Universal Credit: Government must ensure plans protect vulnerable, say MPs

22 November 2012

In a report published today, "Universal Credit implementation: meeting the needs of vulnerable claimants", the Work and Pensions Committee concludes that the Government has designed a welfare system which should help ease the transition from benefits to work, but warns that significant concerns remain about the potential impact of the changes on some of the most vulnerable benefit claimants. It urges the Government to reflect on its ambitious implementation timetable

The report will be launched in the House of Commons later today by the Chair of the Work and Pensions Committee, Dame Anne Begg MP.

Commenting on the publication of the report, Dame Anne Begg MP, said:

"We recognise that the new Universal Credit system is likely to be accessible to the majority of claimants, but we have serious concerns about how more vulnerable people will cope with the changes, especially the online claims system and the proposed single monthly payment."

Dame Anne Begg MP said:

"Some claimants will not be able to make an online claim and others may struggle to adapt to monthly payments.

"The measures the Government plans to put in place to help these claimants may be difficult to access and too slow in identifying who these people are, with the risk that they will fall into debt and hardship before extra support can be provided.

"We believe that the Government should reflect on the possible consequences of these major benefit changes for some of the most vulnerable people in society and that it should consider modifying its implementation timescale if those consequences cannot be adequately addressed before national roll-out begins.

"The Universal Credit pilots (Pathfinders) will begin in the north west of England in April 2013 and full national roll-out is due to start in October 2013. Significant further work needs to be carried out before then to ensure that the concerns we have raised are addressed. The Government also needs to ensure that all the impacts of transition to Universal Credit are carefully monitored from the outset."

The report highlights a number of other areas of concern. (Quotes from the Chair of the Work and Pensions Committee, Dame Anne Begg MP in quotation marks):

On direct payments of housing costs to tenants

Under Universal Credit, payments to cover the costs of rent will go to the benefit claimant, rather than direct to the landlord. This is a major change to the benefit regime for tenants in the social housing sector and for some in the private rented sector. The Committee accepts that many tenants will cope with this change but is concerned that some vulnerable claimants will be unable to manage making regular rent payments and may fall into arrears. [Paragraph 83]

"We believe that time needs to be allowed for a proper evaluation of the pilots which the Government is running on direct payments to tenants, followed by a phased implementation of direct payments, after appropriate safety net arrangements for vulnerable people have been developed and tested. We therefore recommend that, during the initial phases of Universal Credit implementation from April 2013, claimants who currently have their housing costs paid to their landlord should have the option to continue with this arrangement. It is also important for the Government to move quickly to publish a clear definition of "vulnerable" groups within Universal Credit for whom it will not be appropriate to include housing costs in their benefit payment. It also needs to establish a robust process for proactively identifying claimants who are struggling to manage their housing costs so that they can be properly assisted before they fall into arrears and face eviction."

On payments to cover the additional costs of disability

The Committee notes that it has not yet received sufficient evidence to satisfy itself that the Government will achieve its stated aim of ensuring that Universal Credit will provide more generous support for disabled people than it does for people in similar circumstances who are not disabled. [Paragraph 115]

"Ministers have told us that the total expenditure on disabled people as a whole will not be reduced but we are concerned about those disabled people whose entitlement is reduced under Universal Credit. Transitional protection will mean that they do not lose in cash terms immediately, but this protection will erode over time, will be lost if their circumstances change, and is not available to new claimants. The Government needs to address concerns about disability additions within and outside Universal Credit to ensure there is no diminution in the benefit package which disabled people receive."

On the calculation of income

The Government plans to calculate monthly Universal Credit payments by using information about claimants' employment earnings taken from data feeds from HMRC's new Real Time Information (RTI) system, which is being introduced to administer PAYE taxation. The Committee comments that whilst Ministers are confident that RTI will be delivered on time to support Universal Credit, tax, accountancy and business organisation raised a range of specific concerns about the RTI programme, and the Committee did not receive satisfactory responses from DWP and HMRC about these issues.

The Committee welcomes the Government's efforts to simplify the provision of information on income by the self-employed, but shares the concerns of witnesses that the proposed system could impose a significant and unnecessary burden on the self-employed. It is also concerned that the proposed Minimum Income Floor rules could act as a disincentive to entrepreneurship. [Paragraphs 148-149]
    "The  RTI implementation timetable is very ambitious and it is unclear to us whether all of the issues of concern are under control and what measures will be put in place to deal with problems as they emerge during implementation. There appears to be no contingency if the IT system doesn’t work. We are also concerned that the proposed arrangements for the reporting of self-employed income could impose a significant and unnecessary burden on the self-employed and recommend that DWP liaises with HMRC and the professional bodies as a matter of urgency on these issues."

    On the implementation timetable

    The Committee notes that the Government has set a very ambitious timetable for Universal Credit implementation and expresses concern about whether there will be sufficient time for the Government to learn from its pilots and whether it is desirable or necessary to implement so many changes at once. [Paragraph 237
      "Ministers have indicated to us that, because implementation will be phased over four years, there will be plenty of time to get it right. While it is true that system enhancements can be developed and refined over time, there are still a lot of key decisions to be made on the details of how Universal Credit will work, before claims can be processed. We believe it is vital that the essential elements of service delivery and support are in place before the major roll-out starts, so that the system can take account of potential changes to claimants’ circumstances."

      On independent advice and support

      The Committee recognises that some people rely on advisers and other advocates to help them to make a claim and to resolve problems with their benefit claims, and that there is likely to be a significant increased demand for advice services during the four-year transition to Universal Credit. [Paragraph 51]

      "There will be a significant increase in demand from claimants for advice on how to make and manage a Universal Credit claim.  This will place a heavy burden on the advice sector over the whole implementation period. DWP needs to ensure that sufficient additional resources are available in the advice sector to support successful implementation of Universal Credit."

      The report also comments on closely-related policy areas, including:

      • The conditionality and sanctions regime. One element of the new regime is the claimant commitment. This has the potential to help benefit claimants return to work, by making clear what job-search requirements they must fulfil.  The Committee recognises that this is important, but believes it is essential that DWP supports claimants in the job-search and that the support available to each claimant is clearly set out and actually provided.
        The new regime also includes tougher sanctions with the ultimate penalty of benefit being withdrawn for three years. The Committee acknowledges that sanctions are a necessary and important part of the benefits process, but points out that there is little evidence that they strengthen work incentives on their own. The effectiveness of the new regime is likely to depend heavily on the quality of the face-to-face support provided by DWP through Jobcentre advisers. Staff need to be properly trained to apply sanctions appropriately, and to explain clearly why they have been applied and what remedial action the claimant needs to take for benefit to be restored. [Paragraphs 182-183]
      • Passported benefits. The additional support currently available to many benefit claimants through passported benefits, particularly free school meals, is valued by families, and the entitlement criteria have a significant impact on decisions about returning to work or increasing working hours. The Committee accepts that there are no easy answers, but believes that it is essential for the Government to put fair and workable criteria in place to avoid adding complexity to Universal Credit and the risk of reducing incentives to work. A clear indication is now needed on the arrangements that will be put in place when Universal Credit is implemented nationally from October 2013. [Paragraphs 194-195]
      • Localisation of council tax support. The Committee believes that the decision to localise council tax support under a proliferation of local schemes, rather than including it within Universal Credit, will work against the Government’s objective of simplification of the benefits system. It believes that it will introduce local variation, add additional complexity to earnings incentives and has the potential seriously to undermine the objectives of Universal Credit in terms of enabling claimants to see clearly the financial benefits of taking up a job or working more hours. The decision to reduce central government funding to local authorities for council tax support by 10%, but at the same time to protect pensioners, means that the burden is likely to fall on low-income working-age households, many of whom will be asked to pay council tax for the first time.  [Paragraphs 206-207]
      • Localisation of the Social Fund. Social Fund discretionary payments currently provide a safety net for some of the most vulnerable people. The Committee believes that giving local authorities responsibility for a new system of local welfare assistance without central guidance on how to determine eligibility, and in the absence of ring-fenced funding, will result in uncertainty and inconsistency in the way the support is administered. It may well lead to real hardship for benefit claimants who have nowhere else to turn in crisis situations. The Committee believes that the Government should reconsider its position on ring-fencing and that DWP should ensure that it is alerted at an early stage to specific instances of genuine need being unmet because of different local priorities or shortage of funds. [Paragraph 212]

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