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Work and Pensions Committee

Oral evidence: Cost of living support payments, HC 1277

Wednesday 5 July 2023

Ordered by the House of Commons to be published on 5 July 2023.

Watch the meeting

Members present: Sir Stephen Timms (Chair); Debbie Abrahams; Shaun Bailey; David Linden; Steve McCabe; Selaine Saxby; Dr Ben Spencer; Sir Desmond Swayne.

Questions 59 - 114

Witnesses

I: Professor Thomas Gerlinger, Faculty of Health Sciences, Bielefeld University (Germany), Dr Jennifer Robson, Program Director and Associate Professor of Political Management, Kroeger College, Carleton University (Canada) and Dr Miroslav Štefánik, Director, Institute of Economic Research of the Slovak Academy of Sciences.

II: Mims Davies MP, Parliamentary Under-Secretary of State (Minister for Social Mobility, Youth and Progression), Katy Roberts, Deputy Director, Poverty Strategy, DWP, Neil Couling, Director General, Change and Resilience Group, DWP and Nagesh Reddy, Portfolio Director, Change and Resilience Group, DWP.

 

 

Examination of witnesses

Witnesses: Professor Thomas Gerlinger, Dr Jennifer Robson and Dr Miroslav Štefánik.

Q59            Chair: Welcome, everybody, to this meeting of the Work and Pensions Select Committee for our inquiry on the cost of living support. We are very grateful to the members of our first panel, who are joining us from three different countries. I will ask each of them to introduce themselves, starting with Dr Jennifer Robson.

Dr Robson: Good morning. I am the programme director and an associate professor of political management at Carleton University in Ottawa, Canada.

Chair: Thank you for joining us so early in the morning.

Dr Štefánik: Good morning, and thank you for the invitation. I work at the Slovak Academy of Sciences at the Institute of Economic Research, where I am currently the director as well. In my research, I cover impact evaluations of labour market and social policies.

Q60            Chair: Thank you very much for being with us. We can also see Professor Thomas Gerlinger, but I don’t think we have an audio connection at the moment. We will come back to Professor Gerlinger when we have established a connection.

I will put the first question to the two witnesses we can hear from. I wonder whether each of you can outline how your country has supported people in the cost of living crisis, the strengths and weaknesses that you see in the approach that has been taken, and whether help has been delivered successfully to those most needing help. I will start with Dr Robson.

Dr Robson: Thank you again for the invitation to be here this morning. Let me just give a bit of context about Canada. It is important to remember that we are a federated country, so I will be talking about a mix of measures that have been taken by both the national Government as well as subnational governments at the provincial level.

There has been an interesting mix of policies that have been used in Canada. I suppose another thing that I should say, just for reference, is that the estimates of core harmonised inflation in Canada are running quite a bit lower than in the United Kingdom, at a little less than 4% here in Canada. Also, any time I am giving a dollar amount, the approximate conversion into pounds is about 60p to the Canadian dollar.

In Canada, the policy mix federally and provincially as a whole has had about four main planks. There have been a series of temporary cash transfers to households, often delivered through the tax system or with heavy reliance on our personal income tax system. The federal measures have been a bit more targeted towards lower and modest income households. As a matter of fact, exactly today, another round of payments will be reaching households. Provincially, though, it has been quite a bit more mixed. Many of the payments that were made at the provincial level have not been especially targeted.

Other measures that provinces have used have included some fairly haphazard, frankly, cuts to certain provincial fees or capping of provincial tax revenues. For example, the provincial government here in Ontario decided to issue a one-time rebate retroactively for licensing fees for drivers. There has also been some repackaging, frankly, of already planned measures to reframe them as affordability. This has been a mix of cash transfers and delivery of new public programmes. For example, federally, the Government are now rolling out a new top-up to seniors aged 75-plus who are in receipt of old-age security. They are also rolling out a new national dental programme starting with children. In Quebec, there is a pilot for basic income. The important thing to remember is that while these might have an impact on household affordability, they were not necessarily measures that were originally conceived of to address that challenge.

Finally, there has been a far smaller number of instances of governments pursuing targeted spending on goods and services that can reduce pressures on households—so cash transfers, things like additional funding for school food programmes or additional investments in public transit, or spending on community NGOs and affordable housing. That has been a bit of the policy mix.

With regard to impact, unfortunately it is a little early for us in Canada to be able to say whether or not these are making a difference for households. It will take us some time to see the impacts of the data. On the question around targeting, as I said, some of these measures have been more targeted, which I think is probably preferable in terms of reaching those who are most in need without fuelling further inflationary pressures.

Q61            Chair: Thank you very much. Can I ask Dr Gerlinger, who we can see very clearly, whether he can now hear me?

Professor Gerlinger: Yes. I am sorry, I am a little bit late because I had a problem with my internet, but I can hear you. Thank you very much.

Q62            Chair: We can hear you loud and clear as well. Dr Gerlinger, can I ask you to briefly introduce yourself so that everybody knows who you are?

Professor Gerlinger: I am Professor for healthcare systems and social policy at Bielefeld University, which is in a small town in western Germany.

Q63            Chair: Thank you very much for joining us this morning. I will first ask Dr Štefánik the question that Dr Robson just answered and then I will put the same question to you, Professor Gerlinger. I asked each of you to outline how your countries supported people in the cost of living crisis, the strengths and weaknesses that you see in the approach that has been taken, and whether you think that help has been delivered successfully to those most needing help. Dr Štefánik, can you tell us about what has happened in Slovakia?

Dr Štefánik: First of all, I would like to give you a bit of political context because the situation is quite different in Slovakia to that in the UK. We have a fragmented Parliament with much smaller political parties, and we had an election in 2020. After the election we had the first Government lasting for one year, and the Prime Minister, who was also the leader of the strongest political party in the Parliament, had to step down and was replaced by his No. 2 in the party. We then had a period of two years where the Government were not really backed up by the Parliament and they had to implement or fight a lot of unconventional or populist legislation initiatives from the Parliament.

The Parliament has also kept a shortened legislation process since the pandemic. It took advantage of the situation and never ended the period of shortened legislation process, which has resulted in a lack of competent decisions. The process often ignored evidence, let’s say. That is the political context.

What resulted from that was a mixture of income support policies targeting widely defined groups of the population. They were not as targeted and some of them were also not as sophisticated in design. The large populations targeted were old-age pensioners, where we had ad hoc payments, valorisations, extra valorisations, shifted in mid-year valorisations of pensions. We also had this parental pension bonus in parallel being introduced in the same period. Families with children were also covered, on a large scale. The support there more than doubled in targeting this population and was not as much about targeting the low-income families. The existing scheme that we had, which is traditionally operational in Slovakia—the social assistance, which is means-tested—was somehow neglected and the income from there was increased but only slightly. I can talk about that in more detail later.

Perhaps I can also give you an overview of a further situation. We have a different development in terms of the risk of poverty of old-age households. Over here, the risk of poverty is decreasing and it is already below the average, while households with children are suffering more heavily. The risk of poverty there is higher than the average and is more than 50% higher than the overall average based on the EU-SILC data that was very recently published. We also see that in Slovakia, in comparison with other comparable countries in the eurozone, the overall inflation is higher. We are probably one of the last eurozone members with two-digit inflation in June 2023. One possible explanation of that is that these large-scale social transfers are already contributing to the relatively higher inflation. In the end, all the households are suffering from additional and more persistent inflation because of the massive social transfers.

Besides the social transfers, we also had price regulation of energy—electricity and gas—to households in 2022, and in 2023 this was also extended to small firms and municipalities. This was implemented by a decision of the Government. The Government have some regulatory bodies to implement this, but there are still some costs because they have to compensate for the losses of the producers and distributors of electricity, for example. The costs are estimated to be something over 300 million annually.

Q64            Chair: Thank you very much. Professor Gerlinger, can you tell us about what has happened in Germany?

Professor Gerlinger: Yes. Let me first stress that high inflation and particularly high energy prices were of major concern for the German Government. In 2022 and 2023, more than 30 single measures came into force, passed via three major legislative packages—so-called relief packages. We can distinguish two main categories of measures. First, the Government support measures to specifically combat energy poverty by directly improving the affordability of energy, specific income support measures to help people to cope with high energy prices, caps on energy prices or reduction in energy tariffs, with a strong focus on residential energy, not on fuels, and the reduction of VAT or other taxes on energy consumption.

Secondly, the Government support measures to cushion the impact of high inflation in general and indirectly combat energy poverty. Measures under this category include ad hoc income support measures aimed at cushioning the impact of high inflation in general and measures that increase social benefits in order to partially or fully cover the increase in the cost of inflation in general.

Additionally, a third measure was implemented that was a supplement to the other two. People who cannot pay their electricity or heating costs, despite the electricity heating price breaks and other subsidies, can receive money from the hardship case fund in order to avoid supply interruptions. These measures were mostly taken on the regional and local level. The other two that I mentioned were on the federal level.

I think that the measures taken were, by and large, properly targeted to those who were most in need of support, pensioners, people with low income, students and recipients of social benefits. There was a broad agreement among political parties in Germany and the public that measures to cope with inflation and energy prices were, indeed, necessary.

However, the amount of allowances to be granted, the measures to be taken and the population groups to be supported were disputed. There were three main criticisms expressed when discussing the appropriateness of the measures taken. First, the amount of support was sometimes criticised as insufficient, and that opinion was brought forward mainly by welfare associations and by parties on the left. Secondly, it was argued that payments were insufficiently targeted. People who did not need support also benefited from the schemes, though they could easily have coped with the increase in energy costs even without support. That was a main criticism—the measures were targeted to the people most in need but others profited from these measures as well. Thirdly, the measures were not properly linked to environmental objectives, thus in some cases support could have been designed more smartly. For example, from an environmental perspective, tax cuts on fuels reduced the financial incentive to switch to public transport.

Overall, I would say that the support has indeed reached those most in need of support and it considerably relieved recipients of the burden of high energy costs. However, the costs have not compensated the increase in energy costs and inflation, so there is a loss of welfare in Germany in 2021, 2022 and 2023.

Perhaps I should mention one additional tool, which was and still is very popular in Germany. This is the so-called €9 ticket for public transport, subsidised by the Government. It was offered from June until August 2022. It was an innovative tool. There had never been such a programme in Germany before, and due to its success, most recently a so-called €49 ticket was introduced, designed similarly to the €9 ticket. Again, we find that demand is huge. This ticket for public transport was valid throughout Germany on local and regional transport, only on buses, suburban trains, underground tram and low-speed trains, but not on long-distance trains. It aimed, against the background of high inflation, to increase or maintain cheap access to public transport and transport services.

The €9 ticket met with huge demand. A total of around 52 million tickets were sold between June and August 2022. An evaluation found that the ticket maintained or even improved mobility for millions of people, and the €9 ticket cost the federal Government around €2.5 billion. Surveys have shown that the €9 ticket brought a considerable improvement in mobility, as I mentioned, so more people used public transport than before. In terms of environmental problems, this has also been a great success.

Chair: That is very interesting. Thank you very much.

Q65            Steve McCabe: Good morning. You have touched on some of this before, but I just want to this to ask each of you. In this country, the Government chose to target special one-off payments to households where there was someone with a disability and to pensioner households. I wondered if you had done the same thing in your countries, why you felt those groups should be identified as target groups, and how effective the measures were.

Dr Robson: In Canada, there has not been a comparable effort to target support for persons with disabilities. There is work under way now to develop a brand new statutory ongoing programme to be a new source of income support for low and modest-income persons with disabilities. We are still a ways off from that.

Notwithstanding the fact that persons with disabilities do experience additional costs of living, just with differences in their consumption bundles, one of the difficulties that we face here in Canada is that there is no national or even provincial harmonised approach to identifying who persons with disabilities are. They will have benefited from some of the measures that I mentioned. For example, there is today a so-called grocery rebate, which is essentially a refund credit of our goods and services tax, much like your VAT, and while many persons with disabilities and seniors will benefit from that, they are benefiting from it based on their income, not on their other characteristics.

As for the other programmes that I have mentioned, there is, for example, the introduction of a permanent and ongoing top-up to seniors aged 75. While that is being reframed by the national Government as an affordability measure, this is something that had been committed to back in 2020, I think, or even before then. It is really more about reframing it than it being a brand-new measure for seniors.

One thing I would say is that, in Canada, senior benefits at the national level are indexed to inflation four times a year—so quarterly. That has meant that seniors historically—this is still the case now—experience a bit more of a buffer. Notwithstanding the fact that they are more likely to be on fixed income, those fixed income sources are more likely to be keeping up with inflation compared with other vulnerable groups who might be reliant on public income transfers that are not so frequently adjusted to reflect the ongoing costs of living.

Dr Štefánik: In our case, we have these two €100 payments during 2022 covering the social assistance recipients, and also the health carer allowance, which is related to the social benefit. Usually, those households that receive the social benefit also receive the caring allowance. The first reaction of the Government was to target these groups because there was this infrastructure. The public employment service had the usual processes behind distributing the transfers, and they then just decided on an ad hoc top-up of €100 on the usual transfer early in 2022 and then late in 2022, ending in February 2023. Now we are launching the third wave of another €100.

To give you an evaluation, the magnitude of the support is insufficient. It is not covering the real increase of costs. Also, in comparison to the increases flowing to other parts of the population, this is even more pronounced. This very segment of the population is not getting proper assistance.

To sum it up, these transfers were covering the social assistance beneficiaries, and then the caring allowance and also professional parents and special groups that are linked to the contributions paid by the public employment service.

Professor Gerlinger: In Germany, the measures were not specifically targeted to disabled persons, but disabled persons, of course, benefited from the overall measures taken to relieve energy costs. I mentioned that there were one-off payments for employees, for recipients of social benefits, tax reliefs for children, tax reliefs for single parents and so forth. Many of the measures taken have been targeted at disabled persons indirectly. There was no discussion in Germany to specifically relieve disabled persons from high costs. I want to mention, additionally, that disabled persons benefit from certain provisions in general tax law. There is a lot of support for disabled persons but not with these measures taken to relieve people of high energy costs.

Q66            Steve McCabe: There has been some criticism in this country that our Government did not specifically target families with children for their direct support with cost of living payments. What happened in your countries? How useful do you think that it was?

Dr Robson: Here in Canada, again, most of the benefit that will have gone to families with children has been by virtue of income testing rather than specifically because of the presence of children in the household. Again, to come back to the example of the goods and services tax credit—another payment of which is being issued today to households—it is going to about 11 million or 12 million households. An important share of those will be lower-income single parents, but an awful lot of them will also just be single adults as well.

In one province, the income support—the one-time cash payment that was issued for affordability—was a bit more targeted and did include seniors, persons who were already in receipt of welfare benefits and families with children. This is also against the backdrop that Canada has a fairly robust, long-standing, fairly generous system of child benefits that is reaching about 7,000 Canadian dollars a year at the highest end for one child. The amount there is, of course, by household income as well as the number of children present in the household. There is an existing system or mechanism to be able to provide support for families with children.

The federal Government are also very keen to highlight the efforts that they have made in reducing the costs of childcare through a series of bilateral agreements with provincial governments. The impacts of those are still making their way through the system. Some families are starting to see significant reductions in their monthly childcare costs, but those are still very much in the minority as the system has not moved all the way through to maturity, such that there are still a number of parents who are struggling to find childcare and struggling to pay for it when they can find a space.

Dr Štefánik: In Slovakia, family support policies were introduced. They are very intensive and were introduced shortly before the period of high inflation. We have a child allowance that has almost doubled—the direct transfer per child. The tax bonus on a child for earning parents has also doubled since January 2023. We have also introduced a contribution to child free-time activities, which is a payment of €60 monthly. It is also very intensive. On top of that, we have free lunches, or lunches at schools are subsidised almost up to 100% of the cost. There is this very expansive child support and family support policy at the expense of 0.8% of the GDP. That is the estimation for 2023. When we are looking at the distribution of families, this is not so well targeted, especially with the tax bonus driving the impact in the middle-income and above-average-income families, rather than the low-income families.

Professor Gerlinger: In Germany, we also have a strong family support policy. Families with children are taken into account, for example, considerably in general tax law. We have child allowances being raised up to €250 per month for each child and other benefits specifically targeted to families with children.

However, there are still some problems as far as policies for children are concerned. I have to remind you that in Germany we have a coalition Government consisting of a Social Democratic party, a Green party and a Liberal party, representing diverging interests and diverging political priorities. For example, currently we have a strong dispute among the governing parties on the European child guarantee and how to finance the European child guarantee.

There are differences in interests, problem perceptions and in assessing the need to support children, but all in all, I think that children policies in Germany are strong. The support is strong and families and their children have strongly benefited from the measures taken in 2022 and 2023.

Q67            Sir Desmond Swayne: Dr Robson, what have been the differences regionally or by state, between the provinces and states, in the amount of assistance provided and its effectiveness?

Dr Robson: That is a terrific question. I will be able to give you some preliminary information, but in terms of effectiveness, as I said, unfortunately we are still in the very early days. Canada is terrible in terms of having timely data on things like household income. It takes us about two years to get this from administrative records and then make it available.

Six out of our 10 provinces have issued one-time—or, at least, in one province it was two-time—temporary cash transfers to their residents. The vast majority of these have been in the neighbourhood of about $500 to $600 per resident. As I said, one jurisdiction in Alberta was a little bit more targeted in limiting it to seniors, those already on welfare benefits and families with children, but it still reached somewhere in the neighbourhood of about three quarters of the population in that province.

Other provinces, though, have not done cash transfers and have instead used a policy mix of things like, as I said, haphazard cuts to provincial fees and revenue sources. For example, Ontario, where I live, has issued a one-time rebate and has cancelled the fees for renewing your licence plate stickers on your car. It is a quick way, basically, to put a few hundred dollars—a very small amount—into their hands, but only of drivers. In the province of British Columbia, for example, they have frozen the provincially run auto insurance programme at a certain cost. They have capped the cost and issued rebates to insured drivers. There is a bit of a mix between looking for various tools at the provincial level to be able to deliver this cash support or the equivalent of cash support.

One of the pieces that might help to make sense of this is the fact that in Canada most of the provinces are quite reliant on the federal Government for the delivery of tax and transfer systems. We have one national revenue agency that collects personal income taxes nationally and provincially, with the exception of Quebec, which has its own agency, and that has meant that when it is time to try to use that very same plumbing system to be able to deliver income support, provinces often do not have their own infrastructure to be able to identify eligible households and issue payments. They are very much reliant on turning back to the federal Government to say, “Would you deliver this for us, please?”

The Government of Alberta, for political reasons, decided to try to deliver their one-time cash support all on their own, trying to set up a brand new government portal, and was criticised for the fact that it ended up resulting in a delay. Their cash support was announced in the fall of 2020 but only started being issued to households in January and, to my knowledge, has only just started to wrap up.

There are some interesting regional variations. I have not yet seen any evidence that this has had a marked impact on subnational measures of inflation, but that work is yet to be done.

Q68            Sir Desmond Swayne: Thank you. Can I put that same question to you, Professor Gerlinger?

Professor Gerlinger: Germany has, indeed, a strong federal political system, but these provisions on tackling high energy prices have been passed on a federal level, so there were no regional differences, apart from one minor point. As I mentioned at the beginning, at the regional and local level, some hardship case funds have been established to help those people who cannot afford energy, despite all the measures taken at the federal level. These regional and local plans differ as far as the amount and the level of intervention is concerned. It was a federal programme and not a Länder programme.

Q69            Debbie Abrahams: Good morning, everyone. I want to follow on from Sir Desmond. Apologies, the audio is not great so I can pick up most of what has been said, but I am sorry if you have already mentioned this. Could you explain succinctly what the purpose was? What were the objectives that the relief programmes, the cost of living payments, were trying to achieve?

Professor Gerlinger: The main purpose was to relieve people from high energy prices, to avoid any interruption of energy supply and to contribute to maintaining a certain minimum standard of living. That was the main purpose and, therefore, the measures mainly focused on people with low income, with many children, recipients of social benefits and so on.

All in all, I think that these measures have been successful. Nevertheless, we cannot maintain the standard of living we had before 2022. Moreover, you should take into account that the measures taken also contributed to containing inflation. Indeed, the €9 ticket meant that the prices for mobility decreased considerably, and that had a significant impact on the inflation rate in Germany.

Dr Štefánik: In our case, originally—especially in the case of the first measures, the one-time payment, the extra pensions—the rationale was to compensate for the decrease in the real income of households. Then for the specific subgroups, they go further beyond the immediate reaction to the inflation and started to rebuild the existing family support policies, also expecting some increase in activity, for example, as a reaction to the childcare allowance increase. Other purposes somehow snowballed into the original rationale, especially in the case of family support policies or in the case of parental pension bonus. Those are more like conservative ideas in terms of people raising kids and traditional family ideas, which are politically well communicable.

Dr Robson: Let me just say that asking the question about the policy purpose is maybe one of the most important ones when thinking about the impacts of policy and the effectiveness.

Here in Canada, energy prices have not necessarily had the same salience as I am hearing from the other witnesses and as I know has been the case in the United Kingdom. Electricity prices in Canada, for example, have been relatively flat, owing in many parts to the fact that we are fairly sovereign that way.

With regards to other sources, though—for example, fuel and gasoline—those have been more volatile in terms of the international commodities markets. Canada has also been pursuing a policy of pollution pricing, which has created a bit of a political tension between governments that are on the one hand in favour of pollution pricing nationally and in some subnational jurisdictions, and those who are not. There is, however, a programme to try to refund households for some of those climate incentives. It is called the climate action incentive payment.

It has been driven more, I think, by a need to be seen to be responding to the decline in household real income, because wages in Canada have been relatively flat. Notwithstanding the fact that we have a very tight labour market, we have not really seen significant wage growth or a wage price spiral that we might worry about. The drivers of the costs of housing and the costs of retail food have really been the primary pressures, so governments have chosen to address those primarily through giving these one-time cash transfers, so that households feel that they are better equipped to handle those pressures.

Q70            Debbie Abrahams: Following on from that—the question was specifically around effectiveness, and that needs a formal, independent evaluation—many of these programmes are literally just starting, so I wonder what stage you are at and whether there was any prospective analysis of the impacts that could be considered from the programmes, or whether that is something that was not done but will be done retrospectively. Where are you at with that, again as briefly as possible so I do not try the patience of the Chair?

Professor Gerlinger: Could you please repeat your question?

Debbie Abrahams: What evaluation are you going to do?

Professor Gerlinger: Okay. The financial measures have not been evaluated. Tax experts can calculate the impact of certain tax reliefs, for example, and—

Debbie Abrahams: Going back to my original question, for example, you said it was about stopping the interruption of supply, stopping fuel poverty for people on moderate and low incomes. How will you be evaluating that and where will you be evaluating it?

Professor Gerlinger: As far as we know, there was no interruption of supply. I think that there is broad agreement in the German public and among political parties that the measures relieved poor people from high energy costs. I think they had an impact. A major problem is that some groups profited who were not in need of any support. This was a major problem and a lot of money was spent on that. This was due to political conflicts among the governing parties, as I mentioned.

Dr Štefánik: If the purpose is just to ease up the low-income households, you can evaluate it ex ante using a microsimulation model. You have tax benefit models or microsimulation models on tax benefits systems such as the EUROMOD. We do administrate ourselves. The Council for Budget Responsibility of Slovakia did ex ante evaluation of all those measures. That is how we know the impact on various households. That is basically what you can do. If your purpose is only to maintain income, on this one you do not need to have any time elapsed after the implementation of the support. If you are looking for increased activity, of course you need some extra time between the support.

Dr Robson: In Canada, the only analysis that I have seen on the distributional impacts of any of these measures has been done by academic colleagues, including some of my colleagues who have published on this. Not unlike my colleague from Slovakia, here the effort has been to talk entirely about the volume of income that would be transferred to households as opposed to looking for indicators as to what relief this is providing. We have not seen, for example, evaluations around whether this is making any impact for people who are in default of rent or mortgage payments, or on use of food banks. Unfortunately, a lot of that information will take us some time to gather.

Professor Gerlinger: May I add one point? There was one problem concerning the tax reliefs on fuels and on residential energy. The suppliers were expected to pass these reliefs on to the consumers but there was a dispute as to whether they really did. We do not know whether there was an effect and how far there was an effect of the tax reliefs. Of course, it has to be ensured more properly that reliefs on prices for suppliers are to be passed on to the consumers.

Q71            Debbie Abrahams: Thank you very much. It is difficult because if we think about the objectives of the different schemes, and so on, and the methods that were used to deliver that, we are talking about apples and pears. I am also very mindful that you all have more generous social protection systems—your core systems rather than the ad hoc payments and cost of living payments that you have added on there. Do you have any comments about the scheme that the UK has introduced for the cost of living payments? I am talking, for example, about the one-off ad hoc payments, as opposed to a more significant contribution through the core programme, as I say, through social protection.

Dr Štefánik: My first reflection would be that although the one-time payments and flat payments look simpler, they are more cost-benefit efficient than the indexation. If you index any transfer or any income, especially if it is founded on wage or working income, you pay relatively more to the high-end households, while if you give a flat sum to a household, at least you are not contributing to the existing inequality. You can also then target it and narrow it down to the groups that are in need of the support, and then you narrow down the dead weight. Basically, that would be my first comment. Although what you are doing in the UK might look simple, it is not the worst option.

Professor Gerlinger: I agree with Dr Štefánik. What is important, from my point of view, is that for the sake of quick support and equal access to benefits, beneficiaries should not be required to apply for allowances. Benefits should be granted automatically. This is a major point. I would also prefer one-off payments for the reasons that Dr Štefánik outlined.

Dr Robson: From a Canadian perspective, one advantage of the UK approach is that it represents a co-ordinated effort, whereas here in Canada, we have provinces pursuing their own approaches and we have the national Government, and it is not necessarily very well joined up. The United Kingdom is also able to issue a payment that does recognise the additional costs of disability, which is something that Canada has not been able to achieve.

If I understand correctly, the UK payments are available only to those who are currently on ongoing benefit. I think that does reveal a couple of weaknesses, in the sense of reaching people who are actually in need. If I understand correctly, there are some concerns with regards to take-up for some of those existing benefits. I saw one estimate, for example, that in terms of the pensioner credit, there is somewhere in the neighbourhood of an estimated 15% or 20% gap in terms of eligible non-participation. I don’t know what it would be for some of the other measures.

I had a quick look at the UK announcement on this and I found it a bit dizzying, in terms of how to qualify. I think that there are perhaps still some concerns with regards to administrative burden. I very much agree with Professor Gerlinger that the most efficient systems are the ones that are automated, that reduce that administrative burden on recipients—particularly those who are on a lower income and vulnerable, who often have the most difficulty navigating complex government services.

One advantage of the Canadian system is that at least that national payment that I referred to, the goods and services tax credit, is reaching a wide swathe of the population who are low and modest income and who might be feeling the most pressures. It is doing it in a way that is probably the least administratively burdensome. It also provides an opportunity in a sense for other on-ramps. You do not necessarily have to already be on benefits in order to receive these top-ups at the federal level.

Debbie Abrahams: That is very helpful. Thank you.

Chair: Thank you all very much. That concludes our questions to you. We are extremely grateful to all three of you for being willing to join us this morning and for the very clear, helpful and interesting answers you have given to our questions. Thank you in particular to Dr Robson for joining us so early in her day. We will move on now to the second part of our meeting, with our sincere thanks.

Examination of witnesses

Witnesses: Mims Davies, Katy Roberts, Neil Couling and Nagesh Reddy.

Q72            Chair: Good morning, Minister.

Mims Davies: Good morning, everybody.

Chair: Welcome. Thank you very much for joining us. We are here to discuss the cost of living support payments. Can I start, though, Minister, by thanking you for agreeing to attend the meeting in a couple of weeks on the Select Committee’s call for a register of workplace asbestos? I am grateful for your help in setting that up. As you will have seen, there is significantly increased public interest now in that particular subject.

Mims Davies: Yes, Chairman, and I am very mindful of that, and I have asked HSE to be exactly the same. Thank you for the opportunity to engage.

Chair: Thank you for doing that. Can I ask you to introduce your team to us?

Mims Davies: Yes. You might know Mr Couling. We have Katy Roberts next to me and then Nagesh Reddy—this is his first rodeo.

Nagesh Reddy: It is my first, yes.

Mims Davies: I am sure that the Committee will be gentle with him. Neil, do you want to explain your involvement in the cost of living payments? Katy and I worked on the policy together and on HSF, so I will leave you to give the specifics to the Committee.

Neil Couling: I was appointed as the director general responsible for the cost of living payments and led the negotiations with the Treasury and other bits of Government on putting the package together.

Katy Roberts: As the Minister said, I have worked with her on the policy and on the recent Bill. I am also responsible for policy on the household support fund.

Nagesh Reddy: I was involved in the delivery of the scheme.

Chair: Thank you all very much for being with us. The first question is from David Linden.

Q73            David Linden: Thank you very much for joining us this morning. Over the course of this inquiry, we have received evidence stating that while the cost of living support payments have helped people, they have not necessarily been sufficient to meet the cost of essentials. Minister, what is your assessment of the effectiveness of these payments?

Mims Davies: Good morning, David. The Secretary of State set out, when he came to the Committee, that the focus of these payments was to protect the most vulnerable through difficult times. I believe that we have met this objective regarding the adequacy of support for households, in terms of meeting the basic cost of living changes because of the impact internationally of the war in Ukraine. We know the impact of covid and coming out of the pandemic.

We worked extremely hard on the delivery and design for the next stage of cost of living payments. I do not think that Katy will mind me saying—I am about to find out—that when I came in as the Minister responsible for these payments, I was keen to look at the history of how the types of payments had come about. There was much interest as well, particularly linking into the household support fund, in how the two either synergised or didn’t, and also in making sure that local authorities had a strong voice in the support that they felt their communities needed. In fact, as we will all know as Members of Parliament, we have come to know our businesses and our communities even more greatly because of the pandemic. Our port of call with local authorities has been very strong in this.

Katy and I had quite a strident policy discussion on what we brought forward in the Bill in the new year and how we could positively use that time to see whether there were any changes that we could make. I know that there have been concerns around cliff edges and other issues. There was quite a strident conversation and quite a push between us as to how we scoop up the most people and how we make sure that, within the bounds of what we had, this would go to the most vulnerable. Your point, David—

Q74            David Linden: Do you feel that you have met the scale of the challenge then?

Mims Davies: I feel very proud of the team, with the tools that we have, remembering, as I know the Committee will be very aware, that this is extra and over the day job—the day job of getting the payments and the support out to the most vulnerable, to many of those people who may have come into the realms of DWP because of the impact of the pandemic. This is on top of the Plan for Jobs work that we have done, extending our estates and bringing in more work coaches, so I do feel that we have hopefully met what the Secretary of State set out.

Q75            David Linden: Let me press that a bit further. You feel that you have met the scale of the challenge. How does the Department measure and assess whether it has met the scale of that challenge? What is the metric for that?

Mims Davies: We will have an evaluation of the cost of living payments, and we will begin that next year once this phase is concluded. I know that your next question will be whether we will be sharing it, and we will be happy to share it, Committee and Chair. I feel very strongly—having been in the Department for nigh on four years, with a brief sabbatical and a trip to the Home Office in the middle—that what we are able to learn, share and understand helps make things better. Ultimately, our aim is to get people into work and to help people at their most vulnerable.

Q76            David Linden: I am interested that you feel that you have met the scale of the challenge, but the assessment will not be taking place until next year.

Mims Davies: But I cannot assess it until it is finished, David. I hope you will appreciate that.

Q77            David Linden: Okay. We will look forward to receiving that. Finally, going back to the fact that this Committee has received a lot evidence saying that people do not feel that the support has been sufficient to meet the cost of essentials. Are you familiar with the campaign from the Trussell Trust and the Joseph Rowntree Foundation about the essentials guarantee?

Mims Davies: Yes. I was with the Trussell Trust just over a week ago in my constituency, in the food bank in East Grinstead, discussing exactly that.

Q78            David Linden: If you are familiar with the campaign, how much do they reckon that a couple needs per week for essentials in a household?

Mims Davies: I have a note on that and I know where you are going with it. I appreciate that, because I had the conversation with Emma and some of the team there. We do maintain—you will have heard this before—that there is not an objective way of knowing exactly what is right for people, for a family or group. Of course, it has changed. We are hopefully seeing off inflation, which will reduce grocery costs and other impacts.

For us, it is about making sure, whether it is through cost of living payments, Universal Credit or other support that you can get through the Household Support Fund—or, indeed, by using the benefit calculator to ensure you are getting everything you are entitled to—that work is always the best route forward but, ultimately, that families in hard times are able to achieve what they need.

Q79            David Linden: Would it surprise you to know that a couple requires about £200 per week?

Mims Davies: I think there is danger in  being drawn into what is exactly right for who. One of the key things we saw during the pandemic is that people came into benefits need—people who would never normally need benefit support. What would be adequate for the commitments that they had made, particularly in sectors where they never had—

David Linden: Most people require food, electricity, gas, water, clothes and shoes and stuff.

Mims Davies: Yes.

David Linden: They are not luxuries, are they?

Mims Davies: No.

David Linden: That is how we get to the £200 figure.

Mims Davies: The way we build the benefits that people need is to target those to what is right for them, and their family size and make-up. Of course, that is why the Household Support Fund has been drawn particularly to help people who might be just above those thresholds, or maybe not normally needing to have extra support. I am very aware, having done the work with local authorities—we have another session coming up on the 18th July, engaging with the LGA—of how their delivery plans and their knowledge of what people need in their communities will be guiding the additional support that is available.

For example, there is a bed poverty project in Wolverhampton around warm streets and beds, obviously. But for some families, where there are behavioural or welfare issues with children, replacing beds where there has been damage or other impacts is extraordinarily expensive. That is why those projects, interventions and additional funds are there for people who simply would not normally expect to need state support. However, this is about a safety net and adequacy. I understand the Committee is incredibly interested in that fact. That is why the evaluation will be important.

Q80            Sir Desmond Swayne: How were the cost of living amounts calculated? Was it simply a question of what you could extract from the Treasury, or was there some sort of scientific analysis of the principal and disproportionate costs that low income families would face?

Mims Davies: I think, Sir Desmond, it was a balance relating to the increasingly sharp cost of living impact—the factors that I mentioned earlier of covid-19 and the war in Ukraine—and the fact that we had uprated benefits in 2022-23 by 3.1% based on CPI. Further uprating was not due until April 2023 and inflation was changing at that point. It was a bridging exercise for us. For example, the £20 uplift was aimed at supporting newly unemployed people facing those sharp income drops, as I mentioned to David. We did not have a different rationale.

As for what we were able to extract from the Treasury, I think that we had £94 billion over 2022-23 and into 2024 across cost of living support, household support and energy support. The amounts came through according to base 3 costings in that way. It meant that we could support 8 million households on Universal Credit[1] and that people could get up to around £1,000-plus, depending on their circumstances and whether they were getting disability cost of living payments as well. I think, Neil, we have talked about it as a bridging payment between the uprating, if that helps the Committee. I think that is fair.

Neil Couling: It is a bridging payment. At the time, we did look at what the other bits of Government support were. You will remember there was a £150 rebate on council tax. There was £400 off everybody’s utility bill. When we wrapped that together, back when we were looking at this in May, it roughly corresponded to the energy price hike. Of course, that was moving every quarter, so it was not a precise targeting, but we were mindful of other help that was available that the Government were providing when we were setting the level of these cost of living payments.

Q81            Sir Desmond Swayne: Why did you decide to go for cost of living payments, rather than simply adjusting the levels of the underlying benefits that people were receiving?

Neil Couling: At the time, Ministers were very keen to make the payments quickly. From flash to bang—announcement on 26 May, first payments 14 July, and legislation done in a month—it was very, very fast. You can do uprating on the Universal Credit system—as the Committee knows—quite quickly, as we proved in the covid pandemic. In other systems, we can only uprate once a year and it typically takes us about five months to do it through those 13 systems.

Q82            Sir Desmond Swayne: The fragility of legacy systems was a factor.

Neil Couling: Not just the fragility of the systems; the systems work with other bits of public administration. Take pensioners, for example: one of the reasons we cannot move the pensioner uprating more quickly is that we have to provide information to HMRC to set pensioner tax codes. Otherwise, they will not be right in April. It is not just the DWP’s systems that are the problem here and we cannot do UC in isolation. If you have been following the Wayland challenge to the £20 uplift, you will have seen that the reason we have been successful in the challenge is we had a good equal treatment answer there. As the Minister explained, we were helping people who had lost their earnings. Their earnings had reduced or disappeared due to the impact of the pandemic. Therefore, we did not need to apply that to legacy benefits. Here, there would not be that same justification, so we could not uprate Universal Credit very quickly. We could do it, but on the other benefits, we would have an equal treatment challenge and probably would lose that equal treatment challenge.

Q83            Sir Desmond Swayne: What informed the decision to change the amounts and the frequency with which they were paid between this year and last year?

Mims Davies: It is a combination of people knowing the figures that would be coming into their bank account, and being able to make sure that we could track if people had had those payments, and it was also about fraud risk. Neil and the team looked at some work there. By not being over with our qualifying periods, we would not have affected behaviour—we did not want people not to be taking work and flowing off Universal Credit if they knew a potential payment was coming.

On the point earlier about a promise to protect the most vulnerable and meet that objective, we needed to make sure that we staggered three payments on the ad hoc system. It did not impact wider Universal Credit support, but we could make sure that we were paying the most vulnerable.

If anybody believes that they have missed a payment—for example, we have just finished the £150 additional payment for disability or for those with a health condition—there is a reporting system on gov.uk so we can track if somebody has perhaps been missed out. There is also a way of doing additional “mop-up payments”, as Neil calls them, for people who may have missed out. It was a way of tracking that number, as well as letting people see that clearly in their bank account and also not influencing behaviour but supporting the most vulnerable. I think those are probably the key points. I don’t know if there is anything else.

Neil Couling: On the second tranche of payments, we had a little bit more notice and we have tried to drop the payments in when bills would be at their highest. Coming out of the winter into the spring is the first payment. There is then a payment in the autumn, and then spring of 2024 to try to support people at the time their bills are coming in.

Nagesh Reddy: Also from a budgeting point of view, there was quite a lot of evidence to suggest that splitting the payments over that kind of period and through those seasons would be of greater benefit. That is what we took into account.

Q84            Sir Desmond Swayne: What factors would trigger a decision that further such payments are necessary beside that?

Mims Davies: I noted that the Chair asked my colleague a similar question in the Chamber yesterday. The reality is that Government’s focus at the moment is to get inflation down, get people into work and take up vacancies, and to try to tackle our wider energy security and all the other things challenging people. The Competitions and Markets Authority is doing work on food inflation to make sure that the groceries sector is doing all the right things.

We are seeing inflation in the cost of food at around 18% to 19%, and as we heard from Mr Linden, this is a challenge for people. Fiscal events are coming up, Sir Desmond, and I am sure the Chancellor will be looking very closely at that. As my colleague said yesterday, this is beyond my pay grade—I am sure for a long time—and our Secretary of State is already doing the engagement with HMT.

That is why we need to do the evaluation and understand this. I hope you will have seen from the answers to the Committee, both in the passage of the Bill, which was very positive in both Houses, and from some of the rationale that we have explained today, that we are trying to get it right and help people to move forward, but not necessarily to become dependent on these additional payments.

Hopefully, we can get the reasons for those payments being there out of the way and make sure that people are better off generally in work and through upskilling. The mid-life MOT has been announced today—interventions for the 50-plus—so that people can use all the tools in their armoury, alongside what we have at DWP, to be better off. I hope that if we do need to intercede, it is in a minimal way in future. Again, this is extra and over to the day job that we do.

Q85            Chair: Can I pick up on the point, the explanation, that Neil gave us a moment ago about the equal treatment that the Department dispenses? Would it have been possible to increase Universal Credit on the one hand and then use your one-off payment system to provide support for legacy benefit claimants?

Neil Couling: I do not know what the lawyers would advise us on that here. But the problem becomes that if you use the Universal Credit system to uprate—remember, we are trying to bridge payments here, to bridge the next uprating that will then take into account cost of living increases; that is just the way uprating works. If you anticipate that through your rates of benefit, as you asked some of the previous witnesses, you have the problem of whether you do not take that off people or whether you reduce the uprating at the end of all of this.

Q86            Chair: I understand, but would it have been possible to use the one-off system for the legacy benefit claimants?

Neil Couling: You could use the one-off system. As long as you can identify the group that you want to pay through the payment system, you can use it.

It may help the Committee to know this. I was very worried, and I advised Ministers on this, about the fact that we could not disrupt the normal payment of benefits. We get 40,000 Universal Credit claims a week. Pension credit is 149% above its 2019-20 levels and PIP is 41% above, so we are a quite highly stressed organisation. I was looking for something that would be highly automated and these payments are about 99.5% automated. I set various preconditions for success here. We looked at Northern Ireland where they had used it for some of their covid payments and we thought—Nagesh led some of the work here—that we could scale up that system to do this.

Q87            Chair: When was the one-off payment system built?

Neil Couling: During covid.

Mims Davies: During covid.

Nagesh Reddy: It was built in 2020, during covid, in case we needed to make one-off payments for that situation. It was used in 2021 by the Department for Communities in Northern Ireland for their heating payments. That was around 250,000 at the time, and then again in 2022 That is the system we used.

Chair: Interesting. Thank you very much.

Q88            Selaine Saxby: Thank you and good morning. We understand that the Department has said that the ad hoc payment system sits outside the normal benefits delivery system and requires specialist teams to make the payments. How much has it cost to create and administer the system?

Nagesh Reddy: Going back to the previous point, it was actually conceived in 2020. It was an instance of a system that we already had. Without getting too technical, they took a clone of that existing system, so the cost of administration and of that development was already built into the system at that time.

Q89            Selaine Saxby: How does the cost of implementing it and administering the ad hoc system compare with the cost of uprating Universal Credit?

Nagesh Reddy: I cannot give you an indication of the cost of uprating Universal Credit. On the system, I can you tell you that we took three factors into account in getting these payments out. One was speed, one was simplicity and the third was around the safety of core payments. It met those requirements and the time from the announcement to payment out of the system was seven weeks.

Neil Couling: We tried to construct it and construct the payments in a way that does not disrupt our core delivery—so they do not, for example, cause a spike in telephone calls. Your previous witnesses said the best system is when we do not have to claim. You do not have to claim these payments. They are automatic. That means the system is relatively cheaper to operate. Where costs do come in—and we do face some costs—is on the mop-ups. There are not many mop-up payments to do but they are labour-intensive.

Because people’s entitlements might not be determined at the qualifying date, we go back and check. The biggest example of that is around pension credit, where you could backdate your pension credit award by three months. We have done quite a lot of work with pensioners to say, “You should be claiming pension credit because you could get the cost of living payments as well”. That is where the costs come in, but it is not a cost relative to uprating Universal Credit.

Q90            Selaine Saxby: In the light of that, to what extent has the ad hoc payment system made the whole benefit system more complex, given that Universal Credit was meant to be simplifying it?

Neil Couling: I do not think it has made it more complex. The system as a whole has met an immediate need. It is not just about Universal Credit here. It is about benefits for pensioners and extra-cost benefits for disabled people. This has allowed us to make those awards to people and I think meets a lot of need. We will know from the evaluation exactly how successful that has been, but it did mean we had some pretty serious preconditions for success. I can list those for the Committee if that would be helpful.

Q91            Dr Ben Spencer: Building on the topic of ad hoc payments and the fact that we have two systems running concurrently—the legacy benefits and UC—surely this is just a good example of how we need to crack on and move everyone to UC. What are the plans on that?

Neil Couling: Yes. That is another one of my jobs.

Mims Davies: Luckily, that is not my policy area, Dr Ben.

Neil Couling: So where are we on that? We are now stepping up the number of migration notices. These are the invitations to claim Universal Credit. In the last three months, we have stepped up from issuing 1,000 applications a month to 30,000 next month, and by the end of the year, we will be issuing 80,000 applications a month. By the end of the financial year 2024-25, we expect to have moved everybody in receipt of tax credits, income support and Jobseeker’s Allowance across to UC. That will just leave those people on Employment and Support Allowance to be brought across.

Q92            Dr Ben Spencer: I was concerned to hear how expensive the administration is. You said the ad hoc system and the manpower work involved in running has been quite expensive. Do you have an estimate of the cost of having two schemes going together now, and what the administrative cost will be between now and the end of the tax year 2025?

Neil Couling: The legacy benefit system is expensive to run, and it is increasingly expensive to run as the numbers of people on it go down. Universal Credit is much cheaper than the system that it replaced. Its unit costs are now under £200 per claim, which is exceeding the business case, so those two systems are cheaper.

The cost of living payments are not relatively expensive to run in the system. They are an additional cost. I think the Treasury advanced us around £30 million extra to cover the cost of the mop-ups. We are spending about £2 billion on administration for the core benefits, so it is not a big figure. Considering what they do—we have made 49 million payments and put £12 billion into people’s pockets so far, with the one payment still to come this year—I think as a cost-benefit, it is a pretty effective value-for money-case.

Q93            Dr Ben Spencer: Okay. I am probably missing something because I thought the intimation was that it was quite a burdensome process and—

Neil Couling: No. My aim was to try to stop it becoming burdensome. By keeping the system simple, not changing the entitlement conditions in the qualifying benefits, having the Household Support Fund to pick up the cases that drop out from that, not having different amounts and not trying to adjust them for family size—which we would not have the data to do—that has made it pretty cheap to run, considering that it is supporting 8 million people on income-related benefits, another 6 million on disability benefits and 12 million pensioners. It is a pretty effective system, I think, considering it was ad hoc and we put things together rather quickly last spring.

Q94            Dr Ben Spencer: Given the cost that you have given for running the legacy benefits system, how does the transition programme that you have just described and the cost of administrating it look? Do you think the programme is ambitious enough? If legacy benefits are so expensive and burdensome to run, where does it sit in terms of the benefit-reward ratio, in terms of going even faster?

Neil Couling: I am the person directly responsible to Parliament for implementing Universal Credit, and the pace we are going at feels pacy to me. Could I go any faster? Not on the basis of the policy that Ministers have set for me about when to move the cases across. Now my plans are set, I do not think it would be possible to interrupt them and safely deliver them.

By the end of this year, we will be doing 80,000 cases a month. That is 80,000 cases on top of the 200,000 or so normal claims to Universal Credit. So you will get a sense of the size of the administrative systems having to cope with that. I think that is, Goldilocks-style, just about right, really.

Q95            Chair: You made the point that the one-off system was a clone of a system you already had. What was that system?

Nagesh Reddy: It was the seasonal payments system.

Chair: Seasonal?

Nagesh Reddy: Yes. It was built for one-off type payments.

Chair: Winter fuel payment, that kind of thing.

Nagesh Reddy: Yes, exactly.

Chair: Interesting.

Q96            David Linden: We have received a fair bit of evidence in the course of this inquiry about a number of people who missed out on cost of living payments due to perhaps maybe an additional overtime payment at work, or examples such as that. I think that the IFS has suggested that around 825,000 people, who earn just above the threshold for Universal Credit, will miss out on the first £101 instalment, and the £900 cost of living payment and, as a result, will basically end up with less income than those in receipt of the benefit who qualify for that support. Is this an example of not providing for those who it was designed to support?

Mims Davies: I think you heard from Neil and the team today about how we have tried to look at the whole, as widely as possible, to support the most vulnerable—for example through mop-up payments or around Christmas, when we had a big push around pension credit to ensure that people who had not been aware of their eligibility came forward so we could help them.

I see the point and I would love to sit here, Chair and Mr Linden, to say we have captured everybody, and that there was no circumstance that we could not have foreseen. From those strident conversations we had on this next stage, before we brought the Bill forward in the new year with three payments, we were very mindful of the feedback about cliff-edge concerns. That is exactly why the Household Support Fund next stage, which is a year’s payment—which local authorities are very adept at getting out the door now—has been very much drawn up with those circumstances in mind.

I am very keen—whether this is through our colleagues at CAB on Help to Claim, jobcentres, or MPs’ offices and caseworkers—that people reach out and speak to the local authorities or links in the devolved Administrations to make sure that they are picking up the Household Support Fund, because it is there as a safety net.

Of course, if we are talking about sanctions, there is the fact that there are three payments. If you re-engage with your work coach, if there has been an FTA or something has been going on there, or there has been an issue and you are perhaps appealing, there is a chance that you could be scooped up in the next payment. I am very mindful of those situations. Do we have everything tied up in a neat bow? No. But I feel that we have been as strident as possible.

In the engagement after the most recent phase of the Household Support Fund, we asked about who was being helped, who may have missed out in this particular way to make sure that the design engagement with the LGA and others picked up on that. I hope that reassures you, Chair and the Committee, that maybe in the big-system approach that we have had to take—in terms of getting something out the door quickly—we have been mindful of individual circumstances where people may need extra help and do not fit in every box. That is always the difficulty in DWP, because people’s circumstances are often very varied.

Q97            David Linden: You mention folk who have a nil award, so you are right to touch on people who have been sanctioned. If they have been sanctioned—your own Department’s report shows that sanctions do not work, but you can place that to one side—and their benefit has been withdrawn, why is the Government double-punishing them by not giving them the cost of living payment? If they have been sanctioned, does that mean they don’t have to pay energy bills or high food costs?

Neil Couling: I—

David Linden: I am asking the Minister.

Neil Couling: All right. Yes.

Mims Davies: Neil, I am sure you will be keen to come in. I think it is very important that those people who are sanctioned understand why. Of course, there are ways of engaging if they feel that it is unfair. People are only sanctioned if they fail, without good reason, to meet their claimant conditions that they have agreed to. We are always extremely mindful of people’s individual circumstances. If they fail to meet their agreed mandatory required activities without good reason, and very often that is failing to attend an appointment, we will of course have to take action because it is about fairness; fairness for the taxpayer—

Q98            David Linden: But they have already been penalised once. Why are they being double-penalised?

Mims Davies: If they come back and meet their requirements, the chances are that they can make one of those additional payments and, indeed, if there is hardship or other help that they need, that is where the Household Support Fund can help them. It is most likely they will receive one or two of the other payments and it will help people to re-engage.

Q99            David Linden: What is the purpose of those payments, Minister? Is it to help alleviate the cost of living?

Mims Davies: To help people with the cost of living—yes, absolutely.

Q100       David Linden: If someone is sanctioned, do they not have cost of living pressures?

Neil Couling: Under the law, the cost of living payments are to people who are entitled to a qualifying benefit. If they have been sanctioned, they might not be entitled to a qualifying benefit. A lot of the people who are sanctioned are entitled to a qualifying benefit because the sanctionable amount is just the personal allowance. If you get money for children, disability, for other aspects of the claim, they will still be paid. As for people getting hardship loans on grounds that they have been sanctioned, that also appears in our system as a qualifying payment and people get paid.

The small group of people who are sanctioned who do not get a payment are typically non-householders, people not responsible for rent, not responsible for children and so forth. They are the ones who can adjust their behaviour, not be sanctioned again and come back and qualify for later payments.

Mims Davies: As Neil said, they are younger, often non-dependant and often male. That is why we have youth hubs, to engage with people and help people, because quite often the reason that they are not engaging—

Q101          David Linden: I think we might be clutching at straws a little bit now.

Mims Davies: Absolutely not, and I have—

David Linden: With respect, I disagree. Let’s move on. Could such payments be—

Mims Davies: If people are younger and are disaffected and not engaged with our services and we just ignore them, that is not acceptable either.

Q102       David Linden: No, I think the Department’s approach to just withdrawing support from people and waiting to see what the social consequences of that are is the problem.

Mims Davies: It is not just withdrawn. You are engaged with by someone who is there to support you with the wider issues. If a jobcentre isn’t the right place for it, the youth hub or wider community support is the way to do it. Just paying people to go away, in my view, is completely wrong as well.

Neil Couling: Hear, hear.

Katy Roberts: Hear, hear.

Q103       David Linden: Well, you have managed to get some agreement from your colleagues, so we are doing well. Could such payments be included in the mop-up payments for other qualifying benefits that are made if an entitlement that would qualify for a payment is later established to have existed?

Mims Davies: Sorry, I missed the first point.

David Linden: Could we perhaps deal with some of these issues in the mop-up process? You have already conceded that  a lot of people, perhaps as a result of cliff-edges or unintended consequences, are being missed out. Is any work being undertaken in the Department to deal with that mop-up?

Mims Davies: Yes. It is about getting back and engaged with your work coach, being able to have a look at your benefits, whether you have gone to the Household Support fund website or talked to Help to Claim and engaged through us. If there is a chance that, with behavioural change, or if the sanction is unfair—sometimes there may be good cause and it has been missed for whatever reason—that can be picked up. That is what we want. We want people engaging with us and we want them to be helped on to the next stage. The Department is not looking to create problems for people, we are trying to help them with solutions and whatever is holding them back in their lives.

Neil Couling: The other thing we have done, as the Minister will recall, for people whose earnings frequency has meant that they don’t have a qualifying payment of Universal Credit in the qualifying period, is that we staggered the qualifying period for later payments, so they are not in a 13-week cycle.

Mims Davies: Yes.

Neil Couling: That means that if people who are paid either fortnightly or weekly miss one of the payments because their earnings have accrued in that month and they don’t qualify for Universal Credit in that month, they qualify for the next two. That is one of the policy modifications.

Mims Davies: Yes, that is one of the mitigations that we looked at in the staggering of the three payments in the policy updates, from learning from before. That was because, for good reason, people were concerned that those who should have received the payments had missed out.

Nagesh Reddy: Just to build on that, and to go back to how we created this in terms of the qualifying period, obviously there were a number of rules because of fraud and error and so on, but the reality was that we had the qualifying period. We do a data extract within that qualifying period, so if the customer has an entitlement, they will get picked up. If, however, they get subsequent entitlements through an appeal and so on, we also have the missing payment forms that are on gov.uk, as the Minister has said, and we do the mop-ups. So there are three processes that we build in rather than just the initial one to try to pick those people up as we go through the process.

Mims Davies: Yes. There is no benefit for us not to pay this out to people who are absolutely entitled. That is what the process is about, making sure that people who need that help—as I say, this is about supporting and bridging the most vulnerable in difficult times. There is no benefit for us not to get it out the door. It is the complete opposite.

Nagesh Reddy: I will just give an indication around the mop-ups, because they are quite frequent. Since we started last year, we have done the mop-ups 12 times, so it is continuous.

Q104       Steve McCabe: I want to ask about the payment date. It has been suggested to the Committee that if the exact date, the qualifying date, for the cost of living payment was published, that might improve take-up and it might also help households to plan their budgets a bit better, a bit like Neil suggested earlier, I think, with pension credit. What prevents you from publishing the exact qualifying date?

Mims Davies: I mentioned this earlier and I am sure Neil will answer that. If it is pension credit and people very much need that additional support—this is about bridging cost of living—that is absolutely what we wanted to do. As Neil has just described, we have planned the payments so we feel that most people who should be entitled to them will get them, but the converse is we have people flowing in and out of benefits, as you would expect, and that is what we want. We are the Department of Work and we want people to be progressing and doing well, so we do not want to be stopping people from taking a job or taking a start-up date, where invariably they will be better off, because they are going to change their behaviour to get a cost of living payment. These payments are ultimately for the most vulnerable and for people who need help, but they are equally for getting people back into work with a pay packet, and everything a pay packet brings, so that progression opportunity is equally positive for them. We need to not change behaviour so that people do not deliberately stay waiting for that payment. I think that is probably fair, isn’t it?

Q105       Steve McCabe: That is the kind of argument that I think the Department used in response to the Treasury Committee report. You were worried that there might be an element of fraud or it might disincentivise people from working. I thought about that, particularly when I was listening to the comment about pension credit. I wondered if you have any idea how many people you think are there. I don’t know if it is just me, but it conjures up in my head some kind of image of a demon sitting there with a calculator and a calendar trying to work it out, “If I do this, I will get that benefit”. If there is £19 billion in unclaimed benefits each year, how many people do you think are sitting there who might act in the way that you suggest, Minister? I am not saying there can be no one, but surely it must be a very small number of people.

Mims Davies: People’s circumstances change. You are exactly right, Steve, that we are there to help people progress and get on to the next stage. I am sure there isn’t a huge bunch of people with negative motivations, but if a job comes up that is right for you that you need to move forward on to, these things hopefully should not be something that hold you back.

We do not make the eligibility criteria public for the reasons that we have just described. If your circumstances are such that you are at your most vulnerable and need that support at that time, you will qualify—and that you would not make any behavioural changes, other than that you keep engaging with your work coach and keep pushing for the next stage, if that is where you are. If you are somebody who needs that additional support, such as pension credit, and you are at that point in your life, that will equally be there for you.

I hope that is a fair response to a fair challenge. We don’t make policy based on people’s worst behaviours. We are trying to make policy that helps people for the best and works with the systems, approaches, guidelines and legislation that are set. I do not know if there is anything else other people want to add.

Q106       Steve McCabe: I understand that, but in this case you are making a policy deliberately based on an assumption about worst behaviours. You are doing to deter people who you think are going to—

Mims Davies: Maybe not individuals. I am talking about wider fraudulent behaviour and practice.

Neil Couling: Mr Linden’s question was a good one, about whether we should be putting it on the rates of benefit, or are these payments not creating cliff-edges in the system? To some extent they are. That is in the nature of your choice here. You cannot be halfway between those two. I have explained, I think, why we could not use uprating.

When we are looking at this, we are trying not to damage work incentives, when we know cliff-edges do damage work incentives. It is a small measure. It probably does not affect lots of people, Mr McCabe, but we do not want any damage to work incentives coming from this policy. It was an emergency response to a huge challenge globally that countries were facing, and that is why we do not publish the dates in advance.

Mims Davies: And we are trying to be fairer to taxpayers. Ultimately, this money has to come from somewhere and needs to go the most vulnerable. Those people who are not in that position and are contributing would want to know that we are doing it fairly and equally. As Mr Couling has described, it is a balance here of a one-off system, where we are trying to incentivise work but support the most vulnerable in extraordinary circumstances.

Q107       Steve McCabe: I do not doubt your motives. I suppose my question comes back to the fact that there is £19 billion in unclaimed benefits. I just wonder if this is a measure that is worth the candle.

Mims Davies: Yes, which is why I am always a stuck record, reminding people about Help to Claim, the Help for Households website and the benefits calculator on gov.uk. You are absolutely right that there may be people who are perfectly entitled to additional support in what has been a difficult time, but because they are not used to engaging with the benefits system and perhaps do not think they are entitled, they do not do that, which is why I continually say, “It is worth your having a look.” That is why our caseworkers and some of our partners are absolutely brilliant at that. That is again where the Household Support Fund and engagement locally will help people to understand that there may be more support there. We are not looking for behavioural change in a negative way, but in a positive way. If there is additional support there that people are entitled to, they absolutely should be taking it up. That is what we want.

Neil Couling: Encouragingly, we are seeing increases in benefit claim rates. I mentioned that pension credit is 149% above its 2019-20 claim rate; PIP is 47% above its 2019-20 claim rate. In the cost of living situation, we are seeing claimants who are not taking up benefits making claims. That is a thoroughly good thing.

Mims Davies: Katy, you wanted to come in.

Katy Roberts: Yes. We have also made public the kind of broad season, if you like, for each of these payments. For instance, we have already said that further means-tested payments will be following in the autumn and in the spring, so there is information out there about broadly when these payments will land, which is useful for families considering their budgets.

Mims Davies: Yes. That is all on the Help for Households website, again linked to the benefits calculator and the wide spectrum of support. I would urge anybody watching these proceedings to have a look at that. Also, if they are worried about anyone, point them in that direction because you can see the direction of travel in the support that is coming. We do not do it to the single day, as Katy and Neil have described, but as this comes forward and, as Neil mentioned earlier, with those bills coming forward, that will give you an indication about when that help could and should be coming.

Q108       Debbie Abrahams: First, can I make a couple of comments? They do not require an answer but I just think they need to be on the record.

There were 541,440 UC sanctions at the end of January 2023. The average duration was 11 to 12 weeks. I find it incredibly uncomfortable to think that these are people who either can’t be bothered or who are shirkers who do not attend an interview. I just want to put that on the recordI really do.

I also want to make the point, because the Minister has mentioned being fair to taxpayers a number of times, that most people who are on social security have been or are taxpayers, so we are talking about one and the same and we should not “other” claimants.

I am coming on to my substantive question. I have just been looking at Scope’s paper on extra costs for disabled people, which for this year had increased by £330 since 2020 to £975 a month. That is just for one disabled adult. If you have a disabled adult and a disabled child, it is much more. I think we all welcome the cost of living payments that were made. However, it has been said to usI need to convey this to you, and I have certainly felt very strongly about the impacts of the various cuts in support to disabled people over the last 12 years or so since I have been an MP—that although the amount of the cost of living payment to disabled people is welcome, it needs to be recognised in the context of the additional costs that disabled people face. Could the Minister explain how the Department arrived at the one-off figure of £150 for disabled people?

Mims Davies: I don’t exactly know about the decision on the £150. That is not my policy area, but I note all of your particular points.

As we have discussed today, the support packages include the cost of living payments, the Household Support Fund and the energy support. If you are disabled, you would be entitled to various interventions accordingly, so the extra amount wouldn’t just be the £150. Again, I would say to people who are worried and listening, do have a look at the benefits calculator on gov.uk. I would not want anybody listening to think that that is the only support that we are giving to disabled households. I think it is important to flag that. I don’t know if Katy wants to add anything on that. I will just find another note on this. I am just trying to find the exact reason for the £150, unless you can enlighten me.

Q109       Debbie Abrahams: Before you respond, perhaps I could also add a bit of context. I was looking at some of the figures for the OECD and we have one of the lowest rates of support for disabled people1.3% of GDP. I appreciate that is excluding the cost of living payment, but even if you cannot provide this now, I would be grateful if you could supply details of what this additional £150 payment will be in terms of overall support to disabled people. The OECD average is over 2%, so we don’t do well by disabled people, do we? Anyway, Katy, you carry on and respond to the initial question.

Mims Davies: Let me just say that as part of the evaluation for the cost of living payments this year, we will obviously be looking at the impact of that payment. The Disability Unit is seeking to understand and evidence the full impact of the cost of living payments on disabled people across a range of sectors and it is continuing to engage, rightly, with stakeholders to understand the evidence and the impact on individual situations.

Of course, I understand the issue around medical equipment and other issues. When you are more static, for example, of course you get colder. As we set out in the Autumn Statement, we are exploring the best approach to support the wider retail market performance when it comes to energy costs and looking at the energy price guarantee. I am just trying to find outbecause you are eligible for up £900 through the cost of living payments plus the £150. I am not totally sure whether we know exactly how that number was arrived at, Katy, because that is not my day-to-day policy area.

Katy Roberts: Minister, earlier you were talking about the fact that the £150 is not all the support that disabled people are getting. I thought it might be helpful to say that 85% of people who get that £150 cost of living disability payment will also be receiving either the means-tested or the pensioner payment. That is an example of how the cost of living payments work as a package, as a whole.

Mims Davies: It is substantially more, but put in isolation, £150 does not sound enough, because it isn’t. It is part of that wider package. I don’t know how the specific additional amount was arrived at, because that happened before my time in this role. I do not have the detail but I am happy to try to share anything I can get beyond the note that I have.

Q110       Debbie Abrahams: Again, could I refer back to my questions about the overall cost of living and the total of the core package to disabled people? How does that shift our spending from a paltry 1.3% of GDP to disabled people? I think that is the key thing. I recognise that every additional one-off payment is welcome, but it needs to be looked at in the context of a very meagre system of support for disabled people, which certainly does not match Scope’s assessment of extra costs.

Mims Davies: Just to add quickly to that, one thing that might be useful, certainly for your own constituency, is to have a look at the Household Support Fund interventions locally, because we are working with Action Together and Age UK on warm clothing, bedding and other household essentials and support for such things as white goods. I hope that some of the sorts of people you have mentioned can benefit from some broader help that they need. Winter warm packs, blankets and draught-proofing are all being delivered in your constituency through the Household Support Fund. I would very much hope—I am sure it is—that the council is looking at that emergency assistance.

I absolutely take the hon. Lady’s earlier point about not regarding one group as “other”—far from that, I absolutely agree—and I note the points that she makes. I am certainly not in this Department to do anything other than assist people. I think we are agreed on that.

Q111       Chair: One striking difference between the cost of living support here and elsewhere—we were hearing earlier about arrangements in other countries—has been the lack of extra support for children. There has been a flat rate payment for families, but that makes no allowance for how many children there are in the family. Neil Couling made the point earlier that it would be difficult to know how many children there were, but did you have a look at whether there was a way of providing extra support for children? Was it not done for technical reasons or for some other reason?

Mims Davies: I think it is as Neil described. Varying the rates according to family size just wasn’t possible in the system that we had but that is where we have drawn on Household Support Fund. For example, in your constituency, Sir Stephen, there is some focus on helping residents aged over 75 and larger families. Also, there is assistance through the Household Support Fund with holiday voucher funds and other support packages around energy and white goods.

This is a whole-system approach to cost of living payments, which obviously, claimants and those eligible will be able to put towards their bills or whatever they are focused on. If there are things that are outside this, large payments or wider impact, that is exactly why the Household Support Fund will be drawn with some of those gaps that you would see maybe in this policy filled in on a local level, based on the community need.

I am extremely proud of those programmes. I would be very keen at some point to delve into the Household Support Fund and what it is doing in communities. One thing that I hope the Committee can help us with is to really push those interventions that are making a difference on a local level, where big-picture policies like this cannot necessarily drill down in that way. I do not know if there is anything extra—

Neil Couling: I was asked whether I could target the payments on families. The answer I gave was, “I can’t target the payment on families on Universal Credit” so you would have to target payments to all families. The Ministers at the time were keen to help those families and those people most in need rather than all families.

Q112       Chair: But surely the Universal Credit system does have information about children in the families.

Neil Couling: It does, and maybe you might want to ask Nagesh for more detail here, but what we do is take the fact that Neil Couling, for example, has had a payment in the qualifying period. We don’t know the size of that payment; we don’t know what it is for. We take that bit of data and drop it into the ad hoc payment system and issue the £301the payment in spring in the last example. That is how we do it. We do not have a way of interrogating that data and saying, “Oh, some of that payment was made up of money for children”. It is a very unsophisticated system in that way, but that is what allows us to do it quickly. The answer I gave was that I can’t target low-income families. You could, in another part of the system, look at families as a whole in the same way that we have tried to do that—

Q113       Chair: Could you have used the child benefit system?

Neil Couling: We could have used the child benefit system, but that would mean money going to people up the income scale.

Chair: Irrespective of their income, yes.

Mims Davies: From that answer, I hope you can see that if speed is of the essence to get out money to the most vulnerable in the most user-friendly way, that was going to be a hold-up. In this first iteration, there was very little time. Even when I took over in November, in getting the next stage through the House and ready for three payments, very large changes were going to be impossible. Nagesh, do you want to add something on that?

Nagesh Reddy: I was going to add one point, if I may

Chair: Just to reflect on what you have said, and I understand the explanation, that does seem to me to strengthen the case for doing something through Universal Creditincreasing Universal Credit rates for children. Neil, you did make the point earlier that then you would have an equality challenge.

Neil Couling: You would need to do something similar in tax credits. Tax credits do not cope at all well with in-year increases because they are an annualised benefit.

Q114       Chair: But once everybody is over on to Universal Credit, the problem disappears.

Neil Couling: That is why I am working so hard to do that.

Nagesh Reddy: I have one final point on that to try to put some context to this. This was not just about DWP benefits; we were also administering payments for the devolved nations, for the Ministry of Defence and tax credits, and we were using the same data extracts to make sure that we weren’t making duplicate payments. There was an element of fairness, an element of consistency and an element of taking data and the same extract from all the systems in the same way. That is the complication when you have a number of systems that operate in different ways.

Chair: Yes, very interesting, thank you. That concludes our questions to you. We are most grateful to you, Minister, and to your team. Thank you all for coming and for the very helpful answers you have given us.

 


[1] The Minister for Social Mobility, Youth and Progression contacted the Committee after the session to highlight that she should have said 8 million households who are receiving means-tested benefits, as the figure is inclusive of households receiving Universal Credit, Pension Credit and eligible legacy benefits.