Universal Credit, Personal Independence Payment, Jobseeker’s Allowance and Employment and Support Allowance (Claims and Payments) Regulations 2013

Lord McKenzie of Luton Excerpts

Monday 21st October 2013 Lords Chamber

Moved by

[Lord McKenzie of Luton]

That this House is concerned that provisions in the Universal Credit, Personal Independence Payment, Jobseeker’s Allowance and Employment and Support Allowance (Claims and Payments) Regulations 2013 (SI 2013/380) to provide for the payment of universal credit awards on a monthly basis may result in budgeting pressures on low income families; and further regrets that universal credit awards being paid in respect of children or rent charges will not by default be paid to the main carer of the children or to the person liable for that charge, and expresses concerns that this may impact disproportionately on women and vulnerable members of society.

[Lord McKenzie of Luton (Lab)]

My Lords, the regulations before us this evening cover a range of matters, including the claims and payment arrangements and contributory ESA and JSA, as well as arrangements for claiming and payment of the personal independence payment. The thrust of this Motion is to focus on the awards and payment arrangements for universal credit. Of course, these regulations are only one set of a raft of regulations that we have considered concerning universal credit and other benefit changes. Some may be a distant memory in terms of the legislative process, but they are a looming reality for many. The context of all this has shifted dramatically since the start of the Summer Recess, when we were assured by the Minister that we could rest easy in our beds, that universal credit was on time and on budget and that everything was going swimmingly.

The Secretary of State told Parliament in March that universal credit,

“is proceeding exactly in accordance with plans”.—[Official Report, Commons, 5/3/2013; col. 827.]

However, the September NAO report uncovered the truth, describing how the Major Projects Authority raised concerns about the DWP having no detailed blueprint and transition plan for universal credit, which must therefore be reset. It recites that the Government will not introduce universal credit to all new out-of-work claimants nationally from October 2013, but will add a further six pathfinder sites this month. The NAO report emphasises that the pathfinder systems have limited function and do not allow claimants to change details of their circumstances online, as was originally intended. The department does not yet know the extent to which the new IT systems will support national rollout. In its October 2011 business case, the DWP expected the universal credit caseload to reach 1.1 million by April 2014; that reduced to 184,000 in the December 2012 business case. What is it now? Can the Minister tell us when the Government will set out a detailed plan for the full rollout of universal credit?

At a time when some of the poorest families in the land are being forced into debt by the bedroom tax and other measures, it is a scandal that the Government are writing off tens of billions of pounds of wasted expenditure because of their incompetent management of the universal credit programme. It is against this backdrop—where the department has delayed rolling out universal credit to claimants, has had weak control of the programme, is not achieving value for money, has been overoptimistic about timescales and has demonstrated lack of openness about progress—that we are obliged to return to some of the basic architecture of the scheme, to challenge whether it, too, has lacked the rigour of full analysis and, in particular, whether some of the protections against the worst impact of monthly payments are fit for purpose.

We cannot yet look to the April pathfinders for help as their scope is very narrow, covering where universal credit is applied to those who are single, are without children, are not claiming disability benefits, do not have caring responsibilities and are not entitled to housing support, but have a bank account and national insurance number. Clearly, these pathfinders will not tell us much about the impact of universal credit on low-income families and those who rent. The characteristics of those admitted to the further October pathfinders are not clear. Perhaps the Minister will tell us what those characteristics are and especially whether they will involve those who rent their homes. If not, at what point will universal credit be applied to those that do? So far as monthly payments are concerned, has the payments exception policy been applied yet to any recipient of universal credit under the pathfinders?

The substantive issues we raise tonight are not new—we raised them throughout our deliberations on the Welfare Reform Bill, and the Minister will doubtless hear from noble Lords with the same force and passion as was evident then. As our Motion sets out, our concerns are about the impact of monthly payments of universal credit on low-income families and about putting the clock back to the days where support for children did not go directly to the main carer and where the default position of rent support going directly to tenants increased the prospect of poor families losing their homes. We know that the justification for making monthly payments direct to claimants is that it will encourage personal budgetary responsibility and mirror the world of work. This is despite the fact that only half of those earning less than £10,000 a year are paid on a monthly basis. Life on benefits is not a comfortable existence for anyone who has tried it—and not just for a week here or there. There is the grinding awfulness of the poverty it brings, where there is simply no margin for error and where hanging on for the next payment date and juggling the cash to meet the next most pressing bill is the routine stuff of life. The temptation is to skip a payment here to meet a pressing payment there and risk becoming trapped in a cycle of debt.

How will monthly payments and assessments make things better? Research by the Social Market Foundation concludes that they will not, the Government’s exception policy notwithstanding. Although supporting the Government’s aim of encouraging greater personal responsibility and financial resilience, it concludes that changes to the payments and assessments system,

“could cause significant hardship for families on the lowest incomes”.

Its research outlined the budgeting methods that many households adopt to see them through, which inevitably involve debt of some sort, whether formal or informal. The households that it researched cited, in particular, the fact that more frequent payments served as a method to help them ration their income and restrain their spending. They feared that the larger payment might be spent too quickly, given the competing demands on their low income. On the exceptions policy, the Social Market Foundation expressed concern that a centralised system of identifying vulnerable claimants was an inefficient way of helping households and suggested an alternative of claimants being able to opt in to a budgeting portal. Have the Government given that any thought?

The Child Poverty Action Group focused on the “rough justice” that can ensue from monthly assessments where benefit claimants receive increased entitlements but which disadvantage claimants whose entitlement reduces. All of this is happening at a time when the discretionary social fund has been abolished along with crisis loans, community care grants and budgeting loans. They are to be replaced by payments on account or short-term advances and local welfare provision to be provided by local authorities. Short-term advances are much more restricted in scope than crisis loans and are only payable to benefit claimants in very tightly prescribed circumstances. As CPAG points out, that will not cover situations where a person has no, or insufficient, money to meet basic needs. Budgeting loans will continue to be payable to universal credit claimants, subject to strict criteria, on a discretionary basis with no right of appeal.

As for local provision, a recent Children’s Society report identified that money given to local authorities to replace community care grants and crisis loans is only a little over 50% of the equivalent spending at 2010 levels. Hard-pressed local authorities are in no position to make up any shortfall. Have any universal credit claimants under the current pathfinders been eligible for support for local welfare provision, short-term advances or budgeting loans, and what has been their experience?

We know that low-income families are poorly placed to cope with the current economic challenges. Some 10 million low-income households are in unsecured debt; three-quarters of those in the lowest income quartile have no cash savings. The cost of living squeeze is not only hitting the poorest, although it bears more heavily on them. Current levels of inflation will mean that universal claimants endure a real cut in their income at a time when energy bills are soaring and childcare costs are rising at almost 6% a year.

One thing is certain. For those who currently struggle to make their benefit receipt last until the end of the fortnight, the temptation to resort to payday lending will be enormous. For irresponsible payday lenders, the temptation to exploit an expanded market created by monthly payments will be irresistible, and with it the risk that continuous payment agreements will drain bank accounts as soon as benefit payments arrive. We applaud the work that the Minister is doing in encouraging the expansion of credit unions, but note that he is on record as seeking to restrict continuous payment agreements to accounts of benefit claimants until utility bills and rent have been accounted for. Could we have an update on that work? Will the Minister support the call that Ed Miliband has made for a special levy on these payday lenders, so that further moneys can be channelled into credit unions?

We raised the issue of the impact of universal credit payments on women, because time and time again it is women who are being hit hardest by this Government’s measures. It is women who are paying three times as much to get their deficit down, even though they still earn less than men. New mothers particularly are being hit, with House of Commons Library research showing that they will lose almost £3,000 during pregnancy and their baby’s first year.

My noble friend Lady Lister will say more about the wallet to purse issue, given her deep understanding of its history, and why the hard-won settlement should not be put in jeopardy. However, the Government have implicitly acknowledged the concerns we have raised about monthly payments, payments going to the main carer where children are involved, and payments going directly to landlords, because those have all been covered in their proposed alternative payment arrangements. As far as it goes, that is to be welcomed, but it raises a number of issues about how it will work in practice. The main concern is that this is a centralised system. Jobcentre Plus will decide whether an individual can have an APA and there is no right of appeal against an adverse decision. The key issue is whether Jobcentre Plus will have the capacity to make the determination a potential entitlement on a fair basis, given the range of circumstances that has to be taken into account.

Will the Minister indicate the expected number of claimants who will receive an alternative payment arrangement by, say, April 2014 and by full rollout? We have seen the first draft of the local support framework, which sets out the principles of the support that will be offered. However, what was planned as phase 2 of the universal credit rollout was supposed to provide the basis for the DWP and local authorities to start to plan these vital services. What is the plan now, given the revised universal credit rollout?

The Government have also launched demonstration projects to test how claimants can manage monthly payments of housing benefit. These are supposed to inform the final development and design of the exceptions policy. Will the Minister please update us on whether the projects will include any circumstances where monthly payments of rent are made under universal credit, rather than under the existing benefits regime?

We have supported the introduction of universal credit and will continue to do so, despite the project being seriously off-track. We have offered our support to help to restore confidence in the project. We have an unease about some of its components, especially combined monthly payments as the default position, and we will continue to press for the development of fair, comprehensive and practical exemption arrangements. We make no apology for promising to revisit these issues regularly and robustly. I beg to move.

--- Later in debate ---

[Lord McKenzie of Luton]

My Lords, I thank noble Lords who spoke in this debate. It has been a debate of some quality and detail. I also thank the Minister for his very detailed reply. Like my noble friend, I think it would be good to look at the record to see what, if anything, might be outstanding. We acknowledge that the Minister listens to the House and certainly responds to the House—for 28 minutes on this occasion.

We welcome the announcement about credit unions. That is good news. As the Minister will, I hope, have understood, we are on the same page as far as support for universal credit is concerned. We are all signed up to a single in and out of work payment. We welcome the fact that the Minister has accepted the Major Projects Authority’s recommendations. On that, and touching on a point made by the noble Lord, Lord Kirkwood, about helping us keep abreast of what is happening, there was a contrast between our perception about where universal credit was when we went on holiday and the rather rude awakening of the NAO report. I hope there is a way of smoothing that in future.

We have news about a further six pathfinders starting this month. The scope of the people involved in them is still a little unclear, as is whether it is still the fairly narrow category that we started with in April and, in particular, whether it excludes people who rent their accommodation. On the pathfinders—this again touches on one of the points made by the noble Lord, Lord Kirkwood—we do not want this to be rushed; we want it to be right. As I understand it, some of the early pathfinders are focused on helping subsequent policy development. That is why it is important that there is some co-ordination.

I thank the right reverend Prelate the Bishop of Ripon and Leeds for his support. We are on the same page in concerns about payday lenders. The right reverend Prelate did get an answer about the backdating of universal credit. Whether it is sufficient, he may wish to reflect. He made the telling point about the crucial role of mothers in the evaluation and understanding of how universal credit should work.