Spring Budget 2023 is a self-proclaimed ‘budget for growth’ that aspires to break down the barriers to work.
The welfare system has been increasingly reliant on a ‘carrot and stick’ approach to meet objectives, and this budget contains new carrots whilst giving the DWP a bigger stick.
The extended Energy Price Guarantee, changes to childcare, and the ending of the Work Capability Assessment (WCA) are positive changes to the benefits system. Yet some measures are becoming harsher. Greater conditionality, the frozen Local Housing Allowance (LHA) rate and the strengthening of the sanctions regime risk pushing more families further into poverty.
Increased support for childcare, but with greater conditionality for parents
Spring Budget 2023 represents a significant redistribution of spending towards families who work, through increased support for childcare.
For households in receipt of Universal Credit (UC) the two key measures are:
- Initial Universal Credit childcare payments will be made upfront in the form of a one off payment
- The maximum childcare payments available under Universal Credit will increase this summer by 50% to £951 per month for one child and £1,629 for two or more children, although support is still limited to 85% of a household’s costs
Paying Universal Credit childcare costs monthly in advance is a significant and positive change that may encourage take-up among some of the 87% of households who currently do not claim childcare support within their UC.
Many parents on low incomes cannot afford the initial cost of childcare and many currently rely on informal childcare from others. It is unclear whether termly childcare costs will be provided upfront under UC as some providers ask for, but this appears unlikely.
For all households, whether they are in receipt of benefits or not, the government has increased the free childcare offer with the provision of 30 hours a week of free childcare for children aged between 9 months and 3 years. This will only apply to households in which all adults work at least 16 hours per week, at a cost of £4.1 billion. The government will also fund schools and local authorities to provide wraparound care from 8am until 6pm by September 2026 but the funding terms are not yet known.
The rollout will be phased in, starting with:
- 15 hours provision for two-year-olds in April 2024
- 15 hours provision for all ages above nine months from September 2024
- 30 hours provision for children older than nine months from September 2025
This additional childcare support is very welcome and will undoubtedly help parents to keep working through the existing gap in early years provision.
However, even though the new childcare offer is a huge improvement it may not go far enough to make it possible for all parents to return to work. 100% provision for childcare costs for households in receipt of benefits would ensure greater access and ensure that households on lower incomes are able to make up the difference.
The Office for Budget Responsibility (OBR) estimates that the changes to childcare support will help 60,000 people to enter the workforce by 2027-28. This will provide a boost to employers looking to fill vacancies.
Childcare policy reform also requires structural support to be effective
Success in reforming childcare is highly dependent on the government’s ability to increase childcare places to meet the expected increase in take up. To this end, the government is offering one-off recruitment payments for childminders and proposing to increase the staffing ratio from 1:4 to 1:5 for two-year-olds.
The government also indicated there will be more funding for childcare providers. The increase in childcare placement funding is conditional on a Parliamentary vote in favour of the relaxing of staffing ratios. However, efficiencies from increased ratios alone will not cover the cost of expansion.
There is concern within the childcare industry that places will still not be funded in line with the costs of childcare.
In addition, childcare providers insist that early years care is the most expensive part of childhood provision requiring high levels of staffing. Childcare providers have been overwhelmingly opposed to the ratio change, calling it unsafe and likely to further drive staff from the industry.
It is not just the availability and cost of childcare that are barriers for parents going into work. Successfully getting more parents to return to work may also depend on the flexibility of working options for parents and whether Universal Credit conditionality will be adjusted to take the need for flexibility into account.
For example, will parents be required to accept jobs with hours that do not allow them to drop off or collect children from childcare centres?
Some reforms sought by the Coram Family Foundation remain unaddressed. In particular, childcare for people in further training or education would encourage parents to retrain and re-enter work. The call for improved funding for disadvantaged and/or disabled children was also absent from the budgetary measures.
Removal of barriers and increased conditionality for many
An increase in support for childcare coupled with a removal of protection from conditionality means that although barriers to work have decreased, the choice for parents whether working is best for their family has been taken away.
Parents of children aged one and two will be meeting with their work coach more often, whilst parents of older children aged three to twelve who currently have lower conditionality will be asked to spend more time each week searching for work.
This expansion of conditionality comes alongside an increase in the Administrative Earning Threshold (AET) to 18 hours, double what it was a year ago, and the removal of the joint AET for couples.
The AET is the earnings threshold that a benefit claimant must meet in order to no longer be subject to an intensive work search regime.
This measure aims to encourage non-working members of single-earner couples into work. In reality this risks encouraging both members of the couple to work part-time.
I would rather take care of my child than take a job and have strangers take care of her while she cries. I strongly believe that being available for her in the first two years of life are crucial.
Parent of a 13 month old child
DWP figures indicate that the changes to the AET will mean that an extra 100,000 claimants will face stricter conditionality and a greater risk of sanctions.
The sanction regime is harsh with an amount up to the full level of the personal benefit allowance being removed for up to six months. Households that are sanctioned have no income for food or bills and face reliance on food banks and other charity support.
Ending the WCA is a positive move but with potentially negative consequences
The expansion of conditionality and the removal of barriers to work also extends to people with health conditions, one of the most common reasons for economic inactivity.
Ending the Work Capability Assessment (WCA) is a positive, long called for move. The WCA is a test to determine fitness for work and has long been criticised for inconsistency and for causing unnecessary stress for claimants. Removing the WCA will help to end the current binary categorisation between people who are deemed able or unable to work.
As the WCA is used to determine whether someone can receive additional UC support, the Limited Capability for Work (LCW) and Limited Capability for Work-Related Activity (LCWRA) elements will also be removed.
The government’s new white paper on health and disability suggests the replacement will be a new UC ‘health element’ which is passported through Personal Independence Payments (PIP). This risks pushing people who are unable to work due to short-term illness into greater conditionality, at the discretion of Work Coaches.
The new health element will only be available to claimants who receive PIP. This means that support for illness is removed from the benefits system for the first time and is replaced with support for people who need additional help with day-to-day living or mobility.
It is unclear whether this new ‘health element’ will exempt claimants from the benefit cap similar to LCWRA.
New UC claimants who are ill but not eligible for PIP, who would currently receive protection from sanctions and the benefit cap through the LCWRA, will no longer be protected. It is likely that this will primarily affect people with mental health issues or living with addiction.
Major review and reform of the PIP assessment process is needed if it is to be made the sole assessment for this new health element.
The PIP assessment faces many of the same problems as the WCA. Almost half of the decisions made on PIP are overturned when challenged, which risks claimants missing out on support and pushing vulnerable claimants into conditionality.
Once again, this affects claimants with mental health conditions as they are most at risk of failing the assessment for PIP, due to the questions asked and how they are assessed.
Further specialist training and funding of assessors is needed to ensure that people who seek to claim PIP are assessed by those with a specialist understanding of how a specific disability or health condition can impact daily living.
Strengthening sanctions risks becoming ineffective and punitive
With more claimants being subject to conditionality the sanctions regime will also be strengthened and parts of the process will be automated.
In November 2022 the sanctions rate was almost twice as high as pre-pandemic levels. The current sanctions policy means that a claimant can lose up to 50% of their standard allowance for up to three months for a first sanction, and up to six months for any sanction following this.
Increasing the use of sanctions goes against growing evidence that sanctions risk destitution and can move claimants further from the labour market.
There is currently no evidence that sanctions work or are effective in achieving the goal of getting people back into work. The DWP is currently resisting calls to release evidence from internal research on the effectiveness of sanctions, despite a ruling by the Information Commissioner that it must do so.
Scrutiny should also be given to any automation of sanctions to claimants. Conditionality will increase for those with health conditions and for lead carers of children. This will also apply to people who currently have fewer requirements but may merely miss appointments due to unexpected circumstances; around 98% of sanctions are currently for missed appointments. Automating this process risks pushing people into hardship without any human interaction.
Strengthening and automating sanctions while pushing more people into conditionality makes the system more opaque and punitive and goes against the stated aim of providing social security and a path back into work.
The OBR estimates that this tightening of conditionality may result in 10,000 extra people in work. However, given that there is no evidence of the effectiveness of sanctions it is difficult to see how they arrived at this figure.
Energy support: a step towards ending the poverty premium
We welcome the suspension of forced prepayment meter installation and the removal of the 2% poverty premium for families currently on prepayment meters. Our analysis shows that how a household pays for energy, combined with their property EPC rating, has a large impact on how much they will pay for their energy bills.
With over 4.5 million prepayment meters in Britain and over 50% of these customers earning less than £18,000 a year, the Spring Budget’s policy change, combined with the extension of the Energy Price Guarantee, will help stop fuel costs increasing further. The suspension of forced pre-payment meters for families in arrears prevents suppliers from recovering arrears at a rate that may not be in the best interest of the household.
The return of the Universal Support offer
The introduction of a new Universal Support programme shows progress towards Universal Credits’ original idea of providing a universal benefit combined with the necessary support to help people make economic decisions that are right for them.
This voluntary programme will help claimants with long-term sickness and disabilities back into work through matching job vacancies. More effort is needed to ensure that the necessary support gets to people with health conditions or disabilities to ensure that they get the required support to empower choice. For those with significant illness, the best solution may still not be employment.
This measure, along with other announced programmes such as WorkWell, also show a positive move towards giving claimants with disabilities or health conditions the support they need whilst they are still in work to prevent them from leaving the workforce. As evidence shows, once a claimant leaves the workforce, they are less likely to return.
Longer periods out of work also significantly reduce a person’s chances of finding a job in the next financial quarter
ONS, Census 2021
Spring Budget 2023: Fewer barriers to work but harsher conditionality
Spring Budget 2023 is a positive move toward breaking down the barriers that prevent claimants from going into work. However, these positive changes are overshadowed by the increased conditionality which accompanies them.
The strengthening of the sanctions regime only enhances the need for the government to publish its own research into sanctions. A policy that has proven adverse effects needs to have an evidence base of success.
Increased support for childcare, the revival of Universal Support and ending the WCA will help claimants back into work. Conversely, increasing conditionality and sanctions risk claimants falling into destitution and moving further from work through harsher punitive measures.
What’s more, by keeping existing measures that exist to limit benefit support, such as the frozen Local Housing Allowance, the Benefit Cap, and the two-child limit, people who are already reliant on benefits will remain at risk of poverty.
Evidence shows that, as households go deeper into poverty or debt, their mental health worsens. Retaining these measures at their current rates appears to be contrary to the objective of getting more people into the workplace.
Other policies such as removing the High Income Child Benefit Charge or the Personal Tax Allowance (PTA) may be more cost-effective and help improve work incentives for many more people as outlined in our recent research paper.