Appendix 2: Universal Credit (Administrative Earnings Threshold) (Amendment) Regulations 2023 (SI 2023/7)
Letter from Lord Hodgson of Astley Abbotts, Chair of the Secondary Legislation Scrutiny Committee, to the Rt. Hon Mel Stride MP, Secretary of State of the Department for Work and Pensions
Following its meeting yesterday the Secondary Legislation Scrutiny Committee, which I chair, has asked me to write to you for clarification of the policy that underpins this instrument and also to express concern at the poor quality of the Explanatory Memorandum (EM) provided with it.
This instrument increases the Administrative Earnings Threshold (AET) of Universal Credit from the current level to £617 PCM for an individual and £988 PCM for a couple with effect from 30 January 2023 which, we are told, will bring a further 130,000 claimants into the Intensive Work Search (IWS) regime.
The EM has two particular weaknesses: first although we are told these figures represent the equivalent of working 15 and 24 hours a week at the National Living Wage, no justification for choosing those particular figures was advanced. That choice of threshold also seems to conflict with the statement at paragraph 7.2 of the EM that “the AET reflects the fact that UC is designed around earnings rather than hours worked”.
Second we considered an instrument with similar effect in September 2022,11 which raised the AET to the levels now being further increased and which was anticipated to bring I 14,000 claimants into the IWS regime. Our Report was critical of the poor explanation of the context and effects of that instrument, we are therefore astonished that the EM to this “next step” makes no reference to DWP’s overarching policy goal, how this second increment contributes to it, or to the outcome of that previous instrument.
In answer to supplementary questions we were told that “internal Management Information indicates that the roll-out has been successful to date” but, as DWP’s policy objective has not been spelled out to us, we are not clear what DWP’s criteria for success are. Our disquiet was increased by the response continuing “full assessment of data on outcomes for claimants, including the effect on earnings, will however take longer to materialise”, which seems to indicate that positive financial outcomes for the claimant is not the prime motivator.
We would therefore be grateful for a clear explanation of the DWP’s policy objectives and success criteria in this matter, including an explanation of why it is safe to initiate this second step before the outcome of the first instrument is clear.
Disappointingly we have also had to write in similar terms to Mims Davies, MP about the unsatisfactory EM to another DWP instrument from our agenda this week, the Rent Officers (Housing Benefit and Universal Credit Functions) (Modification) Order 2023.
We therefore urge you to ensure that DWP reviews its clearance processes so that the explanation provided with any future instruments consistently meet acceptable standards: that means ·not only a clear statement of what the legislation does but also why DWP has decided to take that step, why the approach enabled by the instrument was preferred, and what the impacts and outcomes are expected to be.
25 January 2023
Letter from Guy Opperman MP, Minister for Employment, to Lord Hodgson of Astley Abbotts
Thank you for your letter regarding the Explanatory Memorandum for the Administrative Earnings Threshold (AET) rise taking place this month. I fully agree with the importance of EMs properly stating the intended impacts and success measures of the instrument and will ensure this point is reiterated with my officials. I am happy to provide further information on the points you have raised in this specific instance.
The policy rationale for increasing the AET is to help low paid Universal Credit claimants to increase their income. This policy contributes to the Department’s priority outcome to “maximise employment and in-work progression”.12 The AET rise complements our new In-Work Progression support offer and changes to the work allowance and taper made last year; this strong package of measures is designed to incentivise and support claimants into work and to increase their earnings, fulfilling the policy intent of Universal Credit.
The AET is an earnings threshold - claimants can exceed the threshold if they (either as an individual or as part of a couple) earn above it, regardless of the number of hours they work. This is important as our approach to in-work progression is not necessarily about asking claimants to increase their hours; it is about finding ways for them to increase their earnings.
The reason that we set out the equivalent hours of the AET in the EM is because it provides context, helping stakeholders to understand what the thresholds means in relation to the National Living Wage, particularly given that the threshold will uprate in line with increases in the National Living Wage.
The decision to raise the AET for a second time was made in autumn 2022 and was included in the Growth Plan.13 We have robust evidence (which we plan to publish soon) that the Intensive Work Search regime can support the lowest earning UC claimants to boost their earnings; Ministers therefore decided that in the face of significant labour market challenges, raising the AET further than the planned September AET increase to extend intensive support to more claimants was the right thing to do, and the AET level was agreed based on deliverability in the desired timeframe.
The decision to proceed with a further AET rise before evaluating the September rise was made based on the strength of the evidence and the fact that we could learn from the process of delivering and embedding the September rise ahead of implementing further changes.
Our internal Management Information (MI) measures the process of moving claimants impacted by the AET rise from the Light Touch regime into the Intensive Work Search regime, rather than looking at outcomes. The MI indicates that this process has been handled successfully by Jobcentres, with good attendance rates and the majority of impacted claimants having a tailored Claimant Commitment. In terms of outcomes, as set out above, our prime motivator is to support claimants to increase their earnings.
We expect that earnings increases will take around 6-9 months to materialise given claimants need time to discuss their goals with their Work Coach, talk to their employers and families and take the necessarily steps to grow their income.
30 January 2023
11 Universal Credit (Administrative Earnings Threshold) (Amendment) Regulations 2022 (SI 2022/886), see SLSC 13th Report (Session 2022–23, HL Paper 68), paras 25–26.