Tackling Financial Exclusion (Financial Exclusion Report)

Baroness Lister of Burtersett Excerpts

Monday 18th December 2017 Lords Chamber

[Baroness Lister of Burtersett (Lab)]

My Lords, as an “immigrant” contributor to the debate I congratulate the committee on its report and its recognition of the link between financial exclusion and poverty. Echoing a number of committee members, I will focus my remarks on issues raised by the chapter on so-called welfare reform, starting with universal credit. In opening the Budget Statement debate, the Minister acknowledged “genuine concerns” about UC’s “operational delivery”—but I am afraid that the problems with UC point to more fundamental design flaws that need to be solved if UC is to work for claimants, many of whom are likely to be among the sizeable minority considered by the FCA to have low financial resilience.

The abolition of the waiting days and introduction of a housing benefit run-on period is of course welcome, but it still leaves a five-week waiting period for the main UC, mitigated only partially by repayable advance payments. The version of the Budget speech circulated to the media stated that reducing the delay at the end of the first-month assessment period,

“would mean compromising the principle of payments … made on the same day of the month … which is very important for claimants in managing their budgets”.

But do we know from claimants themselves whether that is more important than, say, a shorter wait or having a more flexible payment system than the very inflexible one created by monthly payments and assessments, in which a whole month’s entitlement is based on the claimant’s non-financial circumstances on a single day each month? Damien Hinds claimed that,

“monthly is the more sensible pattern”.—[Official Report, Commons, 5/12/17; col. 1001.]

But I am not sure how much sense it makes to claimants or how it is conducive to smooth budgeting.

In her UC debate, my noble friend Lady Hollis of Heigham observed that the aim is,

“to moralise some of the most marginal in society into behaving like middle-class salaried professionals resilient with savings”.—[Official Report, 16/11/17; col. 2129.]

In arguing that monthly payments mirror work, Ministers refuse to acknowledge that this is not the world of work typically experienced by claimants. Nearly three-fifths of those who moved from paid work onto UC had been paid fortnightly or weekly, according to the Resolution Foundation. The foundation criticised “unnecessarily poor policy choices”, flowing in part,

“from misguided attempts at concentrating on altering human behaviour rather than supporting people in need”.

In the past, I think Conservatives might have denounced such misguided attempts as social engineering.

As we have heard, the Northern Irish and Scottish Administrations have listened to the concerns about monthly payments. Also in Scotland, couples may opt for split payments without fuss. The payment of UC into one account could undermine the financial resilience and capability of some women, especially those subjected to domestic violence, even where payment is into a joint account, as research shows that joint accounts provide no guarantee that the money reaches individual partners. It is disappointing that the Government rejected the recommendation of the Joint Committee on Human Rights—I was a member at the time—that the DWP should use UC rollout to test different payment arrangements to protect women’s financial autonomy. It is also disappointing that they appear to have rejected proposals, including for a safe interim payment, submitted by Policy in Practice—run by one of UC’s architects. This would have speeded up the first payment and enabled fortnightly payments without the potential difficulties raised by Ministers. Even if the majority of claimants prove to be comfortable with monthly payments, as the Minister argued in a recent debate on debt, what about the minority who are not?

The Government’s response to the committee lays great emphasis on alternative payment arrangements, but these are at the discretion of the UC agent or work coach. I do not find very convincing the argument that this is more effective than giving claimants the right to more frequent payments because it strengthens the relationship with work coaches. As it is, those who struggle will be labelled poor budgeters even if they were previously very efficient budgeters. They will be offered help with budgeting, requiring a whole new edifice of support.

This brings me to universal support, which was mentioned in the committee’s report. In its evidence to the Work and Pensions Committee, Citizens Advice listed a catalogue of problems. They included: variable delivery because of a lack of published minimum standards, often resulting in over-restrictive scope; ineffective referral mechanisms; and a lack of co-ordination. An updated framework was promised for autumn 2014 but has still not appeared. A local authority source advised me of fears that DWP is drawing conclusions about the level of support needs based largely on the experience of UC Live, which has involved the claimant cohort least likely to have such needs. In the debt debate, I asked the Minister to ask DWP to provide us with a report on how universal support was working—but answer came there none. May I now repeat the request, noting that similar questions in the UC debate also went unanswered?

Not only does universal support appear inadequate to the task but, as predicted in your Lordships’ House, the replacement of the Social Fund by discretionary local welfare assistance schemes, without any ring-fenced funding, has meant that in many areas it is no longer an alternative source of support because many authorities have closed or significantly cut back their schemes. According to the Centre for Responsible Credit, this is leaving some people facing destitution for lengthy periods of time.

While acknowledging examples of good practice, the committee rightly expressed concern about the funding outlook. Shelter and the Longleigh Foundation point out that since specific central funding for the schemes was ended last year, councils,

“have to find the necessary funding from within their existing, and shrinking, budgets”.

They warn that,

“there is absolutely no other emergency fund that is flexible enough to help people in financial crisis and prevent, or relieve, homelessness”.

Yet when I and others voiced such concerns in Oral Questions last Monday, there was an absolute refusal to acknowledge the seriousness of what was happening and to respond to requests for an evaluation of the impact of the changes. How can a Government who extol the importance of responsibility be so irresponsible as to wash their hands of all responsibility for the outcome of this reform?

Finally, the Government’s response to the committee’s call for,

“a detailed, comprehensive cumulative impact study”,

of how social security changes,

“might have adversely affected financial wellbeing and inclusion”,

is woefully inadequate. If the Women’s Budget Group and the Equality and Human Rights Commission can carry out such analyses, why cannot the Government, who have the ultimate responsibility for the impact of their legislation on the well-being of their citizens?

Perhaps the answer lies in the sobering picture painted by these independent studies, which show the negative impacts analysed by gender, disability and ethnicity as well as income. This was summed up by the EHRC, which said:

“Poorest hit hardest by tax, social security and public spending reforms”.


With a cumulative total of £27 billion or more in social security cuts due to have taken effect by the end of the decade, I fear that the outlook is an endless bleak midwinter, marked by more financial exclusion, hardship and debt.