The Social Security Advisory Committee (SSAC) were asked by the Department for Work and Pensions (DWP) to provide guiding principles for the department on how Passported Benefits (Free School Meals, Healthcare, Justice and Energy) could work with Universal Credit. Policy in Practice was asked to feed into this process and our analysis helped to inform the report (p108, table 3.1).
In reforming passported benefits, the SSAC had to balance their intrinsic value: their impact on reducing poverty and improving life outcomes with the work incentive requirements, simplicity of administration and their overall cost. The introduction of Universal Credit means that passported benefits will have to change, otherwise the sudden withdrawal of things like Free School Meals could have a damaging impact on work incentives.
There are two general options for reform, based on the frequency of needing the passported benefit.
- High Frequency, High Value Benefits such as Free School Meals, Healthy Start and health prescriptions the value of the benefit could be monetised and withdrawn gradually as household earnings increased, or as proposed by Policy in Practice, adjusted by varying the earning disregard.
- Low Frequency Benefits such as court visits, entitlement to legal aid and dental treatment could be managed through a ‘run-on’ system, whereby entitlement would continue for a period (i.e. 6 months) while the claimant was out of work, or alternatively through an insurance type system, for example a prescription prepayment certificate could be viewed as an insurance premium for medicines.
Ultimately, the SSAC recognise that Universal Credit allows for fundamental reform of passported benefits, both in terms of eligibility (who should be entitled to support) and administration (How much support is required, and how does this change with income). Fundamental reform may not be possible in time for the launch of Universal Credit, so the SSAC make it clear that they are looking at both short term and longer term types of support.
What are passported benefits
Passported benefits are forms of in-kind support that are often highly valued by the households that receive them. They can have a material impact on reducing poverty, improving life outcomes in education and health and improving the quality of life within a household. They are called passported benefits because entitlement to some case benefits would act as a ‘passport’ for entitlement to this additional ‘in-kind’ support. Under the current system, tax credits kick in at the point that entitlement to passported benefits is lost. However, under Universal Credit there is no point at which income suddenly increases, and a new mechanism for withdrawal will be required and this is the topic of the SSACs report.
The DWP appear to rule out extending eligibility to all Universal Credit Claimants, and will settle for a simple system (i.e. income threshold) in the short run, indicating that anything more fundamental was unlikely to happen until after the general election.