and extended to legacy benefits.
Intergovernmental relations
The benefits system intersects with a wide range of devolved responsibilities, such as skills, housing and health. Our report therefore examines how effectively the two governments work together. Ministers from all four UK governments have met at various junctures during the pandemic to manage and mitigate the unprecedented challenges it has brought: not to build on this foundation would be a missed opportunity. Both the UK and Welsh governments have much to gain from continuing the admirable joint working forged during the pandemic.
We welcome the plans outlined in the Intergovernmental Review for all governments across the UK to meet to discuss welfare, but UK Government policy affects Wales to a greater degree than Scotland or Northern Ireland as no benefits are devolved. In this light we believe a UK-Welsh government Inter-ministerial Advisory Board should be established. Such a board would enable the two governments to discuss policies which impact the other: for example, the UK Government’s work on skills in the Levelling Up White paper and the Welsh Government’s pilot of basic income.
We also looked at the question of whether any aspect of the benefits system should be devolved. Our report acknowledges that there are differing views on this subject. However, we conclude that there is an important distinction between devolving the administration of certain welfare benefits and the wholescale devolution of welfare. We therefore recommend that the UK-Welsh government Inter-ministerial Advisory Board on Social Security should undertake an assessment of the potential merits of devolving the administration of the same benefits to Wales as have been devolved to Scotland.