Written evidence from Ines Newman [UCW0065]
My position
I am submitting this evidence as an individual, not on behalf of an organisation. I am retired from a career working on poverty issues in Local Government. I was Head of Policy at the Local Government Information Unit 1999-2007. I retain an Honorary Visiting Senior Research Fellowship in the Department of Public Policy at De Montfort University. I also work as a volunteer Research and Campaigns Officer at Camden Citizens Advice. In this latter role I have completed several research projects, including research on Universal Credit.
In this submission I am addressing the Committee’s first two questions in their call for evidence. In particular I am submitting evidence that throws some light on the cost benefit of making the Advance payment a grant.
The Evidence
- What problems do claimants still experience during the five week wait?
There is no doubt that those on UC experience extreme poverty and debt waiting for their first payment. Again and again, clients at Camden Citizens Advice tell us that when they went to the local JCP they had no resources. They needed urgent help, not a delay. Often they have been delayed already by having to prove their identity and their citizenship or right to reside. Many do now get advanced payments and this and the elimination of the first week of delay has helped. But, as benefits are hardly enough to live on, after 5 weeks delay almost all our clients have rent arrears and other debts. The deductions of up to 30% of their UC mean that they are under continual stress and often having to forgo meals and/or heating. DWP statistics show that 14% of clients do not receive their full payment on time and for these clients the situation is even worse. We see many clients from among this 14% who come to Camden Citizens Advice because a mistake has been made in their UC calculation: children have been omitted, there is a mistake in rent etc. Some mistakes are probably inevitable but the 5 week+ delay makes the financial situation critical for the clients.
There is plenty of evidence about this situation:
2. What is the best way of offsetting the impact of the five week wait?
- Is it possible to estimate how much this would cost the Department?
- Is it possible to estimate any costs or savings to third parties (for example, support organisations)?
This is my preferred option. I think an advanced payment grant could pay for itself in the long run.
I assume that the Advance would go to those claiming UC who are not employed (i.e. not those who are claiming tax credit elements).There are roughly 180,000 new claimants every month (before the Covid 19 virus).33% of these are working. Some are just claiming housing benefit and will get a two week run on of their old benefit which is non-repayable. And the advances could be limited to those with less than £6000 savings. The mean amount of Universal Credit paid to households is £670 per month. So at the most 100,000 people per month could get an average of £670 Advance payment grant i.e. £67m. This is a relatively small amount. In reality only 25,500 UC advances were paid in June 2017. Making these Advances a grant would only cost some £17m a month.
The point is that this relatively small grant would substantially relieve debt, cut housing rent arrears and all the administration costs that such debts incur in the public, private and voluntary sector. It would result in a significant reduction in client stress and this would result in savings in health costs. It is impossible to fully quantify these savings but I have been responsible for two reports both of which throw some light on this issue.
Camden Council had limited the charge for those on benefits to 8.5% of the full council tax (the range across London councils is 0-30%). Our research showed that in the first year of the scheme (2013/14), a total of 4,360 court summonses were issued to families in Camden who were receiving council tax reduction. This activity cost the Council a significant amount in administrative and court charges. It also meant costs for the voluntary sector and advice agencies which provided support and were often funded through the Council. More importantly it caused great stress to those we interviewed for this research. One resident summed up the problem as follows: “If you are in debt, you are not going to miraculously find more money because you have been threatened. There is no magical pot of money. It doesn’t work like that.”
In the event Camden Council decided to give full council tax reduction to those who were receiving out-of-work benefits. This was not only as a result of our report but also because the finance department decided that the debt collection activity and the extra activity for advice agencies cost nearly as much as was raised by the 8.5% charge on poor residents. Putting poor residents into debt was of no benefit to anyone.
This report into Camden Council’s Local Welfare Scheme showed that the small grants the council were able to give had a significant effect. The findings supported those of an evaluation of the Family Action: Open Doors Programme (see Opening Doors, Changing Lives: Measuring the impact of cash grants on disadvantaged individuals and families (March 2016), which showed:
Our research for this report was backed up by council officers’ research which showed that council tenants who received social welfare grants when moving into a new tenancy were more likely to successfully sustain the tenancy with lower rent arrears. The council estimate that the cost of terminating a tenancy was in the region of £10,000, so concluded that a small grants programme was good value for money.
In comparison the other options that the Committee ask about all have disadvantages. Some of them would constitute useful additional reforms but are no substitute for making the advance a grant.
I do not think this is a viable option. It presents another discretionary hurdle with the possibility of unfair treatment based on some assessment. The figures on successful appeals on ESA/ LCWRA have been running at around 70% over the last five years. The whole Mandatory Reconsideration process is not fit for purpose and the last thing policy makers should do is add to people going through this system. Everyone trying to live on such low UC rates is vulnerable.
There are existing problems with backdating. The comment below was from one of Camden Citizens Advice senior advisors:
"UC backdating – as far as I can see there is no box to request backdating when completing the application form – indeed I am unclear how this can be done or if clients are informed of this option within the application process?
It is very important that backdating is claimed within the period before the claim is decided as back dating can't be requested after the entitlement decision. I would like to know if backdating decisions are made at all? and if so how and how many?"
It is clear that there could be improvements in the current system to allow backdating both in terms of the application form and in terms of making a backdating claim after the initial claim is agreed. But this will still not solve the 5 week delay problem.
The Government have announced an additional two-week payment of Income Support, income based JSA and/or income-related ESA at the start of a UC claim, effective from July 2020. This is very welcome. However it will not assist those making new claims and still means at least 3 weeks delay for those migrating onto UC. It is therefore only a partial solution.
The 2018 Budget extended the period over which advance payments are recovered from 12 to 16 months, effective from October 2021. This delay to October 2021 is incomprehensible. We do find that the existing three month deferral marginally helps many of our clients, particularly those who are applying for additional benefits like PIP and ESA/ LCWRA. But clients have to apply for this deferral and are sometimes arbitrarily refused. While a longer payback period will help, it does not reduce debt or the stress that relates to having a debt and if deductions remain at 30% it will not reduce the extreme poverty that clients face when they have this level of deductions. The level of permissible deductions should be reduced and the longer payback should be a right not a discretionary agreement. Advance payments do not deal with the fact that benefits are paid in arrears, so people start receiving benefits in debt.
A rigid application of the assessment period rule in the Universal Credit Regulations 2013 can cause problems for working claimants if the way they are paid their wages is not completely in step with the UC system or if they move house or have other changes of circumstances. Reports such as CPAG’s Rough Justice (2018) have documented these problems and made recommendations on how to deal with them. Citizens Advice Report , “Managing Money on Universal Credit,” shows that only 14% of the people we helped over the last year knew more frequent payments were possible, although 80% of those who weren’t told about it would have taken the option if they had known. Only around 3% of those claiming UC in August 2018 had more than 70 frequent payments in place.” Clearly paying UC two-weekly would help many clients and as a minimum existing flexibility needs to be increased and the option made more widely known to clients.
Conclusion
The Family Action: Open Doors Programme evaluation concludes:
“It is clear from the evidence in this report that low value cash grants, coupled with appropriate support, enable transformational steps for recipients. The grant has more impact as part of a longer term process, rather than a stand-alone event. Regardless of the type of support provided, a small cash investment has a large impact on the recipient’s progress - the whole becomes more than the sum of its parts. Therefore, it is important that politicians, policy makers and commissioners note the learning from this report, otherwise false economies may be made during welfare reforms and budget cuts.”
Our evidence in Camden fully supports this conclusion. Apart from the obvious financial difficulties caused by 5 week delay and advanced payments ending up in deductions, Camden Citizens Advice has also found that many clients do not understand the elements of their Universal Credit payment and this problem impacts on their future budgeting decision. I would like to see the Advance payment become a grant and to be linked to a budgeting advice session at a local Citizens Advice or other advice agency where a full benefits check could be carried out and the client could be fully briefed on their benefits so that they understand how to manage their claim in the future. This approach could be really transformative.