That this House calls on Her Majesty’s Government, in the light of the Social Security Advisory Committee’s Report of June 2015, to remove the housing element of the Universal Credit (Waiting Days) (Amendment) Regulations 2015, in order to mitigate the harshest impacts of the policy (SI 2015/1362).
Relevant document: 3rd Report from the Secondary Legislation Scrutiny Committee
My Lords, I move this Motion because these regulations introduce additional waiting days before the first payment of universal credit. The period of waiting for this first payment is added to the already-existing waiting period of one month, plus the application and approval period before the award is made. In total, it is estimated that most applicants will wait about six weeks after an application before receiving their first payment.
The Government’s own Social Security Advisory Committee produced a very powerful and thorough report on these regulations. It had full consultation and went into great detail. It recommended, first, that these regulations should not proceed; and, if they did, that housing benefit should be removed from the waiting period. In their Explanatory Memorandum the Government agree that these waiting days are a cost-saving measure. This Motion asks the Government to agree the minimum change that the Social Security Advisory Committee asked for, to deal with the harshest parts of the policy. We on these Benches believe that a primary purpose of our social security system is to provide a safety net, to provide protection for those most in need who need help when sickness or unemployment hit them.
As well as the Social Security Advisory Committee’s report, we can also draw on the reports of the House of Lords Secondary Legislation Scrutiny Committee: not one, not two but three reports—and that on a piece of legislation which is subject to the negative procedure. The second of its reports contains strong criticism of the Government, saying that the Government’s response to its first report was,
“disappointing in that it largely repeated material already received by the Committee from the Department. The House may … wish to press the Minister for a better explanation”.
I hope that this debate will provide an opportunity for the Minister to do just that.
The effects of this piece of legislation will be: first, to push people to use food banks; secondly, to increase rent arrears; thirdly, to turn people to payday lenders; fourthly, to produce budgetary problems for registered social landlords and private landlords; and, finally, to lead to fewer private landlords taking benefit tenants. In that respect I have recently seen in the window of a rental property a notice saying, “No DSS permitted here”. Such notices used to appear some time back and I thought that we had dealt with the issue many decades ago.
There are major differences between the current waiting days schemes for jobseeker’s allowance and employment and support allowance and the universal credit scheme proposed in this legislation. Principal among those differences is that the old system related to a single benefit during a period of unemployment. The proposal in this legislation relates to universal credit, which brings together six existing benefits. These include tax credits and housing benefit as well as support for the current jobseeker’s allowance. So universal credit, unlike jobseeker’s allowance or employment and support allowance, covers both in-work and out-of-work benefits, and spans across a range of existing benefits, some of which are not currently subjected to the waiting days regime, in particular housing benefit.
The Social Security Advisory Committee rightly pointed out that claimants faced with a long wait for their first payment will prioritise feeding their families over paying the rent. Waiting time overall for that first payment will be in the region of six weeks—much longer than the monthly payment for the in-work system which universal credit is trying to emulate. The Government’s position on monthly benefit payments replicates how most people in work receive their pay or salary—but monthly means monthly, not six-weekly. For many workers, that means receiving your pay at the end of the month even if you have started work some way through that month. Very few workers would expect to have to work for six weeks before receiving their first pay. This waiting proposal is about people having no incoming money to budget for essentials such as food, utilities and rent.
The Government have an interesting policy on exceptions to their legislation. They tell us that they want a blanket policy with a limited number of exceptions. That is their stated ambition. They say that they want a simple and fair rule and that it will be difficult to state all the circumstances in which an exemption could apply. In view of this, I wonder how the Minister reacts to the statement in the Social Security Advisory Committee’s report that,
“the Government’s decision to set out a limited set of exemptions (with no further discretion) … is unexpected”.
The Government’s stated principle for this policy as a whole is that benefits are not intended to provide financial support for very brief breaks in employment or periods of sickness. They state that they would expect people to use their own resources to fund themselves during that period. However, people will not typically have savings to cover a six-week shortfall and pay basic living costs, which will include paying the rent.
HSBC reported in a substantial report just a few years ago that,
“34% of the UK population have savings of £250 or less”.
It further states that they do not have the means to cover a week’s rent, let alone six, or living costs if the breadwinner’s job were to end. This headline on savings is backed by a number of other studies referred to in the Social Security Advisory Committee’s report. For example, the Resolution Foundation found that more than half of low and middle-income households—middle-income households are crucially important in this—had no savings at all, and that two out of three had less than enough to see them through a month, let alone six weeks.
The Government intend that the waiting days will apply only to new applicants for universal credit, and say that most will already be receiving one of the legacy benefits, and therefore will not be treated as new applicants. Those who are not, so the Government allege, will be able to cover the six-week period without any money coming in from their savings. However, the evidence for these savings is clearly not there.
Further, as this Government’s £12 billion cuts to the welfare budget are implemented, there will be further erosion of the legacy benefits such as tax credits—so, if the Government achieve their policy aim of reducing the number using tax credits, there will be an even greater chance of people making new applications for universal credit. As it is, the Government estimate that 880,000 new claims will be made each year: that is the number of households the measure will affect. This could be a substantial underestimate of the number of claims there will be when the Government’s welfare reductions work their way through.
This measure will have a number of practical effects on families, households and others. The first concerns the availability of advance payments. The House of Lords committee today published a letter from the Minister on this matter, and the Government are praying this in aid. But last year, under the legacy system of benefits, two out of every three applications for an advance on benefits to help applicants cover the period when they were without any money were turned down. The explanation provided to your Lordships’ Secondary Legislation Scrutiny Committee in the last few days offers little hope that applicants will do any better under universal credit.
Another practical effect of the measure will be to create a disincentive for people to take a job with a six-month contract as it would mean them having to put in a new application. Rent arrears will inhibit free movement of labour. If you choose to prioritise feeding your family or ensuring that you have basic utilities such as electricity and gas in your home, and subsequently build up rent arrears, that will reduce your ability to spend money on moving around to find a job because you owe rent where you currently live, so things will be even worse for you. Similarly, it is clear that because of the variation in rents around the country, claimants in high-rental areas will suffer most.
It is also clear that there will be some fiscal displacement. Additional costs, which the Government are not going to cover, will be passed on to charities and local government, which have to cover the costs of emergency housing and of supporting people, particularly where children are involved. Basically, there will not be an absolute saving to the public purse because those costs will be passed on to other bodies and agencies, particularly hard-stretched local authorities.
In conclusion, your Lordships’ House can send a strong signal to the Government tonight that it expects this waiting-period policy to be changed because it will force people to use food banks, because it will push people towards payday lenders and because it will put people into rent arrears and into a cycle of debt. I beg to move.
My Lords, I thank the noble Lord, Lord German, for moving his Motion and for explaining to the House the effects of this measure. I will not detain the House by repeating that explanation. I also understand his desire to mitigate some of the effects of these provisions by seeking to exclude the housing element of universal credit from the regulations, but I think that there is a better way to approach this so I have taken a different direction in my Motion and I will explain why I think the House should agree. I am also being ever-optimistic, hoping that the noble Lord, Lord Freud, will find this a more persuasive case and that by the end he will rise up and cheer in agreement and obviate the need for a vote at all. I shall do my best.
The starting point for Labour is that we support universal credit. We think it is a good idea. Bringing together separate working-age benefits can potentially make the system simpler and should make it easier to work out whether and by how much you would be better off in work. But because we support it, we want it to work, and we understand that to work it needs to get off to the best possible start. Sadly, that has not happened.
When the Welfare Reform Act was going through Parliament, noble Lords from across the House, from all Benches, pointed out to the Government at different stages some of the risks inherent in the approach they were taking and made various suggestions for how the Bill could be improved. Sadly—as we all think—had these been listened to, we might not be in the position we are in now; none the less, things are not looking brilliant. Unfortunately, once the legislation was in, things did not improve. Delivery has been disastrous from the outset, starting with an implementation plan which the Opposition pointed out to Ministers right at the beginning was hopelessly overoptimistic.
The July 2010 Green Paper on universal credit even included the claim that the IT changes necessary to deliver it,
“would not constitute a major IT project”.
In retrospect, the naivety of Ministers in signing off the plan is extraordinary. Since 2011, £130 million of taxpayers’ money has been written off because of failed universal credit IT. The Government still have not published any of the details of how they are going to spend this £12.8 billion budget, having repeatedly claimed that universal credit was on time and on budget when patently it was neither.
What of the impact on claimants? In November 2011, Ministers announced that 1 million people would be claiming universal credit by April 2014 and the project would be fully rolled out to 7 million people within six years, by 2017. But now there are only 65,380 people claiming universal credit and full rollout is still some way off. It is in this context that these regulations have been laid.
The noble Lord, Lord German, cited the damning report from the Government’s Social Security Advisory Committee, as well as the concerns expressed by our own Secondary Legislation Scrutiny Committee. As he explained, the provisions will extend the waiting time to seven days. They are already in place for jobseeker’s allowance and employment and support allowance but those are normally paid fortnightly and, as the noble Lord, Lord German, explained, the universal credit system is paid monthly and people could find themselves waiting six weeks for money, and at that point getting an amount of money equivalent to only a month minus seven days’ allowance.
When the Social Security Advisory Committee looked at the regulations and recommended, unusually, that they should not be made, the Government’s only response was that they did not accept the SSAC’s recommendation because the risks were outweighed by the benefits that could accrue from reinvesting the savings in measures to help claimants get into work. When the scrutiny committee pressed them on this and said in that case could they explain how they were going to spend this money, all the Government would say was that during 2015-16 they would commit only to spend the money in this way but they would not give any plans for subsequent years or any detail about how the money might be spent. Since that appeared to be the Government’s only defence to the SSAC’s report, it is, frankly, unreasonable for them not to have offered more information when asked to do so by the scrutiny committee.
Can the Minister give the House the kind of detailed breakdown of costs and savings that he was specifically asked for by the scrutiny committee—repeatedly—and which he simply failed to give? The change is described as a “save to spend” measure, which will save £150 million a year once universal credit has been rolled out. The savings will fund measures to get people off benefit and into work. Those savings are predicated on the full rollout to 7 million people. We have 65,000 people so £150 million does not seem a reasonable assumption for the savings at the moment. Will the Minister please tell us? If the figure is proportionate, the back of my envelope suggests that it would cost £1.4 million. I presume it is not proportionate but I invite the Minister therefore to give us an up-to-date estimate of savings in this and the next financial year. The scrutiny committee asked for this but he simply failed to do it.
The only other bit of financial information I could glean was in the Budget costings, which said that the Government would have to spend an extra £5 million if the start of these regulations was delayed by a month. Is that a good way to extrapolate the cost and, if so, will the Minister explain it to us? As the noble Lord, Lord German, pointed out, the Social Security Advisory Committee said that the DWP should give claimants more information about how to get an advance. The Government said they would look at that in the digital process, where nothing is mentioned, so will the Minister tell us what is going on?
In summary, the critiques have suggested that when the regulations were published, there were problems with the impact on claimants waiting six weeks. They have also pointed to the lack of information about the number of people affected, the costs rolled out and the savings that are to be made, as well as the lack of detail to back up the Government’s claim that they were going to reinvest savings—there is no information on whether they are going to be reinvested every year, spent on something new or used to offset the existing already-planned activity.
That would have been bad enough but the picture has got worse since then. The Government were also criticised for not producing an impact assessment. Even if they had done so, in the past week it would have become completely out of date because the Budget contained a whole raft of measures that will have a significant impact on universal credit. These include: freezing the main rate of universal credit and the limited capability for work element for four years; reducing the benefit cap; removing the family element and restricting the child element in universal credit; extending conditionality rules in universal credit to parents of three and four year-olds; reducing the work allowances in universal credit; and ending the automatic entitlement for out-of-work young people.
Cumulatively, those measures could have a significant impact. Will the Government tell us what that impact will be? For example, will the Minister tell us if the total caseload on universal credit is likely to change? Will he tell us what the impact will be on the average entitlement to individuals? Will he tell us if work incentives or gains to work will change? It is hard to imagine they will not, given that the amount you are allowed to earn before you lose your universal credit is coming down; and the taper means that that money is going to be taken away from you much more quickly. What change is that going to make? If we do not have that information, we are being asked to fly without radar.
Universal credit is only an infant. It is barely crawling. It will be March or April before it is even rolled out to all single unemployed claimants, never mind families with children and all the complex cases that will come thereafter. Once families are included, the size of awards will rise significantly, as well as the number of claims being processed. The Government will also have to invent and deliver a mechanism for getting free school meals to claimants since they are currently attached to benefits that are being abolished. The same applies to all the other passported benefits that are similarly attached. What happens if, as universal credit scales up from 65,000 people to 7 million people, the IT system slows down and benefits are delayed for even longer than the six weeks referred to by the noble Lord, Lord German? What happens then to the system of delaying payments?
In other words, we simply do not yet know if universal credit is going to work and what the full range of implications will be so I urge the Minister to think very hard before pressing ahead with the regulations. At a time of such uncertainty and such pressure on his beloved universal credit, is this really the time to step ahead with these measures? Would it not be more responsible to wait until universal credit has been rolled out, has been seen to work and is working properly? The Minister could then come to Parliament and show us it was working and at that point we would be in a position to understand the consequences.
I return to where I started: we in Labour back the idea of universal credit. We want it to work but it has had a very shaky start, it is still deeply unstable and its future has suddenly been thrown into severe doubt and confusion by the Chancellor in his summer Budget. Why put yet another burden on it at this difficult time? I urge the Minister to think again. Millions of people will eventually depend on universal credit. They need it to work so that they can work and live and pay their rent and feed their children. For their sake, the Minister should step back from this measure today.
My Lords, this debate perhaps illustrates why the way in which the House scrutinises important, not to say controversial, statutory instruments is not satisfactory and is rising to the top of the procedural agenda. I know that there is a move afoot for a delaying power; in fact, we now have the Motion of the noble Baroness, Lady Sherlock. I have also put forward what I believe is a better way of debating controversial SIs, with advisory amendments being suggested. But for the moment these two types of Motion, moved by my noble friend Lord German and the noble Baroness, Lady Sherlock, are the best that we can do without killing the regulations. However, I should make it clear that I see no merit in the Government’s proposals at all. It is tempting simply to recommend that the regulations be annulled. The suggestion in my noble friend Lord German’s Motion for removing the housing benefit element from UC waiting days, from the Government’s very own advisory committee, is the very least that the Government should do. However, I will support the Motion of the noble Baroness, Lady Sherlock, as the second-best option after that.
The purpose of the Social Security Advisory Committee is to advise the Government on secondary legislation and to issue occasional reports in this area. Its report on these regulations details what it calls “compelling evidence” as to why they should not proceed, received in response to its consultation. The Government’s reasoning is that the new arrangements refer only to new claims for universal credit made after 3 August this year and do not apply to certain vulnerable groups or those migrating to UC from existing benefits. They therefore believe that those who qualify for UC by a means test are likely to have savings to fall back on because they will be,
“coming from the world of employment”.
In any case, they then say rather vaguely,
“advances of benefit will be available to help those who are in financial need”.
This is a thoroughly misleading sentence which turns out not to be entirely true, as I shall demonstrate.
We are told that the principle behind the waiting days policy in UC is,
“not designed to provide cover for moving between jobs or brief spells of unemployment”,
although this somewhat sniffy comment does not take account of the fact that universal credit, like PIP, is an in-work as well as an out-of-work benefit. I have been very fair to the Minister by spelling out the Government’s rationale for the policy. So why is the policy being questioned by not just the SSAC but our very own Secondary Legislation Scrutiny Committee? I prefer to call that committee by its old name, the Merits Committee, because the clue as to what it does is in the name. I am very pleased that the chairman of the committee, who has been writing letters to the Minister, is here.
The committee has been like a terrier with a bone. First, it points out that, as the noble Baroness, Lady Sherlock, said, no impact assessment giving costs and savings has been provided, so there is insufficient information to gain a clear understanding of what is going on. I take the noble Baroness’s point that the impact assessment would in any case probably be out of date but that is no excuse for the Government not having done it. The equality assessment is not a substitute for a properly done impact assessment. There is a glaringly obvious example of why an impact assessment is vital. The Government maintain that benefit advances are available for those in financial need, as I said just now. But the SSAC report tells us that the Government admit that advances will not be available to everyone, especially not to those who will not be able to afford the repayment. So what will these people do when they are left with no money for six weeks while almost certainly having debts, being in danger of being thrown out of their accommodation for non-payment of rent and with no food?
No wonder the Government have not done an impact assessment. If they had done one properly, they would have had to admit that there will indeed be extra burdens on landlords, local authorities—particularly if they have to give out loans—housing charities and food banks, and quite possibly the police and health services. But, I hear the Minister saying, “These are people from the world of work, surely not those at the bottom of the pile. They must have some savings, mustn’t they?”. But the evidence provided to the SSAC does not back this up. As my noble friend Lord German said, research by HSBC showed that 34% of the UK population have less than £250 in savings and do not have the means to cover a week’s rent and living costs if the breadwinner’s job were to end. Scottish Widows found that of those with no savings, two-thirds had debts. There are lots of similar comments. We also know what happened when there was a computer glitch at RBS recently: many of its wage-earning customers said that they could not manage to pay their outgoings, even for a very short time.
The SSAC report sums up the argument by saying that the question as to the balance between those with sufficient savings and those without has not been resolved in the supporting paperwork from the DWP. What the Government seem not to have understood is that what they call the “world of employment” might mean a very low-paid job in an expensive place such as London.
Turning to the crucial question of the housing benefit element of UC, the SSAC says:
“The fact that the Committee received so many submissions from landlords and their representatives is an indication of the degree of anxiety that has been generated in the housing market by this proposal”.
The Cornwall Residential Landlords Association is more forthright. It says:
“Many landlords have expressed concern about the payment of Universal Credit at the end of a calendar month leading to late payment of rents and other bills. Adding a further barrier to claimants being able to meet their financial obligations is likely to result in an increase in the number of landlords no longer willing to accept these people as tenants”,
as my noble friend Lord German said. It added:
“The increased risk of homelessness will add to the costs of policing and health services”.
The Notting Hill Housing Trust also makes the point that having rent arrears has the potential to inhibit the free movement of labour, thus hobbling those who are looking for work in as wide an area as possible.
Turning back to the absent impact assessment which should have provided costs and savings, the Minister’s letter to the chairman of our secondary legislation committee gives us more information. It says that the anticipated savings will all be spent in giving additional support for claimants in Jobcentre Plus offices but we have heard before of all the support that claimants are now supposed to be getting from JCP offices. As for the impact assessment not having been done, the reason is given that the legislation does not directly impose obligations on public or private bodies. In other words, it is almost admitted that parts of impact assessments are tick-box exercises, often not worth the paper they are written on. That is something those of us interested in statutory instruments know all about.
However, I am concerned not just with process but with the end result. I fear that the result of the Government proceeding with this arrangement will be real hardship for many of those affected. The Government do not seem to acknowledge that many UC claimants will have been trying to find work before they apply, which makes this proposal particularly harsh. I urge the Government to withdraw the regulations—and if not, to take the housing benefit element out before pressing ahead.
My Lords, I support my noble friend Lady Sherlock’s Motion. However, I am sorry that the noble Lord, Lord Kirkwood of Kirkhope, was not able to go ahead with his original fatal Motion, not least because when we debated the earlier waiting days regulations on 19 November, I promised that I would see him on the barricades were he to do so. I, too, oppose these regulations. I will inevitably be repeating some of the arguments already put so ably, but I hope to provide reinforcements in doing so.
I accept that the universal credit regulations will affect fewer people than did those for JSA/ESA, because of how universal credit operates. However, as we have heard, those who are affected stand to be hit harder because of monthly payments and because the universal credit payment includes more elements—in particular housing, to which the Motion of the noble Lord, Lord German, which I also support, relates. The payment also includes childcare costs and children’s allowances.
As the Child Poverty Action Group—I declare an interest as its honorary president—points out in its evidence to SSAC, this means that those with high housing costs and/or with children will be particularly adversely affected. In addition, SSAC points out that carers and lone parents of children aged under three, who do not have to serve waiting days on income support, will have to do so on universal credit.
In its response to SSAC, the department disputed SSAC’s point that the increase in the number of waiting days will decrease the initial amount of universal credit paid. But in our last debate, the Minister stated clearly that waiting days are “days of non-entitlement”. Moreover, if there is no effect on the amount paid, where do the savings of £200 million—or £150 million—come from? Both figures were given to SSAC by the department, as the Secondary Legislation Scrutiny Committee pointed out, noting that such a discrepancy is not good enough. My noble friend has already asked about this, and perhaps the Minister will clarify what the exact savings are. If there are savings, someone is losing out. Perhaps I am being dense here, but it seems to me that this £200 million, or £150 million, will be taken out of the pockets of claimants at a time of particular vulnerability and also out of local economies, given that this money is likely to be spent as soon as it is received.
SSAC and those who gave evidence to it questioned the department’s argument that it is reasonable always to expect people to use their last earnings to tide them over, particularly given the nature of today’s labour market. The impact assessment for the last set of regulations showed that those on lower earnings are more likely to have been paid weekly rather than through the monthly wages on which the whole universal credit policy is premised. It also shows that only 36% of affected JSA claimants had savings of £100 or more to tide them over. The majority had less than £100 and, in the DWP’s own words,
“could be deemed to be less resilient in a vulnerable time just after losing work”.
But that potential vulnerability does not seem to concern the department. I also asked the Minister during our earlier debate whether the DWP had any information on the numbers leaving work in debt or arrears. He did not, and I wonder whether any effort has been made to find out that information subsequently, given its relevance to the matter in hand.
Of course, the official line is that short-term benefit advances are available. But CPAG noted that its research with Tower Hamlets Foodbank identified problems for claimants accessing them. I know that, in response to the Feeding Britain inquiry, the department is supposed to be addressing these problems. Can the Minister answer the question posed by the inquiry in its follow up report:
“What progress has the Government made in improving awareness and, as importantly, take-up of Short Term Benefit Advance payments to bridge the gap between a claim being made and a first payment being received”?
Welcome as any such progress might be—I hope we will hear that there has been progress—as CPAG points out, this new waiting day policy is putting the short-term benefit advance to a different use than originally envisaged. Its report says that,
“rather than ameliorating a delay, it will be used to substitute for entitlement”,
and that, as such,
“it will be a loan, to be repaid in full”.
As a result, it says:
“This proposed solution will simply spread the financial loss to families over a longer period of time”.
Moreover, the Secondary Legislation Scrutiny Committee highlights a nasty little Catch-22, which the noble Baroness, Lady Thomas, has already pointed to:
“Advances will not be paid to those … who will not be able to afford the repayment”.
As the committee observes:
“The DWP does not explain how someone in this … category is expected to manage”.
Perhaps the Minister could do so now.
SSAC also noted that part of the rationale for the policy, as first outlined by the Chancellor of the Exchequer, was that people should spend the first few days out of work looking for a job rather than signing on. However, the committee warns, on the basis of the evidence it received, that,
“a family that has little or no resources with which to manage during a period of up to six weeks, exacerbated by the waiting day rule, will inevitably focus on survival rather than looking for work”.
The committee also points out that the family could then risk sanctioning. This really could be a counterproductive policy, as Crisis underlines in its briefing.
SSAC was very concerned about the likely impact on health. As we have already heard, no impact assessment has been provided, on the bizarre grounds that,
“there is no impact on business or civil society organisations”.
Try telling that to the landlords and food banks—that is not how they see it. As the Secondary Legislation Scrutiny Committee notes,
“chapters 4 and 5 of the SSAC report … set out clearly the extra burdens anticipated”.
For all these reasons, as we have heard, SSAC was unequivocal in its rejection of the regulations,
“based on the persuasive and compelling evidence presented to us”.
It praised that evidence for its richness and praised the efforts made by respondents to consult more widely. The Secondary Legislation Scrutiny Committee branded the woolly reasoning given by the department for not accepting SSAC’s recommendation as “unsatisfactory” and suggested the House might wish to press the Minister for more information as to why it did not accept the recommendations.
Will the Minister also tell your Lordships’ House how many times SSAC has rejected draft regulations outright? I may be wrong but I do not think it is very common, and it is particularly telling that it is a committee largely appointed by the current regime at the DWP that has done so. I congratulate SSAC on taking this stand and thank it and all who gave evidence to it. Given that we are unable to reject the regulations tonight, I very much hope that your Lordships’ House will support my noble friend’s Motion so that, rather than the department steaming ahead in the face of the compelling arguments put by SSAC that the regulations should be rejected, the policy can be reviewed in the light of experience after the completion of the rollout of universal credit.
My Lords, I and others from these Benches have welcomed the principle of universal credit, and I readily do so again. However, the best of policies and principles have practical consequences which make all the difference to the effectiveness of policy. In that constructive spirit, wishing universal credit to be successful in simplifying the complexity faced by benefit claimants and confirming the dignity of work at a decent rate of pay, I add some reservations to the extension of waiting time to seven days.
Delay in receiving first benefit payments has been an issue for many years. Inevitably, and sadly, there can be administrative delays. I am not aware that any assurance has been given that universal credit processes would prevent such delays; indeed, I doubt that any such reassurance could be given. Process, technology and human error are realities. Compounding these with longer statutory waiting times will exacerbate the problem. We should be reticent about further lengthening that wait, at least until delays consequent on the new universal credit process and procedures are ironed out. It would be rash, given our general experience, not to expect some continuing transitional challenges. There are some worrying instances and worrying delays. That is not to attribute blame—rather, it is to remind ourselves of the importance of extensive and ongoing training for those involved in assessing applications and advising on helplines. I hope the Minister might confirm ongoing commitment to this.
Some caution about extending waiting times is therefore appropriate. Furthermore, whereas, as we have heard, jobseeker’s allowance provided for a waiting time of a fortnight, universal credit has a month before first payment is reached. Carers and lone parents have not previously faced a waiting time rule at all. Not all those affected will benefit from redundancy payments or have the cushion of savings. Though some will, a compassionate and just system provides for the worst cases and for those most vulnerable. A job search, which we would wish to encourage, costs money.
The welcome advantage that universal credit encompasses a number of previously independent benefits, which in almost every way is a huge step forward, is in this instance, perversely, a disadvantage. The consolidated nature of universal credit being awaited by a claimant means that the payment being delayed is likely to be a very significant part of income.
As I understand it, the intention of the noble Lord, Lord German, and the noble Baroness, Lady Sherlock, is to moderate the impact of these proposed changes—to moderate risk. On balance, I have some anxiety that the first amendment risks complicating universal credit arrangements by excluding housing benefit from the regulations. It seems to go a bit against the grain of simplifying the benefit system. The second amendment, delaying enactment, gives some time to assess the impact of moving to monthly payments and any protection needed for vulnerable groups, for instance. I hope that the Minister can consider agreeing to a delay to allow for some learning in transition to what I trust will be a significant step forward in supporting those in need through universal credit into work at a decent living wage.
My Lords, I shall make a brief intervention in these two important debates. I congratulate my noble friend and the noble Baroness, Lady Sherlock, on securing the time. I should perhaps say at the outset—and the noble Baroness, Lady Lister, rightly adverted to the fact—that I had a failure of nerve earlier last week and withdrew my prayer to annul. I did so because I think the Treasury is requiring the department to take the introduction of this fundamental flagship policy right to the edge of proper implementation. The Minister told the House last week that the department has already been required to make significant savings. Some £2.4 billion was the anticipated spend, but that has now been reduced to £1.8 billion. The Minister may be able to persuade me otherwise on the rollout of the digital element of the service, and I would like to hear him on that subject but, if not, I am really worried that we are cutting this so thin that we may lose the core benefit of universal credit. I agree with the noble Baroness, Lady Sherlock: everybody in this House, or certainly anyone who served in the Welfare Reform Bill Committee in 2012, is committed to the principle of a single working-age benefit that is blind to work. But if the Treasury is not careful, the house of cards will collapse. So if I had succeeded in a fatal Motion and the Minister had been sent back to the Treasury with his tail between his legs, it may have said, “It’s all too much—we’re just going to let you swing in the wind”.
I know that it is not the Minister’s fault at all, but the idea that this is a save-to-spend initiative is a complete nonsense, as far as I am concerned, and I just do not believe it. It is a departmental expenditure limit that will carry these savings and, as the noble Baroness, Lady Lister, said, the claimants will carry the can, on top of everything else. We are talking about £200 million or £150 million—we do not know—but we really are in danger of putting people at risk.
Another thing that irks me is the fact that we are now beginning to confuse means-tested safety nets with income replacement benefits. Means-tested safety nets should apply in any circumstances; they are the point of last resort. I do not believe that the local government establishment, although it tries hard with reduced budgets, can pick up all of the downstream damage that will be done to low-income households that will struggle to stay alive. Therefore, we have to get behind the department to get the Treasury to recognise a bit more what is at stake here. That is one of the purposes that I hope the debate this evening will serve.
I am very pleased to see the noble Lord, Lord Trefgarne, here, because I want to say to him that, despite the fact that, as has been mentioned, there are rising concerns about the procedures available to us in this House to deal with some of these policy issues, the work that his Secondary Legislation Scrutiny Committee does is exemplary. Even those of us who have been studying this issue for a long while require his help in getting information out of the department. He succeeds in doing that, and the professionals who work for his committee, and the membership of his committee, deserve great credit for doing that. It is boring work, but it is absolutely essential to give confidence to policy-makers on the floor in debates like this that they understand all the issues properly. That is true of Mr Paul Gray and the Social Security Advisory Committee, too; it has always done great work, and I pay both those organisations a great tribute.
I am struggling to understand whether we can get some key performance indicators into the operation of this policy. At the moment, the universal credit payment would normally be paid directly into a claimant’s account within seven days of the last day of the monthly assessment period or as soon as is practically possible. After 3 August, there will be a seven-day waiting period. I am worried about,
“as soon as reasonably practicable thereafter”,
which is a term of art. If these regulations go though, is there some way of monitoring the degree of lateness, if I can put it that way, and whether the six-week, or perhaps even more than six-week, period is observed in practice?
We had this debate about jobseeker’s allowance and employment and support allowance a year ago, and we previewed all these issues. That was a saving of £15 million. It is presumably too early to get any useful feedback from the implementation of that policy, but I would very interested to learn whether, with the new agile computing systems we have, we could pinpoint whether the period that people will be faced with after 3 August is six weeks, six and a half weeks or seven weeks. Over the distance, the House is entitled to ask questions of that kind, as further and better particulars would influence our future consideration of this issue.
We know—the Minister confirms it and he is right—that test and learn is a part of the 2012 legislation framework. I hope that, if these regulations are implemented, we will try to test how we can mitigate some of the effects of these extra waiting days. They will be bound to increase the hardship experienced by people who are subject to the new universal credit regulations. I think the House will want to return to this in future. If the Minister is serious about trying to defend his policy and make it work sensibly, the generality of the people who are claiming will find universal credit much easier to use, but waiting days, particularly on top of digital by default, are going to mean that we could damage the proper, sensible rollout of this policy if we do not pay attention to the bottom 15% of the household distribution who will need help the most. If we do not get that right, the House will be failing households in this country who will suffer in future as a result of these changes.
My Lords, while the noble Lord, Lord German, and the noble Baroness, Lady Sherlock, raise important points for consideration, I have to disagree with them both and speak against these Motions. In fact, I would go further and say that in the light of the £12 billion taken out of welfare in last week’s Budget, I am surprised that they are asking the Government to find yet more savings in other places. This is the implication of these Motions.
The waiting days measure, which is consistent with the wider landscape of welfare in this country, is projected to save around £150 million per annum, although there may be some debate on that. Indeed it is a save-to-spend measure, and so removing the housing element and delaying implementation will sharply decrease the amount of funding available for a number of programmes to get people off benefits and into work. I think noble Lords would all agree that we need to make the best possible use of taxpayers’ money and focus spend here. So I am concerned that, in particular, the proposed Motions will curtail the amount of help the Government can continue to give the long-term unemployed, such as quarterly work search interviews for all claimants and voluntary programmes available to lone parents with children aged three to four years old to help them become work ready.
I have been reading the Government’s response to the Social Security Advisory Committee and note that the SSAC’s recommendation to take housing benefit out of the waiting days regime would cut savings by around a half to two-thirds, costing £70 million to £100 million, as well as increasing the complexity of the universal credit payment from the point of view both of IT and the user. The onus is therefore on those tabling these Motions to say where they would cut the £70 million to £100 million to enable these important initiatives that started last year to continue.
Looking first at the concept of waiting days before entitlement to employment-related support, noble Lords will be aware that waiting days have been a long-standing feature of the benefit system and already exist in other working-age benefits, such as jobseeker’s allowance and employment and support allowance. In addition, it must be recognised that many people who make a new claim for universal credit will have come from a previous job and will therefore have final earnings or other income to support themselves until their first benefit payment.
Again, taking this approach to universal credit is consistent with the wider benefit system, which is not designed to cover very short periods of unemployment or sickness. Waiting days are also more consistent with the world of work, where very short breaks between jobs are unpaid as no employer is receiving the benefit of any work. This Government’s determination to ensure as far as possible that welfare mimics the world of work is the right approach.
It is my understanding that the safety net for vulnerable people is not being dismantled and that a number of groups are exempt from this change, including people who are terminally ill, victims of domestic abuse, care leavers, 16 to 17 year-olds without parental support, and prison leavers. Also, those who are in work and receiving universal credit who lose their job will not be subject to waiting days as they are already in the system.
I was pleased to read about a range of other targeted exemptions, which seem to be a better use of scarce public funds than treating all people as equally in need. I am, however, concerned about those who are long-term unemployed and have no savings or incoming final payment, and this is where it is vital that claimants receive timely and effective personal budgeting support as well as, if necessary, cash support in the form of a universal credit advance. Again, I would say that this Government are right to take a more finely grained approach and help those who particularly need support in the very short term, instead of assuming that everyone is in the same position.
I turn to the other elements of universal credit not tied to employment support, especially the housing benefit element that is the concern of the Motion of the noble Lord, Lord German. My understanding is that as universal credit is simplifying the welfare system, not least to make work pay, it would run counter to that goal to treat the housing element separately. I think that this was said earlier, but paying universal credit as a single monthly sum to households aims to help to prepare claimants for the world of work or to keep them in that mindset when they drop out of the labour market.
Quite rightly there is an expectation placed on households to manage their own budgets. Obviously housing costs do not cease when someone finds themselves having to move on to universal credit, but neither do they cease when someone is between jobs. However, I was relieved to find out that protections are in place for tenants who fall into arrears and alternative payment arrangements are available. In other words, it is not a sink-or-swim situation but we are encouraging the norm that very many of those who are in work try to live by, which is saving something for a rainy day.
In summary I support the Government’s position on waiting days, on the grounds that when there is such a tight financial settlement it is imperative that the welfare system is simple but concentrated on those who need it most. However, I echo the Social Security Advisory Committee’s plea, which we have just heard, that this change be subjected to the test-and-learn approach that was a hallmark of welfare reform under the coalition Government. It is essential that we can irrefutably say that the exemptions and other fine print of the waiting days measure are delivered as promised.
Before considering the individual arguments, I think it would be useful to understand to whom exactly waiting days actually apply. It is not the most vulnerable: care leavers, the terminally ill, victims of domestic violence, youngsters without parental support and prison leavers have all been exempted. It is not those coming from other benefits such as jobseeker’s allowance or employment and support allowance. We have to remember that because universal credit is a benefit for low-income people in work as well as a safety net, many people in low-income and unstable employment will remain on universal credit as they move in and out of work. Hence, the very people for whom much of the concern has been expressed today will not be affected.
Noble Lords, and indeed the Social Security Advisory Committee’s consultation, highlighted a series of examples of cases that might be affected. These included the effect on a single mother reducing her hours to care for her sick child; the effect on those who have not been able to build up a cushion for a rainy day because they have been in low-paid work, on zero-hour contracts or in in-work poverty; the reluctance of claimants to take short-term employment as they fear they may have to serve waiting days again when the job finishes; the concern of landlords that their tenants might not be able to pay their rent because they lose a week’s housing and the disproportionate effect that that will have in London; and the fear that low-income people may borrow from payday lenders and loan sharks to keep afloat, a point made by the noble Lord—I find it hard not to call him my noble friend—Lord German.
I understand why these examples cause concern. They would cause me concern, too, if I was not confident that in such cases waiting days would not affect the most vulnerable. The single mother, the low paid, and zero-hours contract workers will most likely already be on universal credit while in work if their income is low. If on universal credit, they will not serve waiting days. Even if a person on a zero-hours or a short-term contract comes off universal credit, they will be exempted if they reclaim within six months. People moving from other legacy benefits are also exempted.
The policy is focused on those who come to universal credit from relatively higher-income employment, who in general go back to work quickly. Around a third of people who come on to jobseeker’s allowance end their claim within a month and around two-thirds do so within three months, in most cases because they have found a new job. By six months, over 80% have ended their claim for jobseeker’s allowance. Without waiting days, some people may get a very small amount of universal credit, which they may not need, given that they have new work.
The Secondary Legislation Scrutiny Committee’s third report of the Session—the merits committee, as the noble Baroness, Lady Thomas, continues to call it—picks up on the Social Security Advisory Committee’s report and the Government’s response, or several responses. In addition to the housing element, which I will pick up on in a moment, the committee asks about access to advances for claimants with new claims to universal credit. I assure the House that most claimants in financial need will be able to claim a universal credit advance. It is possible that there could be a very small number of new claims where insufficient universal credit is payable due to a sanction or fraud penalty—a point raised by the noble Baronesses, Lady Thomas and Lady Lister. However, claimants in these circumstances can apply for a recoverable hardship payment or can approach their local authority, which can provide assistance.
The committee, as well as the noble Baroness, Lady Thomas, also criticised the fact that no impact assessment was published alongside the Explanatory Memorandum and the equality analysis. As noble Lords will be aware, an impact assessment is not required where the legislation does not directly impose any regulatory, administrative or other obligations on any public or private bodies. Measures are in place to provide support through advances of benefit to those claimants who are in financial need.
The noble Lord, Lord German, gave a considered examination of the issues that relate to housing support during the period of waiting days. At present housing benefit is paid from the Monday after the claim, so housing benefit claimants already have to wait for up to a week for their award to begin. I think I can speak for the whole House when I say that we all agree that the old system of multiple and sometimes overlapping benefits was confusing and could have perverse incentives and disincentives. Because it is a unified benefit available in and out of work, universal credit removes disincentives to work and simplifies the system. To exclude the housing element from the waiting days would add administrative complexity, go against the policy of simplifying income-related benefits, and make the payments confusing to claimants. That point was made by the right reverend Prelate the Bishop of Portsmouth and my noble friend Lord Farmer.
The Social Security Advisory Committee and stakeholders expressed a great deal of concern about this. Again, however, we must recognise that the most vulnerable are protected either by exemptions or because they will already be claiming universal credit while in work. Thus, for them, there will no period of non-entitlement. For other people who do not have the resources to cushion themselves during what, for many, will be a short period before finding work, universal credit advances can be applied for.
I turn to the Motion in the name of the noble Baroness, Lady Sherlock, to delay the enactment of waiting days until after universal credit has been fully rolled out. There is no operational or policy reason for doing this. The systems are in place to implement waiting days in universal credit without any detriment to the more general rollout. Let us remind ourselves that the unified approach of universal credit as a benefit available to those both in and out of work means that people on the lowest incomes will not serve waiting days when their circumstances change. This is very different from legacy systems, where a change of circumstances can mean a new claim for benefit.
The noble Baroness, Lady Sherlock, poured a little bit of cold water on our rollout of universal credit, much to my disappointment. The current expectation is that we will have completed the full rollout of universal credit by 2019. Waiting until full rollout takes place will mean a long period where people on the older legacy benefits such as ESA and JSA are subject to waiting days, while those on universal credit are not. That would clearly create an imbalance in the system during the transitional period.
I have been listening to the debate very closely and I wonder whether the Minister can clarify something for the House. He will be aware that Clause 25 of the Scotland Bill concerns,
“persons to whom, and time when”,
universal credit will be paid. It will be a concurrent power lying with the Secretary of State and Scottish Ministers. How can the noble Lord make with so firm a view the statements about the operational aspects all being in place, when they are not necessarily in place in Scotland? Agreement will still have to be reached with Scottish Ministers about how this will operate. The figures that the noble Lord is giving and the assumptions he is making cannot necessarily be correct when the passporting of one system to another within Scotland is not resolved. Therefore, would it not be better to delay these regulations until these aspects, which could affect many people in Scotland, are clarified between two potential Ministers?
I know that the noble Lord is aware that the Scotland Bill is going through another place, but is he aware that Clause 25, which is headed “Universal credit: persons to whom, and time when, paid”, says:
“A function of making regulations to which this section applies so far as it is exercisable by the Secretary of State in or as regards Scotland, is exercisable by the Scottish Ministers concurrently with the Secretary of State”?
That is still the Government’s position in the Government’s Bill, is it not?
I have expressed the exact agreement under the Smith commission and, as I understand it, as it appears in the Bill to which the noble Lord has referred.
I turn to the question about the savings raised by the noble Baronesses, Lady Sherlock and Lady Lister. In steady state the savings are currently estimated at £130 million to £140 million. In the current year— 2015-16—the figure is £30 million. I think that we can congratulate the noble Baroness, Lady Sherlock, on finding the formula relating to the £5 million difference. The figure goes up pretty rapidly to the steady-state figure over the next three years, so it reaches it by 2017-18.
The expenditure with the savings is committed for 2015-16, and I cannot pre-empt the spending review in the autumn. We discussed the things that that would be spent on.
I am trying not to bore the House by telling it things that it might find unnecessary. I can assure the noble Baroness, Lady Lister, that telephone calls are available to arrange meetings. For the most vulnerable, we will explain the availability of universal credit advances either on the phone or face to face if not digitally.
The noble Lord, Lord Kirkwood, and the right reverend Prelate the Bishop of Portsmouth asked: how will we ensure that people are supported in their work search? We have more than 26,000 staff now trained to provide job coaching, so we are rolling that out in scale.
Let me just wind up. I appreciate that noble Lords genuinely support universal credit. That sentiment has been expressed widely, particularly by the noble Lord, Lord Kirkwood, and the noble Baroness, Lady Sherlock. I understand that. It is a slightly odd debate in that way, because noble Lords are trying to reinforce universal credit. I absolutely understand and appreciate that.
It is a savings measure. It releases £130 million to £140 million in steady state. The blunt reality is that, in the present environment, if we did not find money here, we would have to find it somewhere else. The noble Lord, Lord Kirkwood, has an instinct about how these things happen to which I am very sensitive.
Last week, the Chancellor of the Exchequer set out a vision of a higher-wage, lower-tax, lower-welfare society. As a first step towards this, he pledged to raise the personal allowance to £12,500 by the end of this Parliament, with an £11,000 down payment in the next tax year. Coupled with the living wage, which he announced, it gives people the chance to make decisions about their own money. It is still absolutely right, as noble Lords have said, that universal credit continues to operate as a real safety net for the most vulnerable and offers real support to those wanting to work and support themselves.
I commit to keeping a very close eye on this. I have been alerted to it tonight by noble Lords as something to watch. We are committed to a test and learn strategy. We will be rolling this out from August. I will come back to your Lordships as soon as I have a reasonable level of data to let you know whether that is happening and whether I am right in what I am telling you today: that this will not affect the people about whom noble Lords are so rightly concerned; but that I am right that it affects the people who are flowing through the system and we are just not paying them as much during that short period. I hope I am right on that, and I think that I am, but I will look at this very closely and come back to the House on its concerns about the vulnerable and tell noble Lords what is happening and what my level of confidence is on that when we have real evidence.
The Chancellor was able to reduce taxes for the lowest earners and put us in a position where we can live within our means by reducing spending on welfare and tax credits by £12 billion, which is an enormous amount of money. I know that we will discuss some of that in the months to come. However, that means that we have to make real choices about how we effectively protect the most vulnerable. I have looked very long and hard at this and decided that, in this context, this change is appropriate and strikes the right balance. I will report back on whether that is the right judgment. I hope that the House will accept that.
My Lords, first of all, I thank all Members who have spoken in the debate. I particularly thank the noble Lord, Lord Freud, for his contribution. Many people in your Lordships’ House will recognise that one thing he is very passionate about is the success of universal credit. We on these Benches also support universal credit and wish to see it happen.
The issue raised today is about the very short-term responses that government makes to people who have the worst problems and are in the worst condition. The key question that I wanted to see answered in this debate was how people will manage in that period when they are at their weakest and most vulnerable through illness and unemployment. I know that some people are exempt, but not all are, and considerably fewer people will be exempted than the Government expected. It is about those very short-term measures. This is not about the response to people who are unemployed over a longer term. This is about the period when they have either lost their job or become ill and require support in order to do two things: support their family and pay their rent. The fundamental issue behind the Motion is that, in that period, when choices are being made, people will choose to feed their family first and pay the electricity bill to keep the lights switched on. They will then not be able to pay their rent. That is the period for which the very harshest part of the regime has to be dealt with. It is the very simplest and smallest of measures that we are asking to be changed today in order to allow people to be able to manage at that most difficult time.
A number of noble Lords talked about universal credit in the longer term. Of course we are impatient on these Benches for its rollout to occur more quickly, but it has to be right. That is why it is the smallest of measures that we are asking to be changed today.
I say to my colleagues on the Labour Benches that there is nothing incompatible with removing the housing element from the waiting days and then having a review on postponing the measures for the introduction—both go hand in hand. This is the most difficult part of the whole waiting-days regime and housing benefit is the crucial part that people will avoid when they have to feed their families.
To those who have said that there is an alternative in the form of emergency payments—universal credit allowance payments—I must say that, last year, in answer to Parliamentary Questions, we were told that two-thirds of claimants who asked for emergency payments to help bridge that gap, in this very short period, were refused by Jobcentre Plus. Nearly 150,000 out of 221,824 applications were turned down. We know from the Trussell Trust and others that food banks are about short-term financial crisis. It is that short-term financial crisis which we should seek to avoid.
It is worth clarifying that on universal credit advances, which are an advance for people who feel they need this financial support, I am aware of hardly any turndowns. It is a very different process. It is important not to conflate the two types of financial support.
I say with the deepest respect to the Minister, who I know is an honourable man, that only a very small number of people—and they are not with families and children—have received universal credit. We have to take as an example the past year, where the same rules have applied about being able to afford to repay that advance on payment.
I come back to the fundamental point: how will those who are the most vulnerable manage? I am afraid that I have not yet been satisfied that we will do all we can, and I therefore believe it important to test the opinion of the House on this matter.