Written evidence from Scottish Federation of Housing Associations [UCW0067]

1. Who we are

1.1. The Scottish Federation of Housing Associations leads, represents and supports Scotland's housing associations and co-operatives. We want to see a thriving housing association and co-operative sector providing sustainable and affordable homes.

1.2. Our ambition is that everyone has a good home in a successful community, with a range of high quality, affordable, safe and accessible homes that meet people’s changing needs and aspirations throughout their lives.

1.3. Housing associations and co-operatives are central to achieving this, going way beyond the bricks and mortar with social justice built in and delivering from generation to generation.

1.4. We work with government and others to achieve the legislation, regulation and funding necessary for our members to be strong, resilient and independent social businesses housing Scotland.

2. Executive Summary

2.1. The five week payment causes major problems for claimants and for the organisations, such as housing associations and foodbanks, that have to support them. The five week wait can push claimants in to debt who have never been in debt before, with damaging consequences for their mental well being for their family cohesion and for tenancy sustainment.

2.2. The mitigation put in by the DWP in the form of payment advances merely defers the problem rather than cures it. The fact that advances can also include an amount equivalent to housing costs increases the debt that the claimant will have to repay. Advances are also made before entitlement has been verified. SFHA recommends that any advance should be limited to the standard personal allowance and should not include housing costs.

2.3. The two week run on of housing benefit has been welcome and the plan to extend the run on to JSA, ESA and Income support will help those making the move to Universal Credit, but many new claimants will also be penniless: an equivalent two week run-on should be available to all.

2.4. A better long term solution would be to revert to fortnightly assessments as exist in the legacy system, or to twice monthly assessments that are possible in Universal Credit.

3. Main Report

3.1. In response to the questions asked in the call for evidence:

To what extent have the mitigations the Government has introduced so far (e.g. Advance payments) helped to reduce the negative impact of the five week wait for UC claimants?

- What problems do claimants still experience during the five week wait?

3.2. The Government has introduced two mitigations

▪       An advance payment of up to 100% of the estimated first payment

▪       For claimants migrating from housing benefit, a two week run-on of housing benefit payments

3.3. It will Introduce further mitigations in July 2020 in the form of two week run-ons of JSA, ESA and Income Support, but again these will be only for claimants currently on legacy benefits.

3.4. Advance payments, in the short term, may mitigate a claimant’s immediate crisis of having no money to live on, but it is deferring a problem rather than solving it. Advance payments can be for up to 100% of a claimant’s estimated entitlement, including housing costs. The advance has to be paid back over 12 months (although this will be extended to 24 months in 2021). A couple (over 25) on the standard allowance in a flat with a monthly rent of £480 would have monthly deductions of  £90 from their standard allowance of £594, a significant cut from the money they are expected to survive on; if they have other debts to be repaid, such as third party deductions or fines, they would have even less – their allowance could be reduced by up to £178 per month, for a year. The situation will be even worse once the temporary boost to Universal Credit of £1,000, announced by the Chancellor as part of the Government’s Coronavirus response, finishes in April 2021, leaving claimants a further £87 per month worse off.

3.5. The principal concern of social landlords is that, whilst the advance includes housing costs, those housing costs often are not used to pay the rent  – creating or adding to arrears accrued by the tenant. Social landlords will engage with the tenant and seek to reach an agreement to clear the arrears, but it is another debt that the individual has to manage, which can be detrimental to the individual’s mental well-being and possibly to family break-up and increasing the chances of a tenancy failing. It is also a burden to the landlord in terms of additional management resources being diverted from other priorities. Tenants are left stressed and anxious and the mental well-being of staff is eroded by constantly having to deal with households in crisis. SFHA recommends that any advance is capped to the equivalent of the personal allowance and excludes the housing costs element.

3.6. It should be of little surprise that claimants who may be without experience of monthly budgeting and who are making a claim for Universal credit at a crisis point in their lives, who are given a sum of money larger than they may have had before, do not make the wisest of choices, as was witnessed in a recent BBC documentary on Universal Credit[1]. It would be far better if Universal Credit supported claimants to learn to swim, rather than immersing them in the deep end.

3.7. The five weeks’ wait makes a claimant more vulnerable to fraud. Advance payments are made once the claimant’s identity has been verified, but before their entitlement has been confirmed. The advance payment may be based on exaggerated estimates. Housing associations have reported that claimants may have requested more than their entitlement because of manipulation by illegal moneylenders, by for example giving higher housing costs estimates. The money lenders then pocket all or a substantial portion of the advance, leaving the claimant as penniless as they were at the start of the claim but with a substantial debt to repay in the coming year.

3.8. The provision of the two-week run-on of housing benefit has had a positive impact for claimants who were on legacy benefits making the transition to Universal Credit. The extension of the run-on to JSA, ESA and Income Support will build on this and is essential to help vulnerable claimants who will be swept up in the managed migration to Universal Credit. Yet many of those who are new claimants to Universal Credit who were in employment before may be in little better financial position than those on legacy benefits; they do not have savings to hand to get by on before the first payment but may have household bills coming due during the 5 week waiting period.

3.9. All claimants, not just those making the move from legacy benefits to Universal Credit, need the equivalent to the two week run-on payment. But rather than have a two week run-on payment, a move to a fortnightly or twice monthly assessment process would ease much of the stress currently endured by claimants, who would be better able to avoid falling into debt. It would also be a saving to the DWP in that it would obviate the need for an extra payment above Universal Credit entitlement.

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?

3.10.         Whatever the shortcomings of legacy benefit systems were, the wait for payments was not one of them. The five week wait and the assessment process are the worst flaws of Universal Credit. A return to fortnightly assessments with the first payment being made within two weeks of the initial claim would obviate the necessity of run-ons and would make advance payments the exception rather than the norm.

3.11.         The Government argues that Universal Credit mimics the world of work: it does not. A significant proportion of Universal Credit claimants are in work: some will be paid weekly and some will be paid fortnightly or four-weekly. Their entitlement to Universal Credit will fluctuate depending on how many pay days they have had during the assessment period, which makes personal budgeting a nightmare.

3.12.         Allied to the five week wait is the monthly assessment process. This is also flawed in that it takes into account a claimant's circumstances on the day of the assessment rather than taking into account their circumstances over the course of the month. An egregious example would be a claimant whose assessment period ran from the 1st of the month to the 31st . If they died on the 29th, they would receive no UC payment, leaving four week’s worth of unpaid rent, which would have to be met from the estate or more likely written off as a bad debt.

- Is it possible to estimate any costs or savings to third parties (for example, support organisations)?

3.13.         The five week wait has added to the costs of third parties, as more claimants turn to housing associations and third sector agencies for support and help for the problems caused by the five week wait. Although it is not possible to put a cost to housing associations, all have had to increase their provision for bad debts and many have chosen to recruit welfare advice and support staff, which has to be funded from their mainstream budget. Associations have also had to review their service provision, with greater prioritisation of rent management to the detriment of other services that they had provided.

- Are different mitigating options needed for different groups of claimants?

3.14.         The different mitigation options that are required are not so much to do with the five week wait as with the support needed to maintain and manage claims. Universal Credit’s implementation has been predicated on the claimant being able to apply and manage their claim online; although the DWP can offer alternative methods, there is no adoption of a “no wrong door” policy that has been taken up, for example, by the Scottish Social Security Agency. For many, including the most vulnerable and those with chaotic lifestyles, the expectation that they will maintain their claims online sets them up to fail. Even if they do manage the application process, they then fail to cope with subsequent management of online journals.

3.15.         The vast majority of those on Universal Credit and who are not in work would have been on JSA. Between November 2013 and August 2019, there has been a significant reduction in the number of JSA claimants, whereas there has only been a slight dip in the number of ESA claimants[2]:

3.16.         The DWP is commendably taking a very cautious approach to the managed migration of existing legacy benefit claimants, with its pilot project in Harrogate, and mitigation measures such as the run on and transitional protection may be in place, nevertheless the subsequent monthly assessment process poses a challenge to the well-being of this client group.

- Are there barriers or potential unintended consequences to removing the five week wait—either for claimants or the Department? How can they be overcome?

3.17.         The potential barrier to removal of the five week wait is the far narrower window for verification, though it did not seem to be a problem for legacy systems unless it was a cause for widespread fraud.

3.18.         With twice monthly or fortnightly assessments, would there not be greater capacity to adjust claims?

April 2020