It was Harold Wilson who said that a week is a long time in politics and last week was certainly a busy one for Universal Credit. Amber Rudd was appointed Secretary of State for Work and Pensions on 16 November 2018. In her maiden speech at Kennington Jobcentre last Friday she set out her vision for Universal Credit. In this blog post we recap on the policy changes that were announced and what we think needs to happen next.
Amber Rudd gives a fresh approach to Universal Credit
Amber Rudd set out three of the main areas where change to Universal Credit is needed to meet this vision:
“First – the delivery of the next phase of Universal Credit, known as managed migration, must be handled carefully so it works for all claimants.
Second – flexibility in payments, especially on rent and frequency, should support people financially in a way that works for them.
Third – the system must do even more to support women.”
On the same day, we were reminded of some of the challenges that Universal Credit still has to overcome:
- The High Court found in favour of four working mothers who challenged how the DWP took account of monthly earnings
- The rollout of managed migration was scaled back for 2019, although DWP will still have their hands full with around 1.6m people will still move onto Universal Credit this year through natural migration
- The Secretary of State announced plans to ensure the two-child limit to benefits, set to come into force in February, would not apply to children born before April 2017
- In her maiden speech, the Secretary of State also signalled the desire to move toward more flexible payments, including direct payments to landlords, split payments, and the payment of Universal Credit going to the main carer by default
There were also two excellent programmes on the BBC, the Briefing Room was thirty-minute retrospective on Universal Credit, looking at what’s wrong and how it can be fixed. This was followed by an interview with Amber Rudd on Newsnight, where she indicated support for lower withdrawal rate.
Policy in Practice has long argued for changes to Universal Credit to ensure it delivers on its objectives of simplicity and supporting people towards independence; to be successful it needs to be seen by claimants as a significantly better system than the one it replaces. Whilst last week’s announcements are a welcome step forward, there is more to do.
A new direction from the Department for Work and Pensions
— Louise Murphy (@_louisemurphy) January 11, 2019
We continually share our findings with the department, including formally by providing evidence to the Work and Pensions committee on a number of aspects of Universal Credit. The new direction from the Secretary of State, highlighted in her speech on Friday and demonstrated in a meeting with Policy in Practice earlier in the week indicates that the Department are listening to and learning from organisations with constructive solutions. This approach is both welcome and timely. The department can learn from the experiences of people who have already migrated to Universal Credit and respond to evidence gathered by frontline organisations that support them.
“In welfare, there is no one-size-fits-all solution, and Universal Credit offers the opportunity to move away from that. It must treat individuals as individuals…”
“A standard offer cannot work for everyone. People’s work patterns, the pressures they face, their families – everyone’s circumstances are unique.”
This emphasis on looking at individual need, and desire for a flexible system that is responsive to the needs of the claimant, is an important change in direction. Policy in Practice has gathered evidence of where the system fails to meet its objectives or fails to provide an adequate safety net to claimants, from the frontline organisations we support.
Too often the frontline organisations that Policy in Practice work with have reported a rigid and non-responsive approach from the department that has led to claimants without support as they move to Universal Credit. Despite evidence from the frontline and criticism from the National Audit Office, the UN Special Rapporteur, amongst others, ministers have too often responded defensively to calls for change in the past.
Ultimately, if this new approach translates into concrete changes to both Universal Credit policy and practice, it could make Universal Credit fit for purpose before it rolls out to the majority of claimants under managed migration.
Analysis of the changes to Universal Credit policy announced
A cautious approach to managed migration
Frontline organisations have expressed serious and legitimate concerns over the risks involved in the wholescale transfer of claimants of existing legacy benefits to Universal Credit. Specifically, the lack of support to assist vulnerable claimants, and the reliance on claimants, rather than the department, to drive the transfer.
- Policy in Practice have argued that managed migration is an opportunity to show how effective Universal Credit could be.
Amber Rudd has answered concerns by announcing that every individual will be supported as the move onto Universal Credit and that responsibility for successful transfer ultimately lies with the department. She announced a pilot in 2019 in which the department would support 10,000 people onto Universal Credit through managed migration, adopting a test and learn approach before scaling up the process next year. Full rollout is still scheduled to have completed by December 2023.
The overall success of managed migration will ultimately depend on the department’s evaluation of the pilot, the responsiveness to findings, and an ability to deliver change swiftly.
The two-child benefit limit
The implementation date for the controversial two-child benefit limit, in which Universal Credit will provide support for no more than two children, is set to start from the 1 February 2019.
Policy in Practice was one of a number of organisations that provided evidence to the Work and Pensions select committee on the risks with this policy. This was supplemented by a report that had front page coverage, finding that over a quarter of a million children already in poverty would fall deeper into poverty, a quarter of a million more children would fall into poverty, and further 600,000 children would be closer to the poverty line by 2022 as a result of this policy.
A retrospective measure that penalised those that could previously support their children has thankfully been withdrawn, the positive intent in the Secretary of State’s speech has been backed up by positive changes. However, the policy will still affect families with third or subsequent children born after the policy was announced in April 2017.
In our evidence to the Work and Pensions Select Committee, we called for the complete removal of this policy. It achieves little that the Benefit Cap does not already achieve, weakens the ‘insurance’ principle of the welfare system, and does nothing for children in low income families. Much of the cost of supporting families that struggle to cope with this policy will fall on local authorities, who have statutory duties to protect children.
Amber Rudd made a number of announcements regarding how Universal Credit would be paid in the future.
- In future Universal Credit will be paid to the main carer where there are children in the household
Universal Credit is paid as a single monthly payment, where there are joint claims for Universal Credit, payment is made into one nominated bank account. Legacy benefits provided the means for separate benefit to go into different bank accounts. For example, Child Tax Credit could go to the main carer and out-of-work benefits to their partner.
A number of charities supporting those affected by Domestic Violence have been concerned that payment of Universal Credit into one account could exacerbate abusive or coercive relationships. This risk was recognised by the Work and Pensions Select Committee and changes were recommended in its report Domestic Violence and Universal Credit.
This measure alone will generally welcomed as going some way to ensure that the money gets to those that it is intended to assist.
- The department will immediately start developing a system to enable private landlords to receive direct payment of the housing element of Universal Credit
There is currently little detail on the timescale for implementation of this system or how it will operate in practice. It is likely that the IT system will mirror, or be part of, the landlord portal for social tenants and that provision will mirror current provision in the legacy benefits system. At the same time, the DWP announced that it would change the system for paying the housing element to social landlords from four-weekly to monthly.
This proposal in intended to reassure landlords concerned about renting to Universal Credit claimants. However, the transfer of this provision to Universal Credit is not straightforward in situations where the tenant does not receive full rent support, for example where rents are above the local housing allowance. As Universal Credit is a composite benefit of rent and personal elements, determining the amount to be paid if the claimant moves into work, and the housing element is withdrawn may be problematic.
- A pilot scheme to examine the possibility of more frequent payments for those that face difficulty managing monthly payments
The pilot will attempt to identify claimants who require this provision and refine processes to move these claimants to more frequent payment. This is not a new provision as the DWP currently have the power to make more frequent payments when it is in the interest of the claimant to do so. Policy in Practice helps local authorities to identify people with low financial resilience, in order to target tailored support effectively to them, and we argued in our paper on managed migration that DWP should take similarly sophisticated approach.
The core challenge to successful extension of more frequent payments is the first payment, where people typically face and initial assessment period of one month. While an advance is available, these payments are deducted from future Universal Credit awards, and by the time of payment, the claimant may already have built up debts that can only be met by a full months’ worth of Universal Credit. This barrier to acceptance of more frequent payments was recognised in our report on Supported Housing and Universal Credit.
It is hoped that the terms of the pilot are extensive enough to include trial of an earlier first payment to ensure claimants can take advantage of more frequent follow on payments.
- A more flexible approach to childcare provisions
For the majority of claimants looking to move into work, or work more hours, Universal Credit contains more generous provision for support for childcare costs than the benefits it replaces. However, under Universal Credit this support is paid a month in arrears with claimants having to find deposits and large advance payments which can be over £1,000. Universal Credit also requires the claimant to provide proof of childcare at a JCP office. For some claimants this requirement to access a JCP during working hours is incompatible with full time work. The provision of childcare support under Universal Credit has been identified as a barrier to, rather than assisting, the move to work.
Amber Rudd signalled a need for more flexibility in the approach to childcare support. She has instructed JCPs to use the Flexible Support Fund (FSF) to provide access to childcare and to offer flexibility on the timescale of provision of proof of childcare costs. The Flexible Support Fund is a fund of £84.5M administered by JCPs that is intended to assist claimants with costs associated with the move to work.
It is not new – this measure implies clearer signposting from work coaches. Currently it is primarily used for to cover the costs of transport and childcare for interviews when no other funding is available. Payments are at the discretion of the JCP and are not repayable. There are strict guidelines about how the fund is used, and it requires proof that the claimant has no other means of accessing finance. This limited use means that the fund has been underspent every year.
Earnings and the assessment period: New High Court ruling
On the same day that Amber Rudd set out her ambitions for Universal Credit, a judicial review on behalf of four working mothers found that the DWP had not been correct in its application of the Universal Credit regulations.
The case challenged how monthly salary is taken into account within Universal Credit monthly assessment periods. Universal Credit is assessed on all income within a monthly assessment period and PAYE income is automatically registered on the claimants Universal Credit account.
In the four cases brought to judicial review the automated accounting of salary registered two payments within one assessment period. This was caused primarily by changes in the salary payment date, due to bank holidays and weekends. The court heard how this led to large fluctuations in Universal Credit awards causing cashflow problems and leading to debt. It also meant that, overall, the women lost benefit support.
A similar issue was outlined in an earlier blog by Policy in Practice, highlighting how our software can help people on weekly, fortnightly or four-weekly pay cycles understand how their Universal Credit award may fluctuate.
The loss in benefit support results from an assessment taking account of two salary payments in an assessment period but applying only one work allowance. The work allowance is the amount that a person can earn before their Universal Credit is affected. If the monthly salary payments were assigned to different Universal Credit monthly assessment periods, then each payment would have benefitted from a work allowance. However, when two payments fall into one assessment period, only one work allowance is applied. This means that the women could lose up to 63% of their work allowance (£258/month) for each month that the payment into the bank did not coincide with their Universal Credit assessment period.
A welcome new approach, with more to do
Amber Rudd’s speech was billed as a “reset” of universal credit, signalling a clear break with a past, demonstrating a willingness to consider changes to the flagship reform. The Minister is clearly listening to claimants and organisations who have asked for change, acknowledging that fundamental changes are needed, and shown in certain cases that she will act on recommendations.
So far, announcements are limited to those areas with a limited impact on the cost of Universal Credit. The support of the Treasury will be needed for more wide-ranging reform. Many of the announcements made involve direction on existing provision rather than the introduction of anything new.
- The use of the flexible support fund to fund upfront childcare costs has always been available but is now being signposted
- Flexible payment arrangements are also currently available but an examination of how to extend take-up of these may lead to their greater use
- Payment of Universal Credit to the main carer is a matter of guidance rather than regulation
Nevertheless, these changes are welcome. All of these provisions flag a different direction that should be felt by claimants and go some way to meet specific concerns.
More significant changes announced are:
- The piloted test and learn approach to managed migration should ensure that vulnerable claimants have the support needed to access the new benefit
- The introduction of a direct payment system for private landlords should have a long term impact by addressing their reluctance to let to Universal Credit claimants
The imminent introduction of one of the more controversial elements of welfare reform, the limit of support to two children, has been cushioned by protection for children born before April 2017. However, this protection is, by nature, only temporary. Over time, fewer children will have this protection and the number no longer provided with a safety net will grow, with obvious implications for child poverty and local authority support. The Minister’s stated aim to support women to financial independence could be matched by re-evaluating this decision and fully implementing the recommendations of the Work and Pensions Select Committee.
We also wait to see the department’s response to the judicial review on the correct interpretation of regulation governing earnings within assessment periods. The department should accepting the ruling and ensure that Universal Credit is administered in a way that avoids the most severe income fluctuations that make budgeting hard for so many working claimants.
Re-engineering Universal Credit for all claimants is challenging, but still possible
Amber Rudd’s willingness to listen and to revisit some of the most heavily criticised aspects of Universal Credit, such as the five-week wait for payment and the rate at which benefit is withdrawn with earnings, is very welcome. How much can be achieved will ultimately be determined by the willingness of other departments, specifically the Treasury, to support her.
With this backing, we could begin to see Universal Credit transformed into a flexible benefit that meets the governments objectives, addresses individual need, supports people into work and provides a safety net.
Given the timescale for migrating all claimants across to Universal Credit this will be a challenge.
The department should find ways to harness the efforts of local advocates, including councils and housing associations, and develop a partnership approach that ensures the focus is not solely on ensuring Universal Credit is paid promptly, but also that people migrating onto the new system get the support they need to avoid hardship, and to take steps toward independence where possible.
The experiences of people when claiming Universal Credit will determine whether Amber Rudd has delivered on a responsive, claimant-focused, welfare system that assists people into work and supports them at times of crisis.