Tackling financial exclusion: A country that works for everyone? Contents

Chapter 8: Welfare reform and financial exclusion

325.In recent years the social security system has been subject to comprehensive and far-reaching reforms, beginning with the Welfare Reform Act 2012. The relationships between financial exclusion and the welfare system—and the effects of recent reforms—were consistently highlighted in the evidence that we heard.

326.We did not seek to conduct detailed post-legislative scrutiny of the Welfare Reform Act 2012; this was not within our terms of reference. What we did, however, set out to do was to understand the ways in which changes resulting from the Act have helped to address, or served to intensify, financial exclusion. We received extensive evidence on this theme. Changes that were particularly highlighted as having had an impact included:

Universal Credit

327.Universal Credit is the biggest new development in the 2012 Act. It aims to simplify and streamline the benefits system for claimants and administrators, to improve work incentives, to tackle poverty among low income families, and to reduce the scope for fraud and error.466 It is a single benefit for claimants of working age (16–65), replacing six previous benefits paid to people who had low incomes and fulfilled certain other conditions—namely:

328.Universal Credit is still in the process of being rolled out nationally. The benefit was first paid, from 2013, to a number of childless, single jobseekers in good health through a number of Jobcentres in the north-west of England, and has gradually rolled out to a wider range of claimants. The Government currently expects that all eligible claimants will have been moved onto the new benefit by the end of 2018.467

329.By wrapping these benefits up into one, the Government has sought to simplify the benefit system. The existing system has developed piecemeal over the years, resulting in “an array of benefits, each with its own rules and criteria, interacting in complicated ways, creating perverse incentives and penalties, confusion, and administrative cost”.468 By contrast, Universal Credit does not require the claimant to end one claim and begin another if, for instance, their health improves and they become able to work, or if they find work and move from out-of-work to in-work support.

330.Furthermore, when a claimant does begin work, their Universal Credit claim does not immediately end. Instead, their Universal Credit payment ‘tapers’, being reduced at 65 pence per additional £1 earned (this taper falls to 63 pence in 2017),469 while for many claimants the first £192 per month (or £397 if they are not also claiming for their housing costs) does not affect their entitlement at all, as a result of the ‘work allowance’ from which claimants benefit if they are responsible for children or have limited capability for work.470 These measures are intended to ensure that it is always worthwhile for individuals in paid work to take additional hours.

331.Unlike the existing suite of benefits, which have traditionally been paid weekly or fortnightly, Universal Credit is paid monthly in arrears. This, again, is aimed at easing the transition back into work at the end of the claim: the argument is that, since 75% of wage-earners are paid in this way, making the Universal Credit experience as similar to this as possible will help people gain the financial capability that they will need once they enter work.471

332.Moreover, unlike the previous Housing Benefit system, housing costs under Universal Credit are not given as a separate payment but rolled into the one Universal Credit payment, and are not (as was previously the case for social housing) paid direct to the claimant’s landlord. The then472 Minister for Welfare Reform, Lord Freud, told us that paying housing costs to landlords might well be easier for both tenants and landlords at the beginning of a benefit claim, but it presented a “hassle factor” at the point of returning to work, which then “becomes a non-financial barrier to going into work”. This, he explained, was counterproductive to a system where the “prime objective is to give people the independence to be able to go into work and earn their own money”.473

333.In addition, Universal Credit is designed to be digital by default. The main application process is entirely online, takes around 40 minutes and must be completed in one go; it is not possible to save a part-finished application. The only additional method for accessing the benefit is to call an 0345 number, which is charged at standard rates, and go through the same online form with an adviser who completes it for the claimant.474

334.Of the 19 million people who will be affected by the move to Universal Credit, it has been suggested that 2.5 million will require assistance with money management.475 Assistance for recipients is provided through Personal Budgeting Support. This support consists of money advice; formal budgeting support around financial products; and alternative payment arrangements for claimants who cannot manage a single monthly payment and money advice.476 Officials from the Department for Work and Pensions (DWP) explained:

“Personal budgeting support is available everywhere, in every jobcentre and every local authority across Great Britain, and it is intended to provide guidance on how to budget around the monthly payments and identify people who might be appropriate for an alternative payment arrangement—in effect, paying rent direct to the landlord or splitting payments, and the like.”477

335.There are also plans to produce a more in-depth support system for people to improve their digital skills and financial capability. Known as Universal Support Delivered Locally (USdl), this will be led by local authorities and delivered in partnership with Job Centres. USdl has so far only been piloted in 11 local authorities across England, Scotland and Wales,478 and the lessons from these trials are now being used to prepare for a broader rollout of the system.

336.Lord Freud reported that there are hopes to expand the Universal Support offer further, so that a broader range of support is provided for claimants by local authorities in conjunction with DWP:

“We have set up a universal support framework that is a partnership between the DWP and local authorities. We have tackled two barriers that people have through that. What we are looking at [now] is what we will call expanded universal support: i.e. how many barriers we can get in there and how it would look. The features are that you are put into this either through a universal credit work coach or any other way in. You have a diagnostic or a case worker . . . and get on an organised journey to handle all of your barriers. The information then is shared on a safe basis round that circuit”.479

337.Despite the promised support, the Committee heard numerous claims that some of these changes have exacerbated or contributed to financial exclusion for some claimants. These are now considered in more detail.

The initial waiting time

338.It was reported that the delay between the onset of need for Universal Credit and the initial payment being made amounted to at least six weeks and in many cases longer, if there were administrative complications in the application process. This delay is an outcome of two parts of the Universal Credit design—the payment monthly in arrears and the initial seven-day waiting period for which claimants are not entitled to any money.

339.The initial waiting days are “days served after a benefit claim has been made but in respect of which claimants, who would otherwise satisfy the conditions of entitlement, are not entitled” to any money.480 The Government identified a number of vulnerable groups that might be affected especially severely by the introduction of waiting days, and these claimants will not be required to serve those days. There are also rules to ensure that claimants will not serve waiting days if they are migrating from legacy benefits, moving in and out of Universal Credit due to earnings within a six month period, or getting a new Universal Credit award after a previous award has finished.481

340.A 2015 report by the Social Security Advisory Committee criticised the waiting days policy because of the time it adds to claimants receiving their first payment—especially since, under Universal Credit, this will include their rent. The report recommended that the Government should reconsider the policy.482

341.A number of our witnesses echoed the concern of the Social Security Advisory Committee. CPAG noted that “people simply do not get any money for the first six weeks of the claim, so they are automatically in debt before they even start”.483 The Birmingham Financial Inclusion Partnership told us:

“The long waiting period for new Universal Credit Claims (up to 45 days) has impacted rent arrears and claimants ability to meet their immediate short term needs. It was initially believed that those making fresh UC claims would be coming out of paid employment and have sufficient savings or final salary payment to see them through this waiting period. However . . . a large number of those supported do not have this buffer as they had previously been in receipt of Jobseekers Allowance, Employment and Support Allowance or ‘zero-hour contract’-type employment”.484

342.Lord Freud defended this initial waiting period by explaining that, since employment is generally paid in arrears, claimants moving out of work would begin their period of unemployment with money still coming in. Universal Credit was intended to match up with that, ‘kicking in’ when wages were more likely to be running out. He noted that the original intention was that “people should be able to maintain themselves for the first week”, as “Universal Credit was not designed for short periods”.485

343.The National Housing Federation told us how lengthy delays can arise:

“If you look at the way Universal Credit is constructed, there is a week before you are even allowed to claim. Then it is four weeks in arrears, after a two-week processing. From the date of needing that support to the point of first payment, if everything goes absolutely 100% according to plan, it is seven weeks. If you are in an environment where you have struggled to get to the end of the week, waiting for seven weeks before you get anything is a real problem”.486

344.Lord Freud noted that this did create a “flow issue”.487 He explained that advance payments can be requested by claimants who will face difficulty keeping up with payments during this period, which will cover up to half the relevant sum. These can be requested at a Jobcentre or by telephone.488 However, he also conceded that only around 40% of customers take this offer up, leaving the rest with potentially no income for those weeks.489

345.In subsequent evidence to a House of Commons Select Committee, however, Lord Freud suggested that, if additional funding were to be made available for Universal Credit, he would like to see changes made to the initial waiting period:

“Universal Credit is oddly generous on the way out but not on the way in. I would look at two things to improve that. I think waiting days does not help in the introduction of Universal Credit. I also think you would look at a housing run-on for a fortnight, a housing rent in the old system, and that would start bridging that gap. Those wouldn’t cost a lot of money”.490

346.There was evidence that the lack of income at the outset of a person’s Universal Credit journey can have an extremely negative impact on their finances. A May 2016 report by the Association of Retained Council Housing indicated that 79%491 of new Universal Credit claimants went into rent arrears, and that 49% of these had no history of rent arrears—and that this was very likely to have been caused by the initial wait.492

347.DWP reported that this could in part be explained by the initial Universal Credit claimant cohort. The benefit was initially given only to single unemployed people. They explained:

“Actually, they are some of the people with the most disruptive rent records, because the current system, as they move in and out of work, generates arrears. They go from having the responsibility for paying their rent to not having responsibility, and . . . in that gap in between arrears build-up”.493

348.In considering this issue, however, we find it especially interesting to note that Lord Freud, the former Minister for Welfare Reform, now sees the initial seven-day waiting period as unconducive to maintaining claimants’ financial inclusion and stability. We believe, therefore, that the Government needs to take urgent steps to address this situation.

349.We recommend that the Government abolish the seven-day waiting period at the start of a Universal Credit claim; the waiting period contributes to sometimes lengthy delays in claimants receiving their first payment. These delays put claimants at significant risk of falling into arrears. (Recommendation 19)

Monthly payments

350.The move towards monthly payments, which is central to Universal Credit, will require claimants to exercise greater control over budgeting. As such, the change is intended to require people to exercise a greater degree of personal responsibility over their finances. In part, this initiative is to be welcomed if it is to encourage greater financial capability and capacity-building; we were told that “taking ownership and personal responsibility are key in overcoming financial exclusion”.494 We also heard, however, that this element of the reforms could give rise to difficulties:

“Welfare reform has seen the incomes of some groups put under pressure and this necessarily has an impact on levels of financial inclusion. At the same time reforms have placed an emphasis on personal responsibility and though this can be beneficial, some find it challenging to effectively manage their own financial resources”.495

351.In light of this, there was serious concern among witnesses that the move to monthly payments could have a negative effect on people’s finances. This was partly as a result of the increased budgeting skills required to make a single payment last for the full month. Citizens Advice told us:

“Around two-fifths of the people [whom Citizens Advice] surveyed said that they need support with almost every area of financial planning. When they moved into monthly payments, they needed help with how they budgeted, how they banked, how they worked and how they applied and managed their finances online. We know that there is a need for support”.496

352.The Child Poverty Action Group (CPAG) noted that the DWP itself had undertaken a survey which revealed that around 40% of people were “really worried that they would not be able to get to the end of the month, because they were used to budgeting on a weekly or fortnightly basis”.497

353.Witnesses not only commented on claimants’ fear of not managing their money adequately—they confirmed that these fears might often be well-founded. The Financial Inclusion Commission said:

“There is a very real danger that, in terms of the rollout of universal credit in particular, unless there are changes to help more people to be included, to have access to financial services and to improve their financial capability, this cannot work. When you move from a welfare system that has traditionally been paying benefits on a weekly basis to a situation where they are paid monthly, that requires considerable budgeting skills. That therefore means that you have to have not only the budgeting skills but the products and services that are available to help people to budget in that way”.498

354.MoneySavingExpert.com founder Martin Lewis was even more strident:

“As for the move to universal credit, if I am honest I think that the idea of paying monthly people who struggle to manage their own money is potentially disastrous and a terrible move for financial inclusion. It is a ticking time bomb”.499

355.Some witnesses even questioned whether this additional level of financial capability was really needed among the population that would be receiving Universal Credit. The LGA noted that anecdotally “hourly paid workers tend to get paid by the week” rather than the month.500 CPAG noted research by the Social Market Foundation that found that “of the people earning less than £10,000 a year . . . more than half” are not paid monthly, and concluded that paying these people monthly would be “culturally very different” for them.501

356.The Department for Work and Pensions reassured the Committee that it recognised the “need to do something for that segment of the population who will not be able to respond to the greater responsibility that universal credit puts on the majority of the population”.502 This was why, it explained, it had set up a support programme, including:

357.We welcome the scale and ambition of the welfare reform project. The design of Universal Credit incorporates a number of features that could encourage greater financial inclusion, such as the payment of money into a bank account as standard; the tapers and allowances that ensure that claimants are not penalised for taking on paid work; and the budgeting and computer literacy support available through JobCentres. We also note the overall concern that the social security system should help rather than hinder people’s return to work where possible. We believe that Universal Credit has the potential to be instrumental in giving force to the Prime Minister’s concern to “make the system work”504 for ordinary working people.

358.However, we also acknowledge the widely expressed concerns that some of these inclusive effects risk being undone by other features built into the design of the benefit. In particular, we note with concern the period of at least six weeks at the start of a claim where individuals will not receive any money, and therefore risk having no income at all, and the body of evidence suggesting that this is leading a large proportion of claimants into debt where they previously had none. This is utterly counterproductive to financial inclusion.

359.We note that there is a system for advance payments to ease this transitional period for customers; figures we were given, however, suggest that only 40% of eligible claimants appear to take these up. It is therefore concerning that information about these payments may not be as widely available as it should be. We also note that the Scottish government has already provided for Universal Credit payments to be made twice-monthly,505 and that Northern Ireland has chosen to issue payments twice-monthly as standard from September 2017.506

360.We recommend that the Government should allow for greater flexibility in the frequency of Universal Credit payments in England and Wales so that, where monthly payments would contribute to a claimant’s financial exclusion, payments can be made twice-monthly, as will be possible in Scotland and Northern Ireland. This could be on the basis of a DWP decision-maker decision or on the basis of a Trusted Partner scheme with local authorities or social landlords. (Recommendation 20)

Housing costs

361.We were told that the payment of housing costs to claimants by default rather than to their social landlord was causing concern among advice agencies, local government and housing associations. Advice providers feared that some residents might not manage to pay their rent, either through lack of budgeting capability or because of a sheer lack of money. The Money Advice Trust, for instance, noted “that the payment of the housing element of Universal Credit to the claimant rather than the landlord could lead to increased rent arrears as tenants use this money to pay other creditors”.507 It was suggested that residents’ failure to cope with housing costs could in fact be caused by even more fundamental problems—which the resultant financial exclusion would only worsen. The Local Government Association mentioned “cases . . . involving drugs or alcohol dependency, certain mental health conditions or domestic abuse situations where it does not necessarily make sense to hand money to vulnerable people”.508

362.Witnesses feared that residents in this situation could potentially lose their homes, or at least fall into severe arrears and have the additional costs and stresses associated with court processes. Gateshead Council reported “unprecedented levels of rent arrears” since Universal Credit was introduced in its area, and that “from 231 Universal Credit claimants renting [from that local authority] 221 now have rent arrears at an average of over £800”.509

363.There is already a system in place to protect tenants against the worst of these problems. Under these Alternative Payment Arrangements (APA), rent can be paid direct to the landlord where one of two conditions is met:

The APA can be initiated by the DWP or by a social landlord. It can be requested by the tenant but the final decision rests with the DWP,510 and the decision process is complex, as CPAG explained:

“You have to be accepted by someone in Jobcentre Plus as being the kind of person who is eligible, and then the request is passed on to a decision-maker who decides whether you can have a diversion of payment. It is by no means automatic that you will get this”.511

364.Furthermore, Lord Freud noted the success of a new “trusted partner” pilot scheme, whereby a number of registered social landlords have now been enabled to request direct payment of rent costs to them without the above conditions having previously been met.512

365.Despite this, a large number of witnesses wanted the options to go further. Several strongly promoted the idea that individuals should be able to decide for themselves whether their rent should be paid direct to their landlord.513 The National Housing Federation argued that the exclusion of this choice from the structure of Universal Credit demonstrated “a misunderstanding of the relationship that people have between themselves, benefit payments and their landlords”. It considered that, far from betraying a culture of dependency on the part of tenants, it was “an entirely rational and thoughtful proposition” for them to want to ensure that their housing costs were safe from other pressures.514

366.We were also told that the limited choice afforded to claimants in this respect ran contrary to the wider theme, running through recent welfare reforms, of encouraging greater personal ownership and responsibility for financial management:

“Changes brought in by Universal Credit deny some people a choice to exercise personal responsibility. A number of Citizens Advice clients would like to be able to choose to have their rent paid directly to their landlord as they recognise that this is the easiest way for them to ensure their rent is paid”.515

367.We welcome the importance placed by the Government on removing as many obstacles as possible from benefit claimants’ transition into work; we also acknowledge the Government’s argument that the transition of responsibility for housing costs onto tenants when they begin work could be one of those obstacles. On a wider note, we welcome the Minister’s reports that worklessness among households in social housing has fallen from 46% at the nadir of the recession to 38% today.516

368.We are, however, concerned by the evidence from a wide range of sectors that the inflexibility of the housing costs policy could well be causing arrears, increasing precarity in housing and exacerbating financial exclusion among people already experiencing vulnerability. Beyond Government, those witnesses who addressed this matter were united in the view that Universal Credit claimants should be given the choice of whether their housing costs should be paid to them or their landlords.

369.We have no desire to recommend changes that would fundamentally undermine the operation and implementation of Universal Credit. On a practical level, however, we believe that the systems architecture to enable this particular change already exists. Residents can already request that housing costs are paid to their landlords—albeit through a complex process and only once they have already accrued significant arrears. Additionally, the Scottish government already plans to offer tenants this choice on a wider basis. In Northern Ireland, where Universal Credit is due to be introduced from September 2017 onwards, the housing element of Universal Credit will be paid direct to landlords, although a payment directly to the claimant will be made available on request.517

370.We value the potential of Universal Credit to support financial inclusion, and are supportive of the principle within Universal Credit that claimants should be empowered as far as possible to take control of the decisions that affect their lives as they move towards greater financial capability and independence.

371.We recommend that tenants in receipt of Universal Credit in England and Wales should be allowed to decide for themselves whether their housing costs should be paid to them or direct to their landlord. (Recommendation 21)

372.We believe that the successful Trusted Partner pilots should be rolled out more urgently to all registered social landlords and local authority landlords, so that claimants experiencing vulnerability do not have to fall into arrears before having payment arrangements amended.

Sanctions in the social security system

373.Since the Welfare Reform Act 2012 came into force, the minimum length of sanction for income-replacement benefits such as Jobseeker’s Allowance is four weeks, and the maximum possible length of sanction is three years. A sanction typically amounts to the whole of the ‘personal allowance’ portion of the benefit—not including any additional amounts awarded for disability, incapacity, childcare or caring responsibilities.518 In the 2016/17 financial year this amounted to £73.10 per week for claimants aged 25 or over and £57.90 for claimants aged 18–24.519 Sanctions were incurred by, for example, not attending a meeting with a DWP adviser, not attending mandatory training, or not taking up an offer of work.520 To miss a mandatory training session, for instance, could lead to a 26 year old claimant losing £73.10 per week for a period of four weeks for a first or second infraction and 13 weeks for a third or more. What is more, in certain circumstances, a claimant could lose the entire personal allowance portion of their benefit for three years if, for instance, they refused to accept an offer of a job more than once within a 52-week period.

374.We were told that sanctions of this nature could contribute to financial exclusion.521 It was suggested that claimants who are subject to sanctions will look “at all options to survive” including reducing payments towards priority expenditure (such as rent, council tax, gas, electricity), high cost loans, borrowing from friends and approaches to loan sharks. The Advice Shop concluded that “ultimately more clients will have been financially excluded”.522

375.A number of witnesses suggested that sanctions have had a particularly significant impact on vulnerable groups such as the disabled and those experiencing mental health problems,523 and in particular that the process of informing people of sanctions was imperfect and left those with poor mental health or a poor reading level unable to manage the benefit claim well. The Merton Centre for Independent Living noted a 2014 report by the DWP’s JSA Sanctions Independent Review Team that observed that many claimants could not read a letter or complete a form without support, and that written letters from Jobcentre Plus or a Work Programme provider might not be the most appropriate way to inform such claimants of compulsory appointments or mandated activities.524

376.There are hardship payments available to claimants during a sanction, amounting to up to 60% of the sanctioned benefit. These must be applied for by the claimant at a Jobcentre. Claimants must be able to show that they are experiencing difficulty paying for their essential needs and have stopped non-essential payments. They must also show that they have tried to find the money through other means—up to and including borrowing from friends or family, but not including trying to obtain a loan or using a credit card. Hardship payments are generally repayable—a deduction is made from the benefit once it is restored for as long as it takes to pay off the hardship payment.525

377.According to a 2016 report by the National Audit Office, nearly one quarter of all Jobseeker’s Allowance (JSA) claimants have at some point been subject to a sanction. In 2015, however, 11% of sanctions issued by Jobcentres were overturned at appeal; in the same period some 26% of sanctions issued by Work Programme526 providers were overturned at appeal.527 Sanctions appeals are particularly successful among lone parents and young people leaving care, which could mean sanctioning officials had an inadequate understanding of the particular difficulties inherent in jobseeking for these cohorts of claimants.528

378.The Committee was told on its visit to Coventry that communication with claimants about sanctions and hardship payments was often poor. CPAG told us that there was no mention of hardship payments on the letters that informed people about their sanction.529 The Rees Foundation, a charity supporting young people who have left local authority care, said that their clients reported a failure to inform them how long and how severe the sanction would be.530

379.The National Audit Office (NAO) issued a report in November 2016 which echoed the concerns of witnesses. It found:

“While some people [who have been sanctioned] move into work, studies also suggest that other people respond less well to sanctions. Sanctions encourage some claimants to become ‘inactive’—stopping their claim without finding work. Reasons for inactivity vary. Some people may experience hardship. Others may rely on unreported income or support from local authorities, charities, or friends and family”.531

380.The NAO concluded that the DWP “has not used its own data to evaluate the impact of sanctions in the UK” and needs to “do more to understand these sanctions outcomes”. As such, it is simply not known whether sanctions have the desired effect of increasing jobseeking in this country, and the DWP has not yet attempted to conduct research to find out.

381.Of particular concern to the NAO was the possibility that costs notionally saved in imposing sanctions may be incurred elsewhere in the public sector. This could be through “extra public spending in areas such as local authority funded welfare support”, or through costs to the NHS and other services from “negative impacts on mental health, including depression and anxiety” or to local authorities from “falling into arrears with rent and bill payments”.532

382.We are extremely concerned at the lack of evidence for the effectiveness of sanctions in the welfare system—especially given the evidence received from many witnesses highlighting the ways in which sanctions can contribute to financial exclusion. We also note that recent research from the National Audit Office has highlighted the limited current understanding of the effects of sanctions.

Local welfare assistance—the localisation of Social Fund responsibilities

383.The DWP Social Fund is a set of grants and interest-free loans payable to people on very low incomes to facilitate living through particular income or expenditure pinch points.533 The Welfare Reform Act 2012 removed some of the services provided by the Social Fund and provided for equivalent funding to be given to upper-tier local authorities in England, and the devolved administrations of Scotland, Wales and Northern Ireland, to provide equivalent services.

384.One of the services removed was Community Care Grants. These were cash grants which enabled people to set up or maintain themselves in an independent home, usually by paying for white goods. Among others, they were given to young people leaving care, ex-prisoners, people fleeing violent partners or people who would otherwise not be able to live independently. The other service which was withdrawn was Crisis Loans, which were cash loans to help with living expenses in an emergency situation or to pay rent in advance to fill the gap between applying for a benefit and payment starting.534

385.When these services were removed from the Social Fund, Wales and Northern Ireland created a centralised service, while in Scotland provision is now administered through local councils with centralised standards, such as levels of priority and amounts that can be awarded.535 The Government placed no new duties on English councils to deliver local welfare provision and did not place any monitoring requirements on them. The Department for Work and Pensions did, however, write to local authority chief executives in August 2012 to say it expected them to provide “flexible help to those in genuine need”.536

386.For the first year of the localised provision, 2013–14, local authorities were provided with £133.3 million in funding to create local schemes, equivalent to the level used in their area under the national system in the previous year.537 By 2015–16, however, funding had been cut to £74 million.538 Currently, the funding is no longer ring-fenced or even separately identified in the annual local government settlement but is instead incorporated in the general settlement, which, according to the LGA, is set to “fall away to almost zero” by 2019.539

387.Witnesses were broadly positive about the decision to localise these services, at least in principle. The Birmingham Financial Inclusion Partnership noted that it allowed local authorities to “respond to local need” in a way that central Government could not.540 The LGA elaborated this point, explaining that “an overly national approach would stifle innovation”, and that “different areas”, such as urban or rural areas, “need a slightly different approach, delivered at a geography that people can recognise and relate to”. It therefore concluded that “local councils should have the freedom and flexibility to look to local circumstances” and should be funded adequately to provide the joined-up local services that would help local residents.541

388.The localised and unregulated nature of provision, however, was a cause for concern. Affinity Sutton explained that “each local authority was in control of designing their own scheme and whilst most local authorities provide assistance, eligibility criteria and application processes for these schemes vary considerably.”542 CPAG elaborated:

“This is part of the problem with localisation: that this kind of postcode lottery starts to arise. So we had residency requirements, and we had different rules. In some places they would not make cash payments at all and you could only get goods in kind, or there was a limit on how much you could get and you could only get £30 and you could not get another payment within a year. There are myriad versions of this, because there are so many schemes around the country”.543

389.In particular, witnesses noted that the varying criteria between local authorities for residence within an area were a risk for people fleeing domestic violence, who might well move over a local council border but could be ineligible for help under their new authority for lack of a ‘local connection’, even though this was “precisely the circumstance in which you [would] want a crisis loan or a community care grant”.544

390.The LGA suggested that this was down to a failure of planning and funding at central Government level, reporting that localisation had “often been done in a piecemeal fashion with little or no commitment to providing adequate and appropriate long term funding for a welfare safety net”.545 A major concern for many witnesses was the constant reduction in the funding for these schemes from central Government. The cuts to the budget outlined earlier were described as a “decimation” by the Birmingham Financial Inclusion Partnership, particularly in the context of a level of need that had not reduced—with the result being that food banks and other voluntary organisations were having to pick up excess demand. 546

391.Some witnesses were also concerned that local welfare funding was not ring-fenced or even separately identified. The National Housing Federation warned that “you almost never see those funds increased after they are disaggregated; they almost always go”.547 CPAG expressed the view that “unless [funding] is earmarked for this there is a danger that it will disappear altogether”, noting that eight local authorities had already abolished their schemes.548

392.The potential impact of this on financial exclusion was made clear by StepChange, whose statistical evidence suggested a real threat that people who could not obtain local welfare assistance would be tempted to access unaffordable short-term credit. They reported that, of individuals they had surveyed:

393.We acknowledge the examples of good local practice that have arisen from the devolution of Social Fund responsibilities to local councils, but are concerned at the future funding outlook for this area of work, especially amid the ongoing planned reduction of the block grant to local authorities. We believe that it would be beneficial for Government to disseminate best practice from councils among all local authorities.

394.Throughout the whole area of welfare reform, we have not seen any comprehensive research on the cumulative impact of aspects of the Welfare Reform Act 2012 on the financial wellbeing and inclusion of individuals and families affected by it.

395.We recommend that the Government conduct a detailed, comprehensive cumulative impact study of how changes in social security policy resulting from the Welfare Reform Act 2012 might have adversely affected financial wellbeing and inclusion. This research should consider the extent to which these changes have contributed to debt and arrears and to any greater reliance on high-cost lending. (Recommendation 22)

466 House of Commons Library, Universal Credit: an introduction, Library Note, SN0649, 9 November 2012

467 Department for Work & Pensions, Universal Credit Transition Rollout Schedule—April 2017 to September 2018 (November 2016): https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/571711/universal-credit-transition-rollout-schedule-phase-4-to-6-2017-to-2018.pdf [accessed 14 March 2017]

468 Department for Work & Pensions, Universal Credit: Welfare that works, Cm 9757, November 2010, p 7: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/48897/universal-credit-full-document.pdf [accessed 14 March 2017]

469 Entitledto, ‘Universal Credit earnings taper rate’: http://www.entitledto.co.uk/help/Earnings-taper-Universal-Credit, [accessed 14 March 2017]

470 Entitledto, ‘Work Allowance for Universal Credit’ http://www.entitledto.co.uk/help/Work-allowance-Universal-Credit, [accessed 14 March 2017]

471 Department for Works & Pensions, Universal Credit: Welfare that works, Cm 9757, November 2010 p 34: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/48897/universal-credit-full-document.pdf [accessed 14 March 2017]

472 Lord Freud retired from this role in December 2016.

473 Q 238 (Rt Hon. Lord Freud)

474 Entitledto, ‘Universal Credit: claiming online’: http://www.entitledto.co.uk/help/Making-an-online-claim-Universal-Credit [accessed 14 March 2017]

475 Work and Pensions Committee, Universal Credit implementation: meeting the needs of vulnerable claimant (Third Report, Session 2012–2013, HC 576)

476 HM Government, Personal Budgeting Support and Alternative Payment Arrangements (April 2016): https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/541512/pbs-and-apa-guidance.pdf [accessed 14 March 2017]

477 Q 26 (Neil Couling)

478 Department for Works & Pensions, Government Social Research, DWP ad hoc research report no. 33: Evaluation of the Universal Support delivered locally Trials (July 2016) p 3: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/537089/ad-hoc-report-33-evaluation-of-the-universal-support-delivered-locally-trials.pdf [accessed 14 March 2017]

479 Q 238 (Rt Hon. Lord Freud)

480 Deparrtment for Work & Pensions, The Universal Credit (Waiting Days) (Amendment) Regulations 2015 (S.I. 2015 No. 1362): Report by the Social Security Advisory Committee (June 2015) p 4: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/434281/universal-credit-waiting-days-report.pdf [accessed 14 March 2017]

481 Ibid.

482 Deparrtment for Work & Pensions, The Universal Credit (Waiting Days) (Amendment) Regulations 2015 (S.I. 2015 No. 1362): Report by the Social Security Advisory Committee (June 2015) p 5: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/434281/universal-credit-waiting-days-report.pdf [accessed 14 March 2017]

483 Q 81 (Alison Garnham)

484 Written evidence from Birmingham Financial Inclusion Partnership (FEX0049)

485 Q 236 (Rt Hon. Lord Freud)

486 Q 105 (David Orr)

487 236 (Rt Hon. Lord Freud)

488 Citizens Advice, ‘Get an advance payment of Universal Credit’: https://www.citizensadvice.org.uk/benefits/universal-credit/apply/get-advance-payment/ [accessed 14 March 2017]

489 Q 236 (Rt Hon. Lord Freud)

490 Oral evidence taken before the House of Commons Work and Pensions Committee, 8 February 2017 (Session 2016–17), Q 129 (Rt Hon. Lord Freud)

491 It should be observed here that we found a degree of disparity among witnesses as to the proportion of Universal Credit claimants experiencing rent arrears. The figure of 79% given above was quite widely quoted, but DWP officials disputed it, mentioning figures from the Chartered Institute of Housing which they said showed much lower levels of arrears.

492 See written evidence from Housing Rights NI (FEX0021) and oral evidence from the Money Advice Trust (Q 10) and CPAG (Q 81, Alison Garnham). See also National federation of ALMOs, Association of Retained Council Housing, Universal Credit — One Year On (June 2016) p 2: http://www.almos.org.uk/include/getDoc.php?did=7534&fid=8807 [accessed 14 March 2017].

493 Q 26 (Neil Couling)

494 Written evidence from Bournemouth Churches Housing Association (FEX0058)

495 Written evidence from ABCUL (FEX0037)

496 Q 115 (Joe Lane)

497 Q 83 (Alison Garnham)

498 Q 57 (Chris Pond)

499 Q 146 (Martin Lewis OBE)

500 Q 111 (Cllr John Fuller)

501 Q 83 (Alison Garnham); see also written evidence from CAP (FEX0014).

502 25 (Neil Couling)

503 Ibid.

504 Prime Minister Theresa May MP, The Shared Society: Prime Minister’s, speech at the Charity Commission annual meeting, 9 January 2017: https://www.gov.uk/government/speeches/the-shared-society-prime-ministers-speech-at-the-charity-commission-annual-meeting [accessed 14 March 2017]

505 Scottish Government, Scottish Flexibilities for Universal Credit (January 2017): http://news.gov.scot/news/scottish-flexibilities-for-universal-credit [accessed 14 March 2017]

506 NIdirect, ‘Universal Credit’ https://www.nidirect.gov.uk/articles/universal-credit [accessed 14 March 2017]

507 Written evidence from the Money Advice Trust (FEX0047)

508 Q 106 (Cllr John Fuller)

509 Written evidence from Gateshead Council (FEX0046)

510 National Housing Federation, ‘Alternative pay arrangements’: http://www.housing.org.uk/topics/welfare-reform/universal-credit/alternative-pay-arrangements/ [accessed 14 March 2017]

511 Q 82 (Alison Garnham)

512 QQ 236, 238 (Rt Hon. Lord Freud)

513 See oral evidence from the Money Advice Trust (Q 11), CPAG (Q 82), the National Housing Federation (Q 106) and the LGA (Q 106), and written evidence from the Money Advice Trust (FEX0047), Homeless Link (FEX0052) and St Leger Homes of Doncaster (FEX0072).

514 Q 106 (David Orr)

515 Written evidence from Citizens Advice Redcar & Cleveland and Coast & Country Housing Ltd (FEX0048).

516 Q 238 (Rt Hon. Lord Freud)

517 Nidirect, ‘Universal Credit’: https://www.nidirect.gov.uk/articles/universal-credit [accessed 14 March 2017]

518 Department for Work & Pensions, Jobseeker’s Allowance Sanctions: How to keep your benefit payment (December 2016): https://www.gov.uk/government/publications/jobseekers-allowance-sanctions-leaflet/jobseekers-allowance-sanctions-how-to-keep-your-benefit-payment [accessed 14 March 2017]. Sanctions rules are the same across Jobseeker’s Allowance and Universal Credit.

519 HM Government, ‘Jobseeker’s Allowance: Overview’: https://www.gov.uk/jobseekers-allowance/overview [accessed 14 March 2017]

520 Department for Work & Pensions, Jobseeker’s Allowance Sanctions: How to keep your benefit payment (9 December 2016): https://www.gov.uk/government/publications/jobseekers-allowance-sanctions-leaflet/jobseekers-allowance-sanctions-how-to-keep-your-benefit-payment [accessed 14 March 2017]

521 Written evidence from 2 Shires Credit Union (FEX0016) and Bournemouth Churches Housing Association (FEX0058)

522 Written evidence from The Advice Shop (FEX0039)

523 Written evidence from Homeless Link (FEX0052), Clinks (FEX0026) and Merton Centre for Independent Living (FEX0003)

524 Matthew Oakley, Independent review of the operation of Jobseeker’s Allowance sanctions validated by the Jobseekers Act 2013, (July 2014) p 39: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/335144/jsa-sanctions-independent-review.pdf [accessed 14 March 2017] mentioned in written evidence from the Merton Centre for Independent Living (FEX0003)

525 Citizens Advice, ‘Get a hardship payment if you’ve been sanctioned’: https://www.citizensadvice.org.uk/benefits/universal-credit/sanctions/hardship-payment/ [accessed 14 March 2017]

526 The Work Programme is a mandatory Government scheme for people claiming Jobseeker’s Allowance and the lower rate of Employment and Support Allowance. It “provides support, work experience and training for up to 2 years to help people find and stay in work” (gov.uk). It requires claimants to take part in specific work experience or volunteering opportunities on pain of a sanction—to be decided and administered by the Work Programme provider. Work Programme providers are private-sector bodies contracted to administer the Programme. Despite the Programme’s being hailed by the Government as “central to the Coalition Government’s ambitious programme of welfare reform” Department for Work & Pensions, The Work Programme (December 2012) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/49884/the-work-programme.pdf [accessed 14 March 2017] the Department for Work & Pensions decided not to renew it after 2015 (see https://www.gov.uk/government/news/department-for-work-and-pensions-settlement-at-the-spending-review [accessed on 14 March 2017].

527 National Audit Office, Benefit Sanctions, HC 628, Session 2016–17: https://www.nao.org.uk/wp-content/uploads/2016/11/Benefit-sanctions-Summary.pdf [accessed 14 March 2017]

528 Q 78 (Sarah Milan) and Q 83 (Sumi Rabindrakumar)

529 Q 81 (Alison Garnham)

530 Q 78 (Sarah Milan)

531 National Audit Office, Benefit Sanctions, HC628, p 39

532 National Audit Office, Benefit Sanctions, HC628, p 44

533 See HM Government, The Social Fund: technical guidance (September 2013): https://www.gov.uk/government/publications/the-social-fund-technical-guidance [accessed 14 March 2017].

534 See Citizens Advice, ‘Help for people on a low income: the Social Fund and other welfare schemes’: https://www.citizensadvice.org.uk/benefits/help-if-on-a-low-income/help-for-people-on-a-low-income-the-social-fund-and-other-welfare-schemes/ [accessed on 14 March 2017].

535 National Audit Office, Local Welfare Provision: Full report (January 2016) p 24: https://www.nao.org.uk/wp-content/uploads/2016/01/Local-welfare-provision.pdf [accessed 14 March 2017]

536 National Audit Office, Local Welfare Provision: Summary (January 2016) p 5: https://www.nao.org.uk/wp-content/uploads/2016/01/Local-welfare-provision-Summary.pdf [accessed 14 March 2017]

537 Local Government Association, Delivering Local Welfare: How councils are meeting local crisis and community care needs, (September 2014) p 6: http://www.local.gov.uk/documents/10180/11531/LGA+delivering+local+welfare+-+how+councils+are+meeting+local+community+care+needs/92c88e3c-ca8e-4caf-9bd7-6b236e27d500 [accessed 14 March 2017]

538 Q 107 (Cllr John Fuller)

539 Ibid.

540 Written evidence from Birmingham Financial Inclusion Partnership (FEX0049)

541 Q 102 (Cllr John Fuller)

542 Written evidence from Affinity Sutton (FEX0080)

543 Q 84 (Alison Garnham)

544 Ibid.

545 Written evidence from the LGA (FEX0090)

546 Written evidence from Birmingham Financial Inclusion Partnership (FEX0049)

547 Q 107 (David Orr)

548 Q 84 (Alison Garnham)

549 Written evidence from StepChange Debt Charity (FEX0084)

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