Written evidence from the Lloyds Bank Foundation for England & Wales BPI0048

Lloyds Bank Foundation for England & Wales is an independent charitable trust funded by Lloyds Banking Group. We work in partnership with small and local charities, people and communities, changing lives and working towards a more just and compassionate society. Concerns with social security are a consistent driver of the need for support. We also have a strategic national programme aiming to improve the social security system for adults facing the greatest challenges. Our work in this area is rooted in evidence and insights from our charity partners.

Adequacy of benefits

What ‘essentials’ should working-age benefits in the UK cover? Are current working-age benefit levels sufficient to cover those needs?

There is plenty of evidence that the current amount provided through the benefits system is not enough to cover essential needs. Even before the cost-of-living crisis, the basic rate of benefits was leaving people unable to afford essentials, but this has intensified in the last year. Recent statistics show that a record number of emergency food parcels (nearly 3 million) were distributed by Trussell Trust foodbanks between April 2022 and March 2023 – a higher number than any other previous year, and part of a longer-term upward trend.

Many people do not even receive the basic rate of Universal Credit due to the way the system is designed, with deductions and sanctions, as explained in a later question.

We support the Guarantee our Essentials[1] campaign, led by Joseph Rowntree Foundation (JRF) and Trussell Trust, which is calling for Government to embed in our social security system the widely supported principle that, at a minimum, benefits should protect people from going without essentials. Analysis from this campaign suggest that this would need to be at least £120 for a single adult and £200 for a couple per week, to cover essentials such as food, utilities, essential travel, clothes, shoes etc. The current amount provided through the benefits system falls far short of this amount, leaving many unable to afford essentials such as food, energy or rent payments.

Attention should also be given to housing costs. Local Housing Allowance has an important role to play in preventing homelessness and ensuring housing is genuinely affordable for people on low incomes. The cost of renting has continued to rise while LHA rates have been frozen over several years, leaving many people falling behind, unable to keep up with payments and at risk of homelessness. On top of being frozen for several years, the approach to determining LHA levels in the first place is ineffective, resulting in levels that do not meet the reality of housing costs. The longer action is delayed, the bigger the gap between rates and rent levels will grow, and the more costly it becomes to resolve. It would be more cost effective to act earlier to close this gap.

Research by Bevan Foundation (supported by Lloyds Bank Foundation) has demonstrated a severe lack of affordable housing for low-income households. In February 2023, only 32 properties across Wales were available at LHA rates, equating to just 1.2% of the market, with 16 local authorities not having a single property available at the LHA rate.[2] Crisis have also published research which demonstrates similar patterns in England.[3] The shared accommodation rate makes this situation even harder for those under 35.

Recommendations:

• Implement the Essentials Guarantee[4] to ensure that, at a minimum, the social security system provides enough to ensure people can afford essentials.
• Broad Rental Market Areas (BRMA), used to determine LHA levels, should be reviewed.
• LHA should be uprated annually to keep up with rising rents. Otherwise, people are left unable to afford other costs such as utilities or food.

Are additional components of benefits, such as Personal Independence Payments, sufficient to cover the costs they are intended to cover? 

Disability benefits

Working-age adults who are disabled are already more than twice as likely to live in poverty than those who are not[5]. This is likely to have worsened during the cost-of-living crisis, as disabled people often face higher energy costs.

According to Z2K[6], whose #PeopleBeforeProcess campaign is supported by the Foundation, nearly half of all people in poverty in the UK are either disabled themselves or live with someone who is disabled, yet the current assessment processes for disability benefits often deny people the income they should be entitled to. Many find the current system complex and confusing, and face barriers, hostility, and stigma throughout. Z2K’s research showed that 70% of those surveyed did not feel their assessor understood their condition. The majority of those who went on to appeal a refused claim had the decision overturned, demonstrating clear problems with the assessment process. The campaign is calling for Government to work with disabled people, people with health conditions, and Deaf and Disabled people’s organisations to improve assessment processes for Employment Support Allowance, Universal Credit and Personal Independence Payment.

The Foundation is also supporting work led by Public Law Project that is exploring the experience of disabled claimants and claimants with health conditions when accessing financial hardship measures and relief from deductions, with an expectation that further changes will be needed to ensure disabled claimants access the support they need. 

Recommendations:

• Work with disabled people, people with health conditions, and Deaf and Disabled people’s organisations to improve assessment processes to guarantee disabled and seriously unwell people receive the social security they need to live on.
• Review access to hardship measures and support for disabled people more broadly.

Are working-age benefit levels appropriately set to encourage people who are able to work into work?

The inadequacy of benefit levels leaves many people struggling to even afford essentials such as food, energy, or housing costs, which has a massive impact on physical and mental health, as well as increasing digital exclusion due to lack of access to devices or data. All of this makes it more difficult for someone to work towards employment. In recent years, charities supported by the Foundation have reported that they have had to spend more time and resources on supporting people to get these essential needs met before they can even begin to look at what might help them reach employment. If the social security system provided enough to guarantee that people can cover the cost of essentials, this would provide a much stronger foundation for addressing other challenges in their lives and moving into work.

The design and delivery of employment support alongside benefits also needs to be improved to be more effective at meeting the diverse needs of individuals. The most effective support is delivered at a local level, with the flexibility to tailor support to individuals’ needs. Research by New Local[7] (supported by the Foundation) has shown how taking a community-based approach to employment support is particularly effective and important for those facing the greatest challenges. Similarly, our Value of Small[8] research showed that small and local charities, such as those the Foundation partners with, are uniquely well-placed to deliver this kind of support, and have been working in this way for many years, embedded in communities and with proven success. The support provided through these charities helps people to prepare for and find employment but also provides ongoing support to ensure people can maintain those jobs too.

Recommendation:

• Implement the Essentials Guarantee[9] to ensure that, at a minimum, the social security system provides enough to ensure people can afford essentials.
• Fund partnership working with small and local charities to deliver targeted, flexible, and tailored employments support for people who face the most complex issues and barriers, investing resources in the community.

What lessons can be learned in respect of benefits provision more generally from the £20 uplift to Universal Credit, introduced during the pandemic?

The £20 uplift to Universal Credit made a difference to many people at a time of high uncertainty. It also demonstrated that such a large-scale change can be implemented quickly and efficiently across the whole system, where there is political will to do so.

The impact that the uplift had on people can be seen clearly through the consequences when the Government cut this support. A charity supported by the Foundation in the West Midlands shared these quotes from people they support about the impact of the £20 cut in 2021:

My gas and electric meters were up to date with the extra £20 a week. Now I'm back in emergency measures as I can't really afford to keep them topped up, especially in winter.

I know someone who was able to run his car so he could get out and about - his mobility is not great. The loss of the money now means he can't - this will no doubt negatively affect his mood.

Although the £20 uplift made a big difference to many people, there were also many who missed out on this, including those on legacy benefits, most of whom are disabled, in ill health or carers, as well as those affected by the benefit cap. This discrepancy in approach between those on Universal Credit and those on legacy benefits highlighted how the current social security system is failing to address inequalities effectively. The system should not treat people unfairly simply based on the type of benefit they receive – it should ensure that everyone has enough to cover essentials.

The Keep the Lifeline campaign to stop the cut, led by JRF, was backed by a huge number of organisations across sectors, and by politicians across the political spectrum, demonstrating the widespread support for an increase in benefit levels. Recent research from Bright Blue[10] (supported by the Foundation), reflecting on the adequacy of the social security system following the pandemic, demonstrates clear public support for social security to be set at a level that covers the essentials.

What principles should inform the design and delivery of the working-age benefits system (e.g. fairness, transparency, inclusivity)?

The social security system should, at a minimum, provide enough for people to afford the essentials like food, housing, and energy.

Currently, the system is designed in a way that does not consider individual circumstances or challenges. A more human and inclusive approach is needed, which includes support for those facing complex issues or barriers, who currently experience the harshest end of the system. For example, employment support is often delivered in a very top-down, one-size-fits-all approach, which does not account for individual circumstances or tailor support to people’s needs. This leaves those facing the most complex issues and barriers even further away from accessing employment. As outlined above, a more tailored approach is needed.

Many of the challenges with the current state of the social security system would be avoided if the design of the system and decision-making was more closely informed by the people whose lives are impacted by it. For example, Expert Link[11] (supported by Lloyds Bank Foundation) have been working with a group of experts with lived experience of multiple disadvantage and the social security system to improve access to benefits and reduce the barriers that people face. This includes making better use of the flexibility and innovation that does exist within the system (e.g. alternative payment arrangements), making use of advocates, increasing work coach understanding about the challenges people may face, improving partnership working with other agencies, and making forms and assessments more accessible and supportive. They have delivered training to 200 DWP staff from across London and the South East, as well as more in-depth work with specific Job Centres, as well as improving understanding around homelessness and trauma-informed approaches.

Expert Link and other lived experience-led groups can provide a wealth of practical ideas and insights, grounded in direct experience of what works, to make the social security system work better for the people who need it most, and whom the system is currently failing. Recent work from Bright Blue[12] funded by the Foundation has also echoed the need for policy to be rooted in the insights of people with lived experience. The Commission on Social Security led by Experts by Experience[13] has set out a vision for what this could look like.

Recommendation:

• Involve groups with lived experience in policy design and decision-making processes. We would be happy to connect you with groups working in this area.

Designing benefits policy

What is the role of i) the benefit cap; ii) repayments; iii) sanctions on the adequacy of benefits? 

ii) Repayments / deductions

While many struggle to afford essentials on the basic rate of Universal Credit, repayments / deductions further reduce the amount many people receive, pulling people further into poverty. Our report, Deductions: Driver of Poverty[14], sets out how almost 7 million people are unable to afford basic necessities as they have up to 25% of their Universal Credit payments deducted every month. Recent research from JRF[15] found that 95% of people on Universal Credit who are facing deductions from their benefits are going without essentials (compared to 84% of people on UC without deductions).

Advance payments: The five week wait for a first UC payment leaves claimants with nothing to live on – assuming that they can rely on savings or family and friends, when UC is actually only available to those without savings to fall back on. An Advance Payment is in effect a loan which must be repaid over the course of their receipt of Universal Credit. Advance payments represent a constrained choice for claimants, between no income for the first five weeks, or reduced benefit income later over the repayment period, ultimately leading to increased hardship either way. Take up of Advance Payments is concentrated among low-income households and those with a disability or health condition.

Tax credit overpayments and arrears: the result of system errors rather than individual behaviour, DWP does not actively chase tax credit debt until it is triggered by a new Universal Credit claim i.e. when people already face increased financial challenges. This leaves people confused as to why they are being penalised for a system error that may have occurred years ago, reducing their payment with little notice or explanation. The High Court recently ruled in favour of a UC claimant, where DWP’s decision to recover ‘official error’ overpayment debt was unlawful and should not have been repaid, demonstrating the need for review of DWP’s approach to debt recovery.[16]

Deductions / repayments are an area where change is possible. There is good practice that can be learned from other areas of Government in terms of more responsible debt collection – for example, approaches taken by other regulators like Ofgem and Ofwat include vulnerability strategies and affordability assessments, none of which are considered by DWP when implementing deductions. Similarly, student loans are only repaid when people’s income reaches a certain threshold – in contrast, there is no consideration of ability to pay for those already on the lowest incomes. The Breathing Space[17] scheme also already exists to give people time to seek debt advice and explore their options without facing enforcement, but does not apply to debt deductions from benefits.

Immediate recommendations:

• Reduce the overall maximum deduction rate to 15%
• Reduce the maximum rate for government debt to 5% - this change could be made immediately within current regulations for overpayment debts
• Make waiver processes easier to access and more readily implemented in practice, building on the work of Public Law Project[18]

Longer term recommendations:

• Advance payments should be converted into grants.
• Before making deductions from benefits, Government should follow best practice and carry out affordability assessments by qualified advisors, in line with other regulators.
• Write off historic ‘debts’ that stem from government administrative errors, particularly for tax credits.

iii) Sanctions

Sanctions often leave people without any social security. Fairly minor failings (in the latest quarter to July 2022, 98.2% of sanctions were for being late or missing an interview) typically result in sanctions with a monetary value that is more onerous than some of the most serious court fines.[19] Stopping payments results in debt, poor mental health and people having to turn to crisis support such as food banks.

DWP data shows the rate of overturn at appeal is high (81%), suggesting that many sanctions were imposed incorrectly or unfairly in the first place, resulting in wasted time and resources, and leaving people without any income through no fault of their own. Yet evidence from Public Law Project suggests that claimants face many barriers in challenging decisions. They are often a result of circumstances where it wasn’t possible for the claimant to comply (e.g. an incorrect notification of an appointment) or an impossible choice (e.g. a clash with a funeral or caring responsibilities).

Although sanctions were suspended for a short period during the coronavirus pandemic, they are now at significantly higher levels than before the pandemic – DWP shows that in August 2022 the rate of sanctions was more than double the pre-pandemic peak, with the consequences now even more severe due to the wider cost of living crisis.[20] Claimants who had received a sanction have also missed out on the cost of living payment due to being on a ‘nil award’ of Universal Credit, further compounding hardship.

Recommendation:

• Sanctions policy should be reviewed, looking at when and how they are used, taking into account the issues of effectiveness and fairness raised above, particularly for people facing complex issues. They should never leave anyone unable to afford the essentials.

What is the impact of No Recourse to Public Funds conditionality on benefit provision for affected households?

Some of the people most in need of support fall outside the social security system, because they have no recourse to public funds (NRPF). This leaves people at serious risk of falling into destitution, with nowhere to turn. Charities often step in to fill this gap but are left with little funding or resources to enable them to support people fully. Building on learning from the pandemic, Homeless Link and NACCOM[21] (supported by the Foundation) have led work to provide a roadmap towards supporting individuals with immigration-based restrictions who are facing homelessness. There is also learning that can be taken from Bristol, where Bristol Refugee Rights in partnership with RAMP Project[22] have been leading work to develop a model of support based around designing-out destitution, providing a safe place to stay, and ensuring people are informed, supported, included and involved.

Charities are playing a crucial role in addressing poverty and supporting people through the cost-of-living crisis, but they are themselves increasingly stretched, with costs rising and income sources under pressure. Many charities are anticipating that demand for their support is set to increase beyond their ability to meet it[23]. It is critical that charities have the resources to help people who have fallen through the growing gaps of the social security system.

How does the design of benefit provision within the UK’s four nations vary? How are recipients of working-age benefits affected?

In Wales

A uniquely Welsh piece of legislation is the Wellbeing of Future Generations Act (2015), which includes a goal for “a prosperous Wales”. We would advocate for a joined-up approach that considers local practicalities and cost-effective solutions within devolved contexts.

The Public Sector in Wales is evolving. For example, Regional Partnership Boards are being streamlined and there is a shift towards mainstreaming Co-Production throughout the public sector. The new Social Partnership and Public Procurement (Wales) Bill includes provision for a Social Partnership Council, and the enactment of the Socio-Economic Duty has applied in Wales since 2021. All these recent or ongoing developments are ostensibly aimed at creating a more collaborative, long-sighted public sector in Wales.

It is worth noting that Social Welfare is devolved in Wales, as is Public Sector Compensation, which falls under the Social Security Head reserved to Westminster, however the budget available for Welsh Government to allocate accordingly will vary year on year.

Currently, the Welsh Government and Welsh local authorities provide several different schemes which complement Universal Credit or legacy benefits. These schemes range from the provision of free school meals to discretionary housing payments. At present, each of these schemes is viewed as discrete from each other, meaning that claimants must often make multiple claims to receive all of the additional Welsh support they are entitled to, and creating inefficiency in the system[24].

A 2020 report on the impact of Universal Credit on Council Tax Reduction and Rent Arrears in Wales concluded that Universal Credit is a significant change in welfare support for low-income households. The report provides evidence that the move to Universal Credit had an impact on household resilience and debt levels of low-income residents in Wales[25].

Early feasibility studies conducted by Policy in Practice into a Welsh Benefits System are gaining interest and support from a range of public and third-sector stakeholders, keen to reduce poverty in Wales by ensuring income maximisation through a streamlined, efficient system. A report due this summer will outline concrete recommendations, including, for example, some ‘day one’, cost-free actions:

• Consistently capturing applicants’ wish to apply / agreement to check wider eligibility at the earliest (first) point of contact
• Using existing data, such as Universal Credit Data Share (UCDS), more effectively.

UCDS data is sent to local authorities daily and is already verified by the Department for Work and Pensions. Using this more effectively, could help with identification, applications, and verification, as the data could be used to partially automate the application process and awards for the majority of applicants for Free School Meals and Council Tax Reduction, for example.

Local welfare assistance

Although local welfare assistance is the responsibility of local authorities, central government has an important role to play in setting the resources and strategic direction. Over recent years, local welfare assistance schemes have become a postcode lottery, as local authority budgets are increasingly stretched, leaving some areas with no provision at all[26]. Local welfare assistance can play an important role in helping people who face a financial emergency, responding to a crisis and preventing problems escalating.

The Coordinated Community Support[27] programme, led by The Children’s Society and supported by the Foundation, has shown how better coordination of support between local authorities and the voluntary sector can result in better outcomes. Across four pilot areas (Oldham, Tower Hamlets, Norfolk and Swansea) over three years, the programme showed how better coordination can result in people getting the right support through a quicker and smoother process, creating a ‘no wrong door approach’ which also increased efficiency and collaboration for services. The programme generated valuable learning[28] which could be used to inform future local welfare schemes and funding.

Over the last couple of years, the Household Support Fund has often been used as a way for Government to be seen to be supporting lower income households. While this support is welcome, the need for this funding has been ongoing because the income people receive through the rest of the social security system is inadequate – it should not be a replacement, rather a safety net for emergency or one-off situations.

Recommendations:

• Future local welfare arrangements should include resource for coordination at a local level, building on the evidence from the programme that this led to more joined-up working and smoother processes, enabling people to get the right support quickly and making effective use of limited resources.
• A longer term, more consistent funding settlement is needed for local welfare assistance, with guidance developed in accordance with good practice[29].

Accessibility and Administration

What aspects associated with the administration of benefits impact the adequacy of experience for claimants? 

Inadequacy is currently embedded in the design and administration of the social security system due to features such as the five week wait for a first payment, deductions and sanctions. As outlined above, the five week wait leaves people with no income, often when they’ve already reached crisis point and had to wait for their application for Universal Credit to be processed. This puts people in an impossible position of either falling into debt to cover essential costs during this period, or taking an Advance Payment, which then reduces their income over the longer term as it will be repaid through deductions from monthly payments.

Similarly, deductions not only leave many struggling to afford essentials, but are also often confusing. For example, deductions might be due to tax credit overpayments which occurred several years ago, through no fault of they individual, and which they may have no knowledge of until the deduction is made from their payments. 

What changes should be made to the administration of working-age benefits?

In general, the Universal Credit system can be very difficult and confusing to navigate, especially for anyone who faces more complex issues or barriers. Many of the small and local charities that the Foundation works with are supporting people to access benefits, but without this support many people would struggle. Digital exclusion is also a big barrier, as people may struggle to afford data and devices, or need support with navigating online systems.

Research by the Money and Mental Health Policy Institute[30], funded by the Foundation, has demonstrated that simple changes could make a big difference to people with health problems accessing Universal Credit. Needless flaws in the Universal Credit system make it too hard for people to nominate someone to help them, meaning they are ‘set up to fail’. The research demonstrates clear, actionable recommendations that could make a big difference for many people.

Are there any particular groups who have been ‘left-behind’ in the design of working-age benefits policy?

The level of benefits, as well as the processes for accessing benefits, create additional barriers for specific demographic groups who already face some of the greatest challenges.

As outlined above, disabled people face particular barriers in the system. According to Z2K[31], whose #PeopleBeforeProcess campaign is supported by the Foundation, nearly half of all people in poverty in the UK are either disabled themselves or live with someone who is disabled, yet the current assessment processes for disability benefits often deny people the income they should be entitled to. Many find the current system complex and confusing. The campaign is calling for Government to work with disabled people, people with health conditions, and Deaf and Disabled people’s organisations to improve how the system works.

Social security policy and delivery also needs to work better for care leavers. Care experienced young people are less likely to be in education, training or employment, so are more likely to need support from social security system, yet often face greater barriers in accessing the support they need. Research from Learning & Work Institute[32], in partnership with care leavers and specialist charities and supported by the Foundation, proposed 6 recommendations, including:

• Universal Credit should be increased, and care leavers should be entitled to the over-25s rate, given they may not have the same support from parental income to rely on
• A designated care leaver lead / champion in every Jobcentre Plus or local Youth Hub
• Introducing a UC ‘marker’ for care leavers
• Increase access to more regular UC payment where appropriate, and budgeting support
• Aim to prevent sanctions, and ensure care leavers are clear about what they need to do and the process
• All local authorities should exempt care leavers up to age 25 from paying council tax

The system can be particularly difficult for anyone who has is affected by multiple barriers and inequalities. As explained in an earlier question, Expert Link, supported by the Foundation, have been working with a group of experts with lived experience of multiple disadvantage and the social security system to improve access to benefits and reduce the barriers that people face[33]. Similarly, research from IPPR[34] has shown that support from work coaches for people with complex needs on UC should be more tailored to the claimant, providing more information and better support for the disclosure of sensitive information. It recommends better application of easements with the system, reviewing the sanctions policy altogether and in the meantime, discretion to cancel sanctions if there is a risk of harm to the claimant and replacing a first sanction with a meeting. There are also barriers around access to internet and devices to meet work search requirements, and a lack of consistency and continuity amongst work coaches.

People with no recourse to public funds face some of the greatest challenges, leaving people at serious risk of falling into destitution, with nowhere to turn. As explained in an earlier question, there is good work happening in local areas led by the voluntary sector working in collaboration with local authorities, which could hold valuable learning for change at the national level.

May 2023