Written evidence from Dr Rita Griffiths CLP0014

Response to the Call for Evidence: Cost of living support payments

This response is submitted by Dr Rita Griffiths (r.l.griffiths@bath.ac.uk). Since 2018, I have been a Research Fellow in the Institute for Policy Research at the University of Bath specialising in social security policy, with a particular focus on Universal Credit. Working alongside Professor Jane Millar, Fran Bennett (University of Oxford) and Marsha Wood, I have been lead author on three major reports on Universal Credit (UC) published in 2020, 2021 and 2022, arising from ESRC-funded qualitative, longitudinal research exploring the lived experience of couples claiming UC jointly. Prior to moving in academia, I was a founding partner of a social research consultancy that for 20 years delivered contracted research and evaluation studies of ‘welfare to work’ and active labour market policies on behalf of the Department for Work and Pensions and European Commission.

I am currently leading a research project entitled, ‘Navigating Monthly Assessment in Universal Credit, funded by abrdn Financial Fairness Trust (formerly Standard Life Foundation). Between February 2022 and March 2023, using face to face and telephone interviews, we tracked a sample of 61 UC claimants in 42 working households, collecting monthly income and expenditure data, in real time, to explore how Universal Credit’s systems for assessing entitlement, recovering debts and calculating payment, are affecting income security and financial well-being.

Our main report will be published later in 2023. An interim policy brief was published in November 2022 entitled, ‘Universal Credit, Working Claimants and the Government’s Cost of Living Support.’  This explored how effectively the Government’s £650 Cost of Living payment, together with other government-funded support for people in receipt of means tested benefits, were helping low-income households to manage in the current cost of living crisis. Our responses to questions 1-3 below draw on these research findings.

I am happy for this submission to be made public.

1. To what extent have the cost of living support payments been sufficient at helping eligible households meet the cost of essentials such as food and electricity?

Our findings indicate that the £650 cost of living payment, paid in two instalments in July 2022 and November 2022, have been effective at providing a much-needed boost to the finances of low-income households. That the payments were tax free, did not affect eligibility for other benefits and did not count towards the benefit cap, were crucial to their effectiveness. This meant that the additional amounts of £326 and £324, paid as one-off, lump sums, were available to spend as soon as they reached recipients’ bank accounts.

Some participants said that they would have preferred to have had a regular, monthly amount added to their benefit (as the £20 weekly uplift was), but others liked and valued the ‘lump-sum’ aspect of the cost of living payments. This allowed some participants to fund large or unexpected items of household expenditure that they would otherwise have struggled to pay for without borrowing money and incurring debt.

We asked participants what they had spent, or intended to spend, the money on, and the difference it made. Most said that they had used all or most of the money for immediate household needs, such as buying food, paying bills and helping to clear utility bill arrears. Typical responses included:

"Unfortunately, it’s just been soaked up on, you know …  household bills and so forth."

"It’s just basically … been eaten up! Just by normal living.”

"I received it, it went in one hand and out the other. It just goes."

Just under a quarter had topped up energy accounts or prepayment meters, or put the money aside to help with future energy bills. Some families with children used the first payment, in July 2022, to pay for school uniforms - although these low-paid, working families were entitled to means-tested help, often their earnings were not low enough to entitle them to uniform grants (or free school meals). The November 2022 payment was typically used to pay for Christmas food. Others used it to pay towards extra heating costs in the colder months.

Uses to which cost of living payments were put also reflected personal circumstances. One lone parent said the money helped compensate for a missed child maintenance payment from her ex-partner. For another participant, the money topped up the much lower UC payment they had received due to being paid a performance bonus by their employer the previous month. Using the payment for household essentials freed up a modest surplus to allow a working family with three disabled children to spend a weekend in a caravan - their first break in three years and much needed respite for the mother, who was the children’s full-time carer, and their father, who worked 60 hour per week as a security guard. Others used the money to replace a faulty washing machine, pay for car repairs and purchase a child’s bed.

Paying the cost of living payments separately to UC was helpful for all claimants, but particularly for those who had earnings. Getting a lump-sum paid into their bank account meant that the additional money felt more tangible – even if it was then swallowed up by essential household expenses. Getting a lump sum contrasted with the £20 weekly uplift in Universal Credit which was integrated within the single monthly payment. Paid as an enhancement to the standard allowance, for some, the additional £87 of monthly income ‘got lost’ within the benefit payment, especially when deductions for earnings and debts were factored in. This could serve to reduce the visibility and financial impact of the £20 uplift, particularly for working claimants - a key finding presented in our 2021 Policy Brief:  https://www.bath.ac.uk/publications/complexities-for-claimants-the-reality-of-the-20-weekly-uplift-to-universal-credit/attachments/Complexities-for-claimants-october-2021.pdf

Regarding the difference the cost of living payments made, though a very welcome boost the incomes of cash-strapped households, for most participants, the money was spent in the month that the payments were received. While for some the payments were a lifeline, they did not eliminate the financial hardship experienced by those who relied on UC as their main or only source of income. While participants in this research were grateful for any extra income top-ups they received, with the unprecedented increase in energy prices and inflation at a 40-year high, the additional money thus made little overall difference to participants’ ability to get by month to month. Few people were able to set the money aside to pay for future energy bills and other essentials.

The main reason for people continuing to struggle in spite of the payments was the low level of household income that they had to live on each month. With more than a decade of social security cuts and below inflation annual benefit uprating, neither the Government’s £650 Cost of Living payment, nor the £150 Council Tax rebate, nor any of the discretionary pots of funding made available due to the cost of living crisis (including the Household Support Fund) made any significant difference to their ability to pay for on-going living expenses such as rent, food and bills. Very few had a buffer or savings they could fall back on. Rather, most budgeted month to month, often having to resort to using credit cards, overdrafts or borrowing from family or friends. The cost of living payments must also be set against the withdrawal of the £20 per week uplift. Adding £87 per month to a claimant’s entitlement for up to 18 months between March 2020 and September 2021, the extra money that many received was worth a lot more than £650.

Another important caveat concerns the flat rate of payment. The two lump sums were per eligible claimant, irrespective of how many adults or children the household contained. This meant that the payments were proportionately worth a great deal more to single claimants than to couples and families with children whose living expenses are generally higher. An administratively simple alternative would have been to pay a higher amount to couples and to families with dependent children, as happens with Universal Credit.

2. What role have the following factors played in access to the cost of living support payments:

a) Passporting: Not already being in receipt of certain means-tested benefits, despite being eligible, and consequentially being prevented from accessing emergency support;

We assume that a) refers to very new claimants who met the eligibility criteria but were in the five week waiting period before receiving their first UC payment? None of our participants fell into this category as they needed to have been claiming UC for at least three months to take part in our research. 

b) Cliff-edges: Not being in receipt of a certain means-tested benefit, because households failed to meet certain qualifying thresholds.

c) Qualifying period anomalies: issues relating to the timing of benefit payments

These two questions are closely related, so we are addressing them together.

To be eligible for the first Cost of Living payment of £326, a UC claimant must have been entitled to, or later found to be entitled to, a payment of at least 1p during an assessment period that ended between 26th April and 25th May 2022, not including payments received or awards made as a result of fraud.  To be entitled to the second payment, Universal Credit claimants must have been entitled to, or later found to be entitled to, a payment of at least 1p during an assessment period that ended between 26th August and 25th September 2022. Eligible households in receipt of UC were informed they would receive the second payment of £324 between 8th and 23rd November 2022. Claimants with a nil Universal Credit award during these periods due to earning above the entitlement threshold, or as a result of a benefit sanction or fraud, were not entitled to receive the payments. Self-employed claimants who had their UC award reduced to zero by the minimum income floor were similarly ineligible. There was no right of appeal.

All but one participant in this research was eligible for the first payment of £326, in July 2022.. All those who were eligible had received the money into their bank account within the specified timeframe, by 31st July 2022. All the participants in this research received the second payment within the published time frame. The ineligible participant had worked longer hours in the previous month. His higher earnings had resulted in a nil UC award during the qualifying period.

This was not a statistically representative sample, so these findings cannot be generalised.  In fact, nationally, the number of UC claimants who were ineligible due to earnings is far from insignificant. A response to a parliamentary question on 19th October 2022 confirmed that 498,700 households containing 594,400 UC claimants were ineligible due to having a nil award[1]. The vast majority were due to reported earnings which reduced the UC payment to nil during the qualifying period, as it was for the one person in our research that had not received the payment. This issue is addressed further in d) below.

d) Receiving a nil reward on a Universal Credit payment, due to reasons such as sanctioning (or fraud)

We found that using existing benefit receipt for passporting eligibility for the Cost of Living payments allowed for the timely delivery of targeted help. However, the use of entitlement-based criteria is not without trade-offs. Those who received a nil award in the qualifying periods were effectively debarred from receipt of the payments. No one would disagree that claimants committing fraud should be denied help. However, sanctions are frequently imposed for quite minor breaches of conditionality, such as arriving late for an appointment with a work coach. People who were sanctioned were in effect doubly punished – both by the sanction itself and the consequential loss of entitlement to one or both cost of living payments.

In fact, most nil payments were not due to sanctioning, but as a result of recorded earnings taking a claimant above the threshold of entitlement for UC. This may seem to be a justifiable cut off point, but there is rough justice and policy inconsistency here. For working claimants earning close to the upper limit of eligibility, just an hour of extra work could take their earnings above the threshold of entitlement, making them ineligible for the payment. A one-off bonus, or back pay received from an employer in the qualifying assessment period, could similarly have generated a nil award. Our relatively small sample included only one claimant whose earnings had reduced their UC payment to nil during the first qualifying period. At the time, he was unaware that working a few extra hours would make him ineligible – something he found particularly galling since he took home significantly less in additional earnings than the £326 payment he would otherwise have received. It made him wary of working overtime in case this made him eligible for the second payment.

Though not actually working longer hours or earning more, working claimants who had more than a month’s pay captured in the qualifying assessment period (as a result of receiving five weekly pay packets, or two four weekly pay packets, in one calendar month, for example), could also find themselves ineligible for one or both Cost of Living payments. Being ineligible purely due to the way in which their earning were paid seems particularly arbitrary and unjust. Government ministers who suggested that households struggling to afford essentials should work longer hours or find better paid employment may therefore not have understood how earning more could have made some UC claimants ineligible in the first place. Denied financial help because they ‘did the right thing’ seems to be particularly unjust and against the stated aim of Universal Credit; to incentivise work and ensure it always pays. 

People who found they were ineligible to receive one or both Cost of Living payments were advised to seek help from the Household Support Fund, or equivalent help in Scotland and Wales. In our research, only twelve households (12/42) had been successful in securing help from this source - mostly food vouchers or vouchers to top up their gas or electricity prepayment meters. The monetary value was generally very low – typically between £30 and £60. Not all participants who had applied for help were successful. Households in which someone had paid work were less likely to receive this discretionary support, although some working families with children did get help, possibly reflecting the ring-fencing of earlier funding tranches.

Some participants had been put off from applying due to lack of time and an assumption that working households would not be eligible. Others said the eligibility criteria were unclear.  Both successful and unsuccessful participants testified to the bureaucratic nature of the claims process. Typically accessed online, application forms were said to be over-long and time-consuming to complete. Onerous requirements for evidence of need and income also acted as a barrier to take up among working claimants, particularly those struggling to juggle work and childcare.

e) Any other technicality you believe the Committee should investigate?

It was initially unclear as to whether a nil UC payment due to deductions for debts or having the housing element paid direct to a landlord, would make a claimant ineligible. The guidance was ambiguous, stating, "If money has also been taken off for other reasons (such as payments of rent to your landlord or for money that you owe), you might still be eligible."  A Parliamentary Question tabled on 7th September 2022 asked what happens in the case of deductions.  The answer was that 'deductions for debts...are not a reason for someone to be ineligible,'[2] but no further clarification was provided about direct payments to landlords. It would appear that people with direct payments to landlords that reduced their payment to nil, were in fact still eligible. But it would be helpful if issues such as these were in future clarified.

3. How has the Department’s ad-hoc payment system and its design and use benefitted or limited the delivery of cost of living support?

Our research showed that using the Department’s payment system as an administrative gateway for targeting and paying the Government’s Cost of Living payments has been an efficient and effective means of getting one-off cash payments swiftly into people’s bank accounts. In our study, everyone who was eligible to receive a payment did so within the published time frame. The main reason for this was the automatic passporting of entitlement without claimants needing to apply and engage in additional form filling. Automatic passporting also eliminates the need for further assessment and means-testing, reducing administration and bureaucracy for the Department. A further advantage is that automatic passporting, together with retrospective eligibility criteria, significantly reduce the likelihood of fraud and error.

This all said, while using existing benefit receipt for determining eligibility allowed for timely and targeted help, the use of entitlement-based criteria is not without trade-offs. As noted above, the system of monthly assessment in UC, in which entitlement can vary month to month, sometimes for arbitrary reasons outside claimants’ control, means that significant numbers of working claimants were deemed ineligible for one or both awards ”simply because of the quirks of the DWP computer system”[3]. A fairer method of determining eligibility among Universal Credit claimants might have been for the qualifying period to have spanned a longer timeframe, enabling those with a one-off or unexpected increase in monthly earnings to nevertheless remain entitled to the payment.

More generally, though providing much-welcomed additional financial support, our research showed that one-off, time-limited and discretionary payments are ill-suited to addressing persistently low and inadequate income caused by low and stagnant wages in combination with the long-term erosion in the value of working-age and child benefits over time. The increasingly complex array of ad hoc payments and discretionary support to enable low-income people afford essential living costs also runs counter to the goal of a simplified welfare system.

May 2023