Benefit Sanctioning

Debate between Paul Blomfield and Yvonne Fovargue

Tuesday 2nd December 2014 Westminster Hall

[Paul Blomfield]

I understand the hon. Gentleman’s point. There are people who take advantage of any system, there are people who avoid their tax obligations, and so on. The point I am seeking to make is that if we design a system with the stated objective that he describes—supporting people back into work and taking sanctions against those who deliberately avoid it—we have to measure the effectiveness of the system against its stated objectives. My contention is that the operation of the system is failing that objective, so I ask myself why these seemingly illogical sanctioning decisions are being made.

Coincidentally, last Thursday I was out knocking on doors and meeting constituents, and I knocked on the door of a jobcentre worker. She described to me a range of issues that she faced in her daily work. I happened to mention that we were having this debate this morning, and she immediately responded by talking about the pressure that she and her colleagues felt they were being put under to impose sanctions.

That is a serious point. Indeed, in a survey of staff within the Department for Work and Pensions that was conducted by the Public and Commercial Services Union, 23% of union members surveyed said they had been given explicit targets for referring claimants for sanctions; 36% stated that they had been placed on a performance improvement plan for not making enough sanctions referrals; and 10% said that they had gone through poor performance procedures for not making enough sanctions referrals.

I know that the Government will say that there is no pressure to sanction, but the DWP acknowledges that statistics on sanctions are collated centrally and that local jobcentre managers will be contacted if their performance is out of line with that of other jobcentres. If this is a matter of good management, and no league tables are being compiled and no targets are being set, why is a lower level of sanctions seen as a sign of poor performance by a jobcentre manager?

Turning to how the situation can be improved, I start on a positive note. The Government’s independent review of jobseeker’s allowance sanctions carried out by Matthew Oakley was certainly a welcome step. Although its remit was limited—I will come on to that point shortly— it made some important suggestions about how communications and processes within the JSA sanctioning system can be improved.

I will not go into details, but a key point to take from that review is the lack of understanding between the claimant and the jobcentre. That chimes exactly with what Sheffield Citizens Advice is saying: too many claimants are not being adequately or appropriately informed of what is expected from them in the first place. They are not being informed about what they have done wrong when they have been sanctioned, and how to avoid the situation happening again.

The Sheffield Citizens Advice report chimes with the points that Matthew Oakley made. It says:

“A common experience is that they realise that no money has been paid into the bank first and then later get a letter stating that their benefits have been stopped.”

Will the Minister say what school of behavioural economics that sort of approach comes from? If a jobseeker does not understand the agreement that they have entered into, how does sanctioning achieve its aim, and how can sanctioning serve as a disincentive if a jobseeker does not know what behaviour triggers a sanction?

Perhaps Tony, whom I mentioned earlier and is mentioned in the report, was told that he needed to do more jobsearching, or perhaps he was sent a letter to that effect. That might be the case; I am not clear on that point. However, I know from talking to other constituents that such letters have led to sanctioning when they have not been responded to properly. The problem is that Tony cannot read; he has learning disabilities. He wants to work, but in that context the letter is meaningless, so what is the Minister doing to ensure that jobcentre staff are sensitive to such barriers—the barriers that claimants face in engaging with them? As I have said, it is positive that the DWP has responded to the Oakley review by setting up a specialist team to look at communications, but I would be grateful if the Minister updated us on the work of that team and outlined exactly what has changed as a result of its work. Will she also address some of the other recommendations in the report when she responds to the debate?

Many claimants tell Citizens Advice that they were not aware that they had been sanctioned until they contacted the jobcentre after finding out that they had no money in their bank account. Subsequent decision letters are often poorly worded, and without a clear explanation as to the misconduct that led to the imposition of sanctions. I urge the Minister to respond to the following proposals to address this issue: the wording of decision letters should be reviewed, so as to provide more detailed information about what led to the sanction, and to give information about the possible knock-on consequences of not responding to the decision letter; a sanction should not be put into effect until the decision letter notifying the claimant has been sent and a reasonable time for it to be delivered has passed; and notification letters should clearly inform the claimant of their right to challenge the sanction, explaining how to do so and, where appropriate, how to access hardship payments.

I say that because the Sheffield Citizens Advice report details how sanctions are often imposed because claimants failed to carry out agreed steps or activities even though many of them face barriers—through language, caring responsibilities or health problems—that mean they could not reasonably have carried out the agreed steps. That is an important point: they could not reasonably have been expected to respond. Other claimants do not understand what has been agreed and, according to the report, jobcentre staff are not aware of the genuine barriers that some claimants face.

I urge the Minister to respond to the following proposals to address this situation. First, jobcentres should make claimants aware that they have a say in the content of jobseekers’ agreements, and that this is a two-way process that should have claimants’ full engagement. It is supposed to be a partnership leading people into work. Claimants should be made aware that they have a right to have the agreement reviewed if they are not happy with the content.

Secondly, jobcentres should take whatever steps are necessary to be certain that all relevant factors that could possibly act as a barrier to work have been taken fully into account when deciding on the content of a jobseeker’s agreement. I have already cited some of the barriers that exist. Thirdly, jobcentre staff should be invited to awareness training about the practical and specific difficulties faced by some claimants; those difficulties may be learning disabilities, mental health issues or language barriers. I make this proposal because the Minister will agree that without workable, reasonable and well-understood agreements between jobcentres and claimants, the process is bound to fail, and if it fails it will clearly cause extraordinary hardship. I visited a food bank that I helped to establish in the heart of my constituency. The increase in the demand for its services is in significant part due to the increase in benefits sanctioning—the same is reported by other food banks across the city.

[Yvonne Fovargue (Makerfield) (Lab)]

I congratulate my hon. Friend on securing this debate. In my constituency, Compassion in Action provides a food bank that covers the whole of Wigan. The charity’s statistics show that 37% of the people who go there do so as a result of being sanctioned. One individual who had gone to the food bank had actually received training for a month with a guaranteed job at the end of it; he had found that job himself. His employer was willing to say to jobcentre staff that he needed the individual there every day that month, but the individual was sanctioned for that month and Compassion in Action kept him fed.

[Paul Blomfield]

I thank my hon. Friend for that intervention, which echoes many reports I have received from the food banks in my constituency. The desperate level of hardship that we are talking about needs to be understood in the House. We understand that food banks provide a weekly food parcel, but when I recently spoke to colleagues at the S2 Food Bank in Sheffield, they pointed out that they were now receiving demand for food parcels containing cold food that would not require heating as people did not have enough money not only for food but for basic fuel supplies. People are living in houses or flats illuminated by candles and eating cold food provided by food banks. That is desperate hardship.

Debt Advice and Debt Management

Debate between Paul Blomfield and Yvonne Fovargue

Thursday 1st December 2011 Commons Chamber

[Yvonne Fovargue (Makerfield) (Lab)]

It is a pleasure to follow the hon. Member for Chatham and Aylesford (Tracey Crouch), who made a thoughtful contribution; I agree with most of what she said. I congratulate my hon. Friend the Member for Stockton North (Alex Cunningham) on securing the debate, which is timely, as Christmas is coming up, although that is not traditionally a time when the advice agencies see people who are in debt; they see them in January, once the debts have come through.

The number of people finding their debt unmanageable can only increase; that is beyond doubt. My hon. Friend mentioned the Financial Inclusion Centre’s recent report, “Debt and the Generations”, which says that a £50 per month drop in disposable income, due to any one of a number of factors—a small drop in hours, increased pension contributions, increased child care costs, or a rise in rent—would result in 3.2 million people who are just about coping and keeping their head above water no longer being able to pay all their creditors. As has been said, we are not talking about being profligate, and buying designer trainers and large flat-screen TVs; we are talking about paying the heating bills, paying for food, and buying school uniforms. Research from the Joseph Rowntree Foundation shows that only one person in six seeks advice from any source. If we accept that, it means that a further 500,000 people would seek debt advice if incomes dropped by only £50 a month.

We need to target the people who are not seeking advice, as the research proves that people who receive advice manage significantly better than those who do not. The Money Advice Trust has done an interesting report called “Facing the squeeze”, which indicates that many families are managing at the moment only because they have low interest rates, are taking on additional sources of credit—some of which, unfortunately, are payday loans—or are cutting back on essential expenditure to the point of deprivation. All of us will have visited constituents like the one I visited the other week, who said, “I’ll put the heating on while you’re here, but I’ll turn it off when you’ve gone, because I want to save the money.”

It is incontrovertible that debts do not come singly, and that early intervention when there are debts saves money. Government policy is slightly short-sighted in removing the majority of debt issues from the scope of legal aid, and in leaving things until the point of eviction.

[Paul Blomfield (Sheffield Central) (Lab)]

Does my hon. Friend share the concerns of Peter Hemmingfield, a debt team supervisor in my constituency who works, under the community legal advice contract, with the Legal Services Commission to provide specialist debt advice? He is very concerned that the service that he provides will practically disappear as a result of the intended legal aid cuts. He says in a letter to me:

“A substantial amount of our work is involved in helping many clients who have mental and physical health problems, who are aged”—

[Paul Blomfield]

You are absolutely right, Mr Deputy Speaker; I was just coming to the end. Peter Hemmingfield talks about people who are unable to manage their debts alone. Should we not be concerned about the impact on the most vulnerable?

[Yvonne Fovargue]

I agree with my hon. Friend. As for the idea that people can manage by themselves, that is not happening at the moment, and as a result of the cut to legal aid, 100,000 of the poorest people will lose access to advice. We need to look at where they will go, and how they will be helped in future.

Of course, there is a cost to free debt advice, and it is estimated at about £150 million a year. The credit industry contributes 3% of that amount. I would like the Minister to investigate further how a levy on the credit industry could be made to work without affecting the business model of companies such as the Consumer Credit Counselling Service, which relies on a “fair shares” principle to fund its work; I would not like such companies to go because we were looking at a levy on the credit industry. However, it is not sustainable that the industry should pay just 3% of the £150 million.

On the latest figures, Citizens Advice deals with 8,910 new debt problems each working day. The reason why it deals with that many cases, and why people go to it, is brand awareness. Some 97% of people recognise Citizens Advice, although they might not always know what it does; they sometimes say, “It tells people where to go, doesn’t it?”—well, it does not tell people where to go very often. However, people recognise Citizens Advice, and I am concerned about the Money Advice Service spending its hard-earned money on building a brand that people will recognise. I would question the need to build yet another brand. Why not use a trusted brand to deliver money advice services on the high street?

I am pleased that there is more research on why people get into debt, and I do not think that the reasons have changed significantly over the years. As I have said, they include low income, sudden changes in income, changes in family circumstances, illness, divorce and so on. However, the type of credit that people access has changed. One form of credit that has exploded over the past five years is payday loans. There is evidence of people relying on that type of credit when they max out their credit card and have been denied other avenues of mainstream credit. They use their credit cards regularly to pay their bills.

Only this week I attended a fascinating presentation facilitated by the Centre for Responsible Credit on the international experience, particularly in the US, which is an interesting place, because different states have different regulatory regimes, so the way in which they work can be compared. The former secretary of the securities and banking council who presented the report was adamant that the sector needs to be regulated. He said that as an American citizen he is no fan of regulation, but that regulation needs to be enforced, and the regulator has to have the power to suspend companies where necessary.

I urge the Minister to consider the report and its conclusions, including limiting the number of roll-overs and a cooling-off period so that people cannot immediately take out another loan when the first one ends, then take out another one to pay off the second one. Evidence from Florida shows that capping the total amount that people can take out in any one period—for example, $500 in a year—improves their ability to pay back that loan. We asked whether that sent people into the hands of illegal lenders, but we were told that the average amount that people take out in loans in Florida is $388, which is quite a bit below the $500 limit. People do not max out their loans, which may mean that they do not go anywhere else. In California, however, where maximum loans are much lower at $250, people take out $249, which is evidence that they will look elsewhere quite quickly. It is an interesting report.

We should also consider setting up a real-time database owned by the regulator, but funded by payday loan companies, that stores basic data, including the number of loans and amounts, so that easy referrals for debt advice can be made.