Written evidence submitted by Department for Work and Pensions (WIS0015)

Scottish Affairs Committee – Response to Welfare policy in Scotland inquiry

Background

1.     The Department for Work and Pensions welcomes this inquiry into the impact of welfare policy in Scotland. The impact of welfare policies is complex and the Department is providing evidence to support this inquiry, focusing particularly on the specific policies of interest highlighted.

The rollout of Universal Credit in Scotland

2.     Musselburgh Jobcentre was the first site in Scotland to go live with Universal Credit Full Service in March 2016. Rollout for new claims to Universal Credit in Scotland was completed on 5 December 2018, when Castlemilk, Drumchapel and Shettleston Jobcentres rolled out. There are six Jobcentre districts and four Service Centres in Scotland.

3.     More than 200,000 people in Scotland are successfully receiving Universal Credit, with the UK total now over 2 million. [1]In the most recent Universal Credit Survey 98% claimants surveyed made their Universal Credit Claim online, the majority of claimants are satisfied with Universal Credit (80%) and satisfaction with the way queries were dealt with was high. Universal Credit complaints received in Scotland stand at 0.03% in June 2019, against 0.04% nationally.

4.     The next phase is piloting moving legacy claimants to Universal Credit, which will take place in Harrogate. It is an experienced Universal Credit site, the legacy caseload reflects what will be typical as we start to scale, it covers a mixed urban and rural area, and the office has good relationships with partners locally. Transitional protection will be available for all claimants who are part of the pilot.

5.     We are working with a wide and diverse group of stakeholders to better understand their concerns about moving existing legacy claimants onto UC, as we design and develop our pilot approach. We will move a very small number of people who have not had a change in circumstances onto Universal Credit as part a pilot process, which will begin in July 2019.

Scottish Choices in Universal Credit

6.     Universal Credit Scottish Choices which include the choice of Direct Payments to Landlords and twice monthly payments are now available to all claimants in Scotland on Full Service and not in receipt of a DWP Alternative Payment Arrangement.

7.     We are working collaboratively in supporting Scottish Government to find a policy proposition that can be implemented which meets their policy intent on Split Payments within a household.

8.     We are committed to continuing our work together to help Scottish Government officials refine their policy proposals into workable options. 

Scottish Employment Figures

9.     Latest Scottish employment figures from August 2019 show that:

• The number of people employed in Scotland is at a near record high, of 2.685 million.
• The number of unemployed people stands at 102,000.  Scotland’s unemployment rate (3.6%) is below the UK national average of 3.9%.
• The number of workless households has fallen by 97,000 since 2010.

What are the unique drivers of inequality in Scotland? Does Scotland have different welfare needs from the rest of the UK?

10. Income inequality across the UK has been falling. In the decade to 2017/18 the average income, before housing costs, of the poorest fifth has risen much faster than the richest fifth – up 7.0%. This is over 5 times faster than the average income of the richest fifth.  

11. The Scottish Government’s own published statistics show that inequality in Scotland was lower in in 2017/18 than it was in 2010. Inequality in Scotland is lower than in the UK as a whole, according to the latest UK and Scottish governments’ statistics (2017/18).[2]
 

12. For the purposes of this evidence, we are focusing on relative income poverty, both before and after housing costs.

13. On this basis, the number of working-age adults in the UK in poverty who are in working families has clearly increased since 2010 (from 2.8 million in 2009/10, to 3.4 million in 2017/18, before housing costs). However, this is almost all due to the substantial increase in the number of adults in employment (an extra 3.6 million since 2010). The chance of being in poverty before housing costs for adults in working families has remained stable at around 10% over this period.

14. For working families with children, the picture is more nuanced. The chance of being in poverty when at least one parent is working has risen slightly before housing costs (from 13% to 17%) over the same period and has increased when measured after housing costs (from 20% to 24%).

15. Therefore, it is clear that the increase in in-work poverty is largely the flip-side of record employment rates but the increase in housing costs for families with children is also an important factor. The impact of housing costs is largely driven by the increase in the proportion of working age families with children living in private rented accommodation, which on average is the most expensive tenure type.

16. Looking at the employment effects more closely, it is clear that working part-time or being in low earning self-employment makes poverty much more likely. For couple families with children, there is only a 7% chance of being in poverty (after housing costs) if both parents work full-time. However, this increases to 29% for families with someone in full-time self-employment, to 37% for one earner couples, and to 66% for families with only part-time work.

17. There are no easy solutions to in-work poverty. However, the UK Government is clear that Universal Credit is designed in a way that supports families to move out of poverty. Full-time work virtually eliminates the risk of in-work poverty and that is what UC is designed to support. It incentivises the entry into work, offers smooth incentives to increase hours, sets a general expectation that lone parents and partners should work (if not caring for young children or a disabled person) and offers generous childcare subsidies. The Minimum Income Floor within Universal Credit incentivises growth of self-employed businesses.

18. The strong incentives to work under UC are reinforced by increases to the National Living Wage, Personal Tax Allowance, which work together to promote independence from benefits. Further improvements to work incentives were announced at the last Budget – increases to the National Living Wage and the Personal Tax Allowance, alongside a £1,000 per year increase in UC work allowances which means that 2.4 million households will keep an extra £630 of income each year. The Joseph Roundtree Foundation has acknowledged the importance of these measures in tackling in-work poverty. In addition, power to set the rates of Income Tax and the thresholds at which these are paid for the non-savings and non-dividend income of Scottish taxpayers has been devolved.

19. Alongside strong incentives to work, individuals need good quality work to be available. The UK Government recognises there is more to do to ensure good quality work is available to all, which is why it has responded positively to the wide-ranging recommendations of the 2017 Taylor Review.

20. Whilst there is a correlation of the rise of in-work poverty with high employment rates greater work intensity coupled with higher wages and the availability of good work, is the solution – which holds for Scotland too. The UK Government believes that the only effective and sustainable long-term strategy to tackling in-work poverty is to increase earnings and hours worked and to disincentive people from low remuneration self-employment. .

21. Universal Credit provides us with the opportunity for the first time to support people through the benefit system to progress their earnings. We are building an evidence base to support this work, but information remains relatively limited at this stage. Therefore, a key priority is to invest in understanding the best ways of supporting our existing and future in-work claimants, including working with other Government Departments on this cross-cutting agenda.

22. We want people to fulfil their potential at work. For many, we hope that this will result in an increase in earnings, which will help to support households to move out of in-work poverty.

23. However simply seeking more hours or an immediate increase in earnings is unlikely to be beneficial for everyone. We want to support people to make good choices, and achieve outcomes which are beneficial for them. For some, this might mean moving into more secure work, or finding good quality, flexible work which enables them to manage caring commitments or health conditions. For others it might be about participating in training to improve their earning power and maximise their potential in the labour market. Others may need support to seek out new opportunities, and to gain the confidence to do so. 
 

24. This is not an issue that any one department, or indeed government, can tackle alone.

How similar are in-work poverty trends in Scotland to the UK?

25. Scotland has lower rates of relative poverty after housing costs than the UK, likely driven by lower housing costs, in the 3 years to 2017/18:

• 20% of working-age adults in Scotland were in relative poverty (AHC), compared to 21% for the UK.
• 24% of children in Scotland were in relative poverty (AHC), compared to 30% for the UK.

26. Scotland has slightly lower rates of in-work relative poverty after housing costs than the UK:

• The labour market in Scotland has been similar to the UK, seeing large increases in employment since 2010.
• Between June and August 2018, the Scottish employment rate was 74.9%, just below the UK rate of 75.5%.
• In-work poverty rates were slightly lower for Scotland, likely driven by lower housing costs in Scotland.

3 year average, chances of being in relative poverty after housing costs: 2015/16 – 2017/18[3]

How well is Universal Credit working in Scotland? Are there issues with Universal Credit that are specific to Scotland compared to the rest of the UK?

27. Universal Credit statistics for the period ending February 2019, demonstrate that in the first assessment period of a claim 93% claimants were paid in part and 88% paid in full. This compares national figures of 91% and 85% respectively.

28. Within rural communities the Department adopts a multi-agency approach working with key stakeholders, including Local Authorities to provide outreach facilities for our more rural claimants to improve access to work coaches, this also involves co-locating with partners in remote areas such as Western Isles and a Skype facility within Wick improving access across the rural Highland area.

29. Jobcentres have created Community Hubs to improve access to a range of additional services through working in partnership with Local Authorities, adult education providers, landlords and other key stakeholders such as Citizens Advice and Housing Associations attending their local hubs.

30. For those people living rurally Universal Credit allows claimants to communicate with case managers and work coaches by telephone in addition to their online journal.

31. Scottish Government published a report on 22 March 2107, which showed 81% citizens had basic digital literacy which is the second highest rated area in the UK. 

32. The same report highlighted that 92% premises have 4G internet coverage and 88% next generation broadband access.

33. For those people who have limited or no access to the internet at home there are community access points in rural areas are available through to allow access to the internet such as libraries and Local Authority service points.

34. According to study conducted by Ipos MORI which examined digital capabilities across the UK, Scotland has one of the highest percentages of adults with basic digital skills. Individuals were classed as having basic digital skills if they reported being competent in all five basic digital skills areas, including: managing information, problem solving, communicating, creating, and transacting.

35. However, certain demographic groups in Scotland are less confident in carrying out online activities. Among those that have internet access, a lower proportion of adults in social housing were very or fairly confident in their ability to perform a variety of online activities than those in private rented housing. Those aged over 60 and those on incomes between £10,000-£20,000 consistently reported being less confident than average across all activities.

36. We know that the transition to Universal Credit can be challenging for some claimants particularly if they struggle using online services.

37. People who can’t make their claim via the on-line self-service, or are not able to travel, can call the Freephone Universal Credit helpline to make and maintain their claim.

38. Help to Claim is a service designed and delivered by Citizens Advice and Citizens Advice Scotland to help people make a Universal Credit claim and get their first full correct payment on time.

39. Help to Claim is free, confidential, independent and impartial support provided by trained advisers from Citizens Advice and Citizens Advice Scotland. It is for people who need some support making their Universal Credit application. Claimants can get advice on anything to do with applying, like how to gather the evidence they need, or how to prepare for their Jobcentre appointment. Claimants can get Help to Claim over the phone, by using online chat, or in local Citizens Advice Scotland offices, and in other locations like libraries and Jobcentres. 

The Help to Claim service includes:

• Multi-channel ‘no wrong door’ access: Support is available face-to-face, over the phone and through web chat and online content - so claimants can access support in the way that’s right for them. They can be sign-posted or referred to the service by other agencies, or self-refer.
• An individual needs assessment for everyone who applies to the service, to determine the right level of support. Those who can support themselves with some reassurance are helped to do so; more intense support will be offered to those who need it most.
• Support to begin an online UC claim, which might include (depending on the level of need) setting up an email address/UC account, or working through claim to-dos. Citizens Advice will also help claimants who self-refer to Help to Claim to access UC phone claim services or DWP home visit support, where appropriate.
• Claim completion and preparation for first payment, which might include - identity verification, gathering additional evidence, accessing adaptations (such as direct payments to landlords and conditionality easements) or applying for additional financial support.
• Access to longer term support - supporting claimants with other issues in their lives by signposting or referring them to other services (within Citizens Advice or to other organisations).

40. In exceptional circumstances, a home visit can be arranged to support a claimant in making their initial claim and completing any other administrative tasks required to ensure the claimant receives the correct payment.

41. The Department has received correspondence relating to rent arrears in Scotland. There has been an upward trend in rent arrears which began before Universal Credit rollout, and we know that many tenants are arriving on Universal Credit with pre-existing rent arrears, which Universal Credit actually appears to be helping to clear over time.  According to latest figures (August 2018) only about 7% of social rented households were on Universal Credit: it is difficult to see how a long duration national trend can therefore be attributed to Universal Credit. 

42. Whilst we have always said that there are many reasons people use Food Banks and that their growth cannot be linked to a single cause, we have acknowledged that there were issues with the early roll out of Universal Credit which may have been a factor.

43. The Department have responded quickly to the feedback and made numerous improvements to Universal Credit including ensuring that people get the money they need as soon as possible through advances; and reducing the waiting time for the first payment.

44. We are also exploring whether, building on existing good practice, working more closely with food banks can help us to identify and better support any customers who may, for a variety of reasons, not be receiving the full formal support that they are entitled to.

Universal Credit Scottish Flexibilities – Scottish Choices

45. The first set of Universal Credit Flexibilities regulations commenced in October 2017, which is the first time the Scottish Government used it’s devolved Social Security powers. Scottish Government’s Universal Credit Scottish Choices allow new Universal Credit customers in Scotland to opt to be paid twice monthly and/or to have the housing element of their award paid directly to their landlord. They can decide not to use these options or to have one or both choices.

46. A further amendment came into force on 31 January 2018. This extended Universal Credit Scottish Choices to customers who were on Universal Credit Full Service prior to 4 October 2017, and to customers transferring from live to Universal Credit Full Service once their claim has been established.

47. It should be noted the implementation of Universal Credit Scottish Choices does not remove the DWP Alternative Payment Arrangement policy.

48. Scottish Government also plans to use its powers for Universal Credit Choices to remove the spare room subsidy at source, and DWP has agreed to deliver this. Scottish Government is also developing a policy on split payments. However, for both these work areas, the completion date is subject to prioritisation and any change will not be introduced before 2020, at the very earliest and almost certainly later, given the competing pressures on development time.

What impact has the Benefit Cap had in Scotland? Have certain communities been more disproportionally affected than others?

49. Since the benefit cap was introduced in April 2013, 12,000 households in Scotland have had their Housing Benefit capped. 

• 2,700 households are currently capped under HB, making up 5% of total caseload in Great Britain. 
• 9,800 households are no longer capped under HB (78% of those previously capped), 19% of these have moved into employment (measured as a claim to Working Tax Credits). 
• 2,300 (83%) households are capped by £100 per week or less, including 1,400 (53%) capped by £50 per week or less. 60 (2%) households capped by £300 per week or more.

• In Great Britain, 160,000 households (77%) are no longer subject to cap under Housing Benefit and 58,000 of these (36%) are exempt due to working tax credit indicating they have found work.

Characteristics of households currently capped in Scotland under Housing Benefit

50. The majority of capped households are lone parent households:

• 1,800, (67% of households), with 24% in couple households with children, and 10% in single person households with no children.
• 90% of capped households in Scotland have at least one dependent child, with 79% have 3 or more dependent children.

• The majority of capped households are in large urban Local Authorities (18% of Housing Benefit capped households are in Glasgow City and 18% in the City of Edinburgh). 

Benefit cap under Universal Credit

51. Figures for those subjected to the Benefit Cap under Universal Credit show that:

• 590 households had their Universal Credit award capped in May 2019. 
• 1,100 households have been capped at some point since October 16.
• 460 households are no longer capped under Universal Credit (44% of the total) of which 80 are above earnings threshold (17% of those who are no longer capped).
• 510 (86%) of households are capped by £100 per week or less, including 380 (64%) capped by £50 per week or less. 
• In Great Britain, 17,000 households (40%) are no longer subject to cap under Universal Credit and 4,000 of these (24%) are exempt due to earning more than the threshold at which households become exempt from the benefit cap.
• The capped caseload under UC is currently small relative to the number of Housing Benefit claims capped in Scotland and Great Britain generally, but this is projected to increase as the number of people on Universal Credit in Scotland grows.

What is the impact of the Two-Child Limit on families in Scotland?

52. In the first year of the policy’s implementation (up to 2 April 2018), the policy to provide support for a maximum of two children affected a total of 3,980 households in Scotland (both in Universal Credit and Child Tax Credit), defined as all households reporting a third or subsequent child born after 6 April 2017.  Of these, 200 were in receipt of an exception for a third or subsequent child born after 6 April 2017.

53. The Government’s view is that providing support for a maximum of two children or qualifying young persons in Universal Credit and Child Tax Credit will ensure fairness between claimants on the one hand and, on the other, those taxpayers who support themselves solely through work.

54. The policy had only been in place for just under a year when the data behind these statistics were extracted so these numbers were always expected to be small. Despite this, across the countries of the UK, a similar proportion of those affected by the policy were receiving an exception.

55. Although, Scotland has a slightly higher proportion of exceptions (5 per cent) compared to the other countries (4 per cent); this is primarily due to a higher percentage of multiple birth exceptions. The next iteration of these statistics will be released on 31 July 2019.

How effective has cooperation been between the UK and Scottish Governments on the devolution of new welfare powers to Scotland?

56. DWP continues to work in full partnership with the Scottish Government, including Social Security Scotland, at both Ministerial and official level. Collaborative working and communication at the earliest opportunity are essential to achieving our ambition of a safe and secure transfer of powers.

57. In a recent letter to the Convener of the Social Security Committee of the Scottish Parliament, the Scottish Cabinet Secretary for Social Security and Older People, Shirley-Anne Somerville MSP, stated that: “our relationship with DWP will be an ongoing one, and I remain committed to ensuring that close working continues to ensure we deliver for the people of Scotland. To that end, I and my officials regularly engage with our UK counterparts across a variety of forums. The third DWP/SG Joint Executive Team Meeting was held in Edinburgh on 25 and 26 April 2019, and provided a valuable opportunity for senior officials to reflect on lessons learned and what has been achieved, in a spirit of joint working. Discussions also looked ahead to the next wave of work and the nature of the relationship between the organisations to continue delivering outcomes for Scottish citizens”.

58. Under their powers in the Scotland Act 2016, the Scottish Government introduced Fair Start Scotland (FSS) from April 2018 which provides employment support provision for eligible customers living in Scotland and supports people with a disability, a health condition and those who are long-term unemployed. The recently published FSS evaluation report which reviewed implementation and early delivery offered evidence of a positive start to the programme. The minutes of the Joint Ministerial Working Group on Welfare held on 10 September 2018, record:

“Item 4: Employability Programmes

8. The Minister for Business, Fair Work and Skills (MfBFWS), Jamie Hepburn MSP, updated the Group on contracted employment provision. MfBFWS stated that levels of referrals to Fair Start Scotland from Jobcentres had been in line with forecasts, and highlighted ongoing successful joint working between DWP and SG, as well as with contractors and partners. In particular, the enthusiasm of work coaches for Fair Start Scotland had been, and would continue to be, valued.”

59. This cooperation has proved fruitful to both Governments, and includes joint workshops, “deep dive” and other policy and delivery meetings across the range of benefit areas being devolved, and visits both to DWP benefit processing sites and job centres, and to Social Security Scotland in Dundee. The respective Senior Responsible Officer in the Scottish and UK Governments attend each other’s Programme Boards.

60. There remains ongoing, close collaboration between programme teams from both Governments, particularly through joint project development activity with the aim of ensuring safe and secure transition of cases and data.

61. This cooperation between the two Governments has enabled the Scottish Government to pay a new Carer’s Allowance Supplement, and to introduce Universal Credit Choices and Best Start Grant. Building on the success of Fair Start Scotland and these early successes in social security, DWP Ministers are committed to continuing to support the Scottish Government as executive competence for the remaining benefit areas transfers.

What challenges are posed by the DWP administrating benefits on behalf of the Scottish Government? How can these challenges best be managed?

62. Executive competence for Carer’s Allowance transferred to the Scottish Government in September 2018 to allow the Scottish Government to establish the Supplement. An Agency Agreement between the two Governments means that DWP continues to administer the underlying benefit in Scotland on the same basis as it is delivered in England and Wales, an arrangement agreed at the Joint Ministerial Working Group on Welfare. This will apply until the Scottish Government has developed the infrastructure necessary to deliver its own Carer’s Assistance, which will replace Carer’s Allowance. The Scottish Government meets DWP’s costs in this respect. This approach has proved practicable in this case, and we are reviewing lessons learned in the event that Agency Agreements may be required on an interim basis for other benefits.

63. Executive competence for non-contributory, non-means-tested benefits for those with disability needs (in England and Wales, the main such benefits are Personal Independence Payment, Disability Living Allowance and Attendance Allowance) will be transferred to the Scottish Government in April 2020. The Scottish Government will also introduce replacements for Winter Fuel Payments and Cold Weather Payments.

64. Lessons learned as we break the new ground of devolution of social security include the critical importance of the two Governments sharing as early as possible details on developing polices, legislative requirements, funding and accounting arrangements, and delivery plans, including across digital and operations.

65. In all cases, the focus needs to be on the people receiving support from one or (in most cases) both Governments. This is consistent with the UK Government’s experience in implementing changes to the social security system. The nature of devolution is different in kind from other such changes, but the focus on those needing support is a constant.

What changes might be necessary to help manage the transfer of claimants and data from the Department of Work & Pensions to Social Security Scotland?

66. A number of changes have already been implemented to support the devolution of social security to Scotland. For example, DWP supplies data scans on Carer’s Allowance recipients to enable the Scottish Government to pays its Supplement until such time as its own benefit can be introduced.

67. To support the payments of Best Start Grant from October 2018, and of Funeral Support Payments which are to be introduced later this year, DWP has provided Social Security Scotland with access to its Customer Information System to enable the Scottish Government to identify and verify information. All such data exchanges are, of course, compliant with the relevant data protection legislation.

68. Social Security Scotland also uses DWP’s Customer Payment System, Bank Liaison Service, Financial Services Support & Reconciliation Services and Shared Services Connected Limited for accounting and reconciliation business services.

69. The transfer of executive competence for non-contributory, non-means-tested benefits for those with disability needs will mark a step change in the scale of activity as Social Security Scotland establishes its first ongoing payments to people in Scotland, many of whom will also continue to receive support from DWP, for example through Universal Credit or the State Pension. The same will be true of the Scottish Child Payment. Both Governments will apply lessons learned in the closure and replacement of Sure Start Maternity Grants and Funeral Expense Payments, the establishment of the Carer’s Allowance Supplement, and the introduction of completely new Young Carer Grants and Job Grants. Where new benefits are replacing existing DWP ones, both Governments start from the principle that the transfer of existing cases must be conducted safely and securely, with no break in provision. The disability benefits in particular provide support to some of the most vulnerable people whose interests must come first.

What impact could diverging welfare policies in Scotland and the rest of the UK have on welfare claimants in Scotland? 

70. It is the Scottish Government’s intention to make gradual changes to the social security system in Scotland, to ensure the safe and secure transition referred to above. Both Governments can learn as the systems diverge, and on a relatively modest scale in benefit expenditure terms, this has already been the case with Best Start Grants, which differ significantly from the Sure Start Maternity Grants that they replace.

71. Most recipients of Scottish social security benefits will also be receiving DWP benefits (the most common combinations will be – for pensioners – State Pension and Winter Heating Assistance, which will each go to around a million people in Scotland; and – for adults below State Pension age – Disability Assistance and Universal Credit/new-style Employment and Support Allowance. It will be important for the two Governments to place the people receiving support at the heart of both systems. We have some experience of this already with carers who receive Carer’s Allowance from DWP and a Supplement from Social Security Scotland; and with Universal Credit Choices which are delivered by DWP on behalf of Scottish Ministers under legislation enacted in the Scottish Parliament.

72. As the systems diverge, DWP will continue to work closely with the Scottish Government to understand the relationship between devolved and reserved benefits, including the interactions around “passported” benefits and additions such as the carers addition in Pension Credit. We will also develop expertise as people move between jurisdictions within Great Britain.

73. For people using the two social security systems, clear and joined up communications are essential. A Joint Communication Framework is already in place, setting out high level principles and ways of working to maximise opportunities for both Governments to co-ordinate their approach to communications wherever possible. This helps both parties to deliver clear, communications to both internal and external stakeholders, whilst minimising duplication and promoting consistent, joined-up messaging.

Annex A Benefit Cap Regional Statistics – May 2019 Data

Housing Benefit only (all rounded to the nearest 100) 

Universal Credit (rounded to the nearest 10) – May 2019

Number of households capped in Scotland (UC and HB), May 2019 point-in-time caseload

September 2019

1