Policy in Practice (PIP) is a social policy software and analytics company working with councils, government, housing providers and community organisations. We are a team of policy experts who combine cutting-edge tech, insightful data and expert analysis. We help organisations analyse the impact of policy, identify and engage the people impacted, and track the effectiveness of interventions.
What ‘essentials’ should working-age benefits in the UK cover?
Determination of the essentials to be covered by working-age benefits is dependent on the objective for support (or a principle of intent). The intention is currently unclear and emphasis has varied over time depending on the political objectives of the Government. If the intention of social security is to prevent destitution, essentials are different to those required to prevent poverty, or to provide active participation in society.
Determining essentials includes day-to-day living costs together with additional costs for specific circumstances (illness, children, housing). The UC elements provide the basis for this. A personal allowance could usefully be linked to a set of essentials, such as the JRF essentials guarantee work. The methodology includes public agreement on the goods required to meet a stated objective.
Additional elements for circumstances need to be sufficient to meet the objectives of the particular element (e.g. to cover rent). If support for rent is inadequate, the shortfall will need to be met by the support deemed essential for personal needs.
Are current working age benefit levels sufficient to cover those needs?
Our data analysis suggests that current working-age benefit rates are insufficient to meet essentials for even the least generous objective i.e. to prevent destitution, for many households.
In 2022 Policy in Practice carried out data analysis using the benefit administration data (the SHBE and CTRS datasets) held by six councils spread geographically around the UK, covering 80,788 working age households.
The analysis evidences that the main means-tested social security benefit rates are insufficient for many households to meet costs. The proportion that are not able to meet costs can be seen as a proxy for those at risk of destitution.
Analysis using a higher threshold for social security, to alleviate poverty, finds that in April 2023 57.7% of households in the dataset were in relative poverty.
There is added complexity caused by caps to housing support. Housing is likely to be considered an essential need whether the objective is prevention of destitution or prevention of poverty.
The extent to which income no longer covers costs has been exacerbated by inflation in the last couple of years. However, the inadequacy of current benefit support levels to meet essentials is longstanding.
What lessons can be learned in respect of benefits provision more generally from the £20 uplift to Universal Credit, introduced during the pandemic?
Our data analysis shows that reinstating the £20 per week uplift to Universal Credit would have a significant impact on poverty and destitution:
What principles should inform the design and delivery of the working-age benefits system (e.g. fairness, transparency, inclusivity)?
We would support the inclusion of the principles listed in this question (fairness, transparency, and inclusivity). Additional principles that could be considered are:
Design should be evidence based
Greater sharing of all benefit administration data would allow for improved scrutiny and should be included within a principle of transparency. This data could be released, without PII, for research purposes.
Design should incorporate stakeholder and public agreement and consultation
Benefits should be designed so as to support households, afford dignity and not cause harm
Inadequate benefit rates cause harm, particularly through the accumulation of debt. For councils, this causes considerable cost with regards to administration and enforcement of debt and emergency provision.
Promotion of take up of benefits should be enshrined
Policy in Practice calculated that unclaimed benefit stands at about £19bn. Responsibility for benefit take up and support is not part of mainstream benefit administration and largely unfunded, localised and geographically patchy.
A minimum level of benefits should be guaranteed.
What should be the purpose of working-age benefits?
There is unlikely to be a single purpose for working-age benefits across all households. The current emphasis on a return to work as the key purpose for benefits does not reflect the circumstances of the 60% of benefit claiming households with significant barriers to work.
PIP’s fieldwork into households that applied for Local Welfare Assistance illustrated how lack of security exacerbated mental health conditions and led to depression and debt. Emphasis on work preparation, and the associated conditionality regime and sanctions, risks causing additional barriers to work. The purpose of benefits should extend beyond employment and include social security and prevention of harm.
Our work with local authorities suggests that any stated purpose of the benefit system should include the principle of cost effectiveness. Design should take account of possible further additional costs to the public purse such as through homelessness services, provision of residential caring services, local discretionary support, benefit take up support services, mental health support services, and debt advice services.
What is the role of i) the benefit cap; ii) repayments; iii) sanctions on the adequacy of benefits?
Recent analysis by PIP showed that when deductions are included in the analysis, 38% of those with deductions (excluding direct payment of rent) cannot meet costs. This figure would be 34% if deductions were not applied.
Benefit cap
Data analysis carried out by Policy in Practice in 2022 evidenced that the benefit cap means that housing is unaffordable for most affected households.
Increasing the benefit cap to match current median earnings means London is still mainly unaffordable for larger families. However, families with more than two children could afford to rent in 70% to 85% of Britain.
Repayments
Internal PIP analysis shows that 40% of UC households experience a deduction in their benefits, not including payments to landlords. Our analysis showed that deductions disproportionately affect the poorest households.
Currently, around half of UC claimants see deductions from support, with an average deduction of £62/month. Our analysis shows that:
The most widespread impact is through repayment of UC advances. Recent DWP statistics from November 2022 show that 45% of Universal Credit claims receive a deduction for an advance payment at an average of £62.
Third party deductions and overpayment recovery are also significant. DWP statistics show that the average amount deducted for third party deductions is £33 a month.
Sanctions
The latest release of DWP statistics shows that in November, 6.5% of Universal Credit claimants subject to conditionality had a deduction taken from their award due to a sanction. This is more than double the peak of sanctions prior to the COVID-19 pandemic, which was just over 3% in October 2019.
Almost all sanctions (98%) are given for a failure to attend or participate in a mandatory interview, compared to just 1% for failure in availability for work.
Recent policy changes by the DWP risk pushing over 1 million further claimants into greater conditionality and therefore at risk of having their income reduced. This includes those with children and those who have been out of work due to a partner working.
What impact do working-age benefits, such as Universal Credit, New Style Job Seeker’s Allowance and New Style Employment and Support Allowance, have on work incentives?
What is the impact of policy interventions designed to incentivise work, such as sanctions, on the adequacy of support received by individuals—both monetarily, and in how they help individuals to find work?
Work incentives are generally taken to encompass both a carrot (increased household income) and a stick (conditionality and sanctions) approach. The design of the current benefit system means that neither type of work incentive is fully met.
In recent years there has been a lot of emphasis on conditionality and sanctions to move people into work. However, this emphasis overlooks the 60% of households that are unable to work for various reasons. The DWP’s own recent report showed a negligible impact of sanctions on return to work: “results suggest that the impact of a sanction is to decrease the rate of exit into higher paid work, while the exit rate into some kind of work is not greatly affected.”
Previous research into conditionality of those receiving JSA also showed how sanctions led to an increase in exit from benefits but not a correlating increase in the entrance into employment. This leads to a negative financial impact on the claimants who are subject to sanctions. DWP research finds that sanctions have a negative effect both at exits from welfare either into PAYE earnings, or into a state where they are earning at all. Furthermore, sanctioned individuals earn on average £34 per month less than non-sanctioned claimants. Other UK research has found that there is also inconsistency in how sanctions are administered both geographically and demographically.
The bigger risk with sanctions is that they create a lot of hardship and risk additional public costs to prevent harm through local support and homelessness. The consequences of hardship, distancing from employment for sanctioned claimants, and additional costs to local authorities need to be balanced against any benefit to work incentives.
The second part of work incentives relates to the increase in household income that working provides. Legacy benefits and new style ESA and JSA have a 100% marginal tax rate for additional earned income (above earnings disregards). This is clearly not supporting first steps into work. UC has smoothed this cliff edge through a lower taper for withdrawal of support and generous work allowances for certain households. Nevertheless, a recent paper from Policy in Practice showed that households in receipt of UC still face marginal tax rates of over 60% (rising to 100% in some cases) through the interaction of tax and benefits. This research focuses on the interaction of benefits and the tax system and therefore does not take account of loss of income from localised Council Tax Support or local discretionary support such as school transport, nor does it account for additional costs of working. As such, the MTR is likely to be an underestimate.
The fragmentation of the benefit system means that calculation of the financial benefits of a return to work is highly complex and needs to take account of income loss through tax, national insurance, main means-tested benefit tapers, local benefit tapers (CTR), and full withdrawal of certain benefits or services (free school meals, prescriptions, local authority funded services). This complexity means that for most households on benefits a calculation of whether work is financially advantageous is just not possible. Given the complex calculation, it is unlikely to act as a work incentive.
There are specific areas of current benefit design elements that may create negative work incentives. For example:
Increasing work incentives would be complex and would require better alignment of tax and benefit systems, extension of work allowances, a less fragmented benefit system, protection from the harmful consequences of sanctions, and the removal of cliff-edges within the benefit system.
What aspects associated with the administration of benefits impact the adequacy of experience for claimants?
What changes should be made to the administration of working-age benefits?
Are there any particular groups who have been ‘left-behind’ in the design of working age benefits policy?
The social security system in the UK is made up of a complicated web of interacting benefits. The sheer complexity of multiple application mechanisms, administering organisations, eligibility criteria and conditionality creates a barrier for many people who are trying to navigate the system and access support.
Universal Credit seeks to reduce this complexity by rolling the main means tested benefits together into a single application and payment. However a number of support schemes sit outside of Universal Credit and require a separate application and assessment. Households need support to navigate the system, as evidenced by the work that councils and third sector organisations do to drive benefit take up.
The complexity of the benefits system is partially driven by the need for an ever-increasing array of support, including social utility tariffs and local discretionary schemes, to top up mainstream benefits.
The fragmentation of social security needs to be addressed to reduce the onus on the claimant to understand and untangle the complicated process of claiming support. Reducing complexity is likely to need a cohesive solution that includes the aggregation of benefits, greater data sharing across agencies, and the driving of awareness at all points of contact with households.
Even if the fragmentation of the current system were to be addressed, some households will still need to be supported through the claim process. A strategic and funded approach to a support offer is needed to ensure that access to support is not a postcode lottery.
DWP has an important role to play. Targets should be set by DWP and day-to-day responsibility to maximise take-up of support given to Job Centres and local authorities. Simple actions such as encouraging people to claim and ensuring that benefit entitlement checks are performed at contact could make a big difference.
DWP runs a high-profile Pension Credit take-up campaign and they should consider doing the same for Universal Credit. Such an awareness campaign would provide a very helpful environment for highly targeted, data-led benefit take-up campaigns run by local authorities.
The government must also address the inevitable need for emergency or crisis support that will occasionally arise. Such funding must be dedicated and ring-fenced with agreed accessibility and application processes. A national approach would support awareness and signposting.
Finally, targeted take-up campaigns should be funded and implemented. This is currently undertaken primarily by councils and is therefore reliant on council funding. Councils are best placed to deliver targeted local campaigns but require dedicated funding to do so. Our work with councils found they have an even greater positive impact when they provide holistic, wraparound support to vulnerable households, including benefits advice.
What information should the Government publish to facilitate the effective scrutiny of benefit levels?
How frequently should such information be published?
PIP understands the importance of administrative benefits data to evaluate benefit design, evidence impact, and inform policy recommendations. Anonymised full benefits data at a household level should be made available, for research purposes. In order for real time analysis and insight. This data should be provided at a minimum on a monthly basis.
May 2023