Written evidence from the Policy in Practice CLP0055


About Policy in Practice

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.


Recent work undertaken by Policy in Practice can inform an evaluation of the effectiveness of Cost of Living payments.

Are cost of living support payments reaching everyone in need of help?

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 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. The cost of living payments alleviate this considerably, although a significant proportion of low-income households will still be unable to meet their essential costs.


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 estimates the proportion of households that are unable to meet expected costs, both with and without the cost of living payments. We used real data for household expenditure on rent and council tax and modelled other household costs using the ONS Family Spending Workbook and the rates of the Energy Price Guarantee. Those unable to meet costs can be seen as a proxy for those at risk of destitution. 


The £900 cost of living payment was modelled as a £50 increase in monthly income to those eligible, as the payment is to be administered in three instalments of £300, six months apart. The £150 payment for households on disability benefits was modelled as a £25 increase in monthly income to those eligible, to reflect a reasonable monthly budgetary increase from this payment.


Analysis using a higher threshold for social security, to alleviate poverty, finds that:


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 consequently being prevented from accessing emergency support;


Passported eligibility for certain benefits mean that many households that are eligible for but not claiming qualifying means-tested benefits are consequently unable to access the additional support. Recent research by Policy in Practice highlighted there is currently a total of £19 billion of unclaimed benefits, with £7.5 billion of Universal Credit (UC) being unclaimed by 1.3 million households. The take-up of UC has been impacted by multiple factors including awareness of eligibility, administrative complexity, and stigma around claiming.


Pension Credit also has a low take-up, often due to low awareness or reluctance to access state support. As pensioners are unlikely to be able to increase their income in any other way, maximising take-up amongst this population is key to getting emergency support to those most in need. Currently, both Policy in Practice and the DWP are running take-up campaigns which target low-income pensioners eligible for this support, which has increased take-up. We recommend a similar take-up campaign for Universal Credit to ensure that all those who are eligible claim, not just for cost of living emergency payments, but also for ongoing financial assistance.


Additional cost of living payments are to be provided for those with a qualifying disability benefit (such as PIP, DLA or AA), and for pensioners born prior to a specific date. This provides additional support to those who are unable to access financial support through other means. However, access and qualification for disability benefits such as PIP is often fraught with stress and households who are eligible often face rejection. Previous statistics by the DWP show that 10.3% of all decisions made in PIP awards are overturned, and almost half of DWP decisions are overturned when challenged. This process means that households who were incorrectly turned down may not have known to appeal any award and therefore may miss out on needed support. This process should be reviewed for future payments to ensure that any additional support is provided to those who need it.


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

The nature of the qualification requirements for the cost of living payments creates a cliff-edge where a household earning only £1 above the level at which they would qualify for a means-tested benefit will miss out on up to £1,200 in cost of living payments over the course of the year. This may provide a disincentive for households to take on any additional hours or seek to increase their income to ensure that they qualify for the additional cost of living support.


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


The use of only one qualifying period for each cost of living payment may mean that those who are paid in a frequency other than monthly miss out on cost of living payments due to the time period where payments fall. Those paid four-weekly face one month throughout the year where they will be paid twice in one month and will therefore miss out on cost of living payments if this coincides with the qualifying period and they earn over a certain amount.


Using Policy in Practice’s Better Off Calculator, we can model what a single mother from Leeds, who is privately renting a two-bed flat for £450 a month and earns £1,250 gross every four weeks, will receive across a year. Due to the payment schedule of her earnings, there is currently one month where she would not be eligible for a cost of living payment despite being eligible for every other month of the year. This creates a system of inequality of access to cost of living payments only due to the day and month that payments are received - if another household was in the same financial situation but received payments on a different date, they may be eligible for the cost of living payment where this person is not.


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This fact will also be replicated in those who are paid weekly and those with variable earnings. Those in lower income households are also more likely to face more insecure work and be working on zero hours contracts. The infrequent nature of earnings in these roles may mean that those most in need of emergency support may be more likely to fall outside of the eligibility requirements during the one-month assessment period. We recommend that qualifying criteria for cost of living payments are taken over multiple assessment periods to prevent this. 


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


There is a risk that those who are sanctioned have their UC award reduced to zero and therefore become ineligible for cost of living payments. This may include some of the households most in need of cost of living support.


Internal Policy in Practice research has shown that the poorest households are disproportionately affected by deductions and are 11.4 times more likely to have a conditional sanction. It also shows that levels of sanctions differ significantly between Jobcentres indicating a postcode lottery of application. As nil awards due to sanctions prevent access to cost of living payments, this postcode lottery is brought into the cost of living support mechanism. 


The interaction of sanctions and ineligibility to a cost of living payment creates, in effect, a double punishment for what could be a minor non-adherence to work search conditions. This risks exacerbating crises as, for many of these households, borrowing is likely to be the only option. This leads to a reduction in future income due to debt or loan repayments.


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


We are pleased to see that access to the cost of living payments do not require an additional application for support for the majority of recipients. Our work with councils around take up of benefits provides evidence that the distribution of discretionary support only partially aligns with need (private tenants and single person households are proportionally underrepresented) and also that application limits take up (e.g., requesting a CTR application rather than automating awards through receipt of relevant data indicators form the DWP). It is also positive that the support is spread across the year in instalments, to allow budgeting for bill payments. It is presumed that for the DWP the current design mechanism is simpler to implement than other possible options such as increasing the Universal Credit personal allowance or the addition of a cost of living element.


These positive aspects need to be balanced against the untargeted nature of support and the cliff edge to qualification. There is unfairness in households missing out due to nil UC awards within the qualifying period, often due to pay frequency over which they have no control, and through different eligibility rules for qualifying benefits. Qualification may be dependent on whether the households fall under the UC or Tax Credit eligibility criteria with some households qualifying under legacy benefits but not if they have moved to UC (e.g., self-employed households, households with savings above £16,000, benefit capped households). Although the Household Support Fund goes some way towards supporting those who are ineligible for the cost of living payments, the need to apply and the discretionary nature may act as a barrier to access. Particularly affected will be those that are also most likely to find conditionality challenging and so be subject to sanction and so not receive support such as individuals with mental health or addiction issues.


Some of the drawbacks of the current mechanism could have been overcome through extending the qualifying period to two months or through temporary additions to the personal allowances within current benefits. A temporary uplift to personal allowances may be politically difficult to reverse and so a separate uplift element is likely to be preferable. Given the flexibility of the UC systems this should be possible for UC but may be challenging for legacy benefit systems.

May 2023