We move on to the second evidence session in our consideration of the Bill. I am delighted to welcome two people to give evidence to the Committee: Anne Spaight, formerly chair of the Disability Living Allowance Advisory Board, and the Essex Coalition of Disabled People.
Sorry, Mr Adams, I missed your name out. Perhaps you would both like to introduce yourselves for the record.
Thank you both for coming today. I wanted to ask something about the objectives. The Minister with us today—if I may quote her and then perhaps broaden the question—recently said that she wanted to ensure that disability living allowance reflects the needs of disabled people better today than in the 1990s. DLA enables support to be targeted on those with the greatest need. I was going to ask, initially, whether you supported these objectives and if the proposals were met in the Bill.
However, I wanted to broaden the question out and get more specific views and thoughts. DLA was introduced in 1992; since then, we have had a great deal of change in the legislation, in the support at work, in aids and adaptations, and in a broadening of our understanding of disability. Specifically, what changes would you like to make to DLA to bring it up to date?
Anne Spaight: Thank you very much for this opportunity, which I welcome.
There are changes related to the whole assessment process. For a start, I really do welcome the change of name—the personal independence payment, rather than the disability living allowance. I feel that this is an opportunity to concentrate on the ability and not the disability of the person, so I welcome the change very much.
It is obvious that, since the 1990s, there has been a number of changes in medical science and in the way that conditions are treated and can be made better, or better than they were, through orthopaedic operations and so on. There have been a lot of changes, and therefore the whole assessment process needed to update itself in that respect.
Mike Adams: I absolutely agree with the Minister. There is a need for reform. We support the DLA but accept the premise that, in terms of how it needs to be reformed, some of the recommendations for aligning it with definition are correct.
In terms of specifics, the point that I would like to make is that the DLA reflects and is in many ways a proxy for the additional cost associated with living with a disability. We need to ensure that we do not mix cost and need, because there is not a direct correlation between the needs of individuals and the cost of individuals. What we are pretty clear about is that the reform needs to focus on the cost. In many ways, that drives a position in which we need to look at the supply, and at the market in terms of the DLA and of driving down the cost, as well as the focus on demand in terms of pure numbers.
According to the Library research document, which is available publicly, just under 2 million people were claiming DLA in 1997, but there were 3.2 million cases by 2010. Do you have any explanation for why the number of cases has grown over that period, I think more than people would have expected?
Mike Adams: I am certainly not in a position to say why the numbers have grown. I suspect that, in terms of society, how it has responded to disabled people and the opportunities now available that were not in 1992, DLA has become a vital element in independence for a swathe of people. It was very interesting that, when we were talking to disabled people about right to control, they were saying, “Well, we have got right to control—it is called DLA.”
Anne Spaight: I would have to concur with Mr Adams. I also think that people have just got to know about it more. I suspect that, in the 1990s, it and what it was for were not as widely known. That is quite important. I also have to add that maybe people began to see that claiming DLA was not instead of going out to work, and that there was a possibility of still working and having DLA to perhaps support that work. I think there may have been some confusion over that initially.
Mike Adams: There is also the correlation between the definition of disability—in 1992, we did not have the Disability Discrimination Act 1995—and the further amendments of the DDA which have brought into line a broader scope of people who have rights under it and the Equality Act 2010, and who may be eligible for DLA. I think that might be a part of the explanation.
I am also not sure whether you will have seen the written evidence that we have received. One is labelled WR04 and is a submission from Mohammed Mahmood. At the moment, he goes to work in a motability car, but he is worried—I have heard this from others as well—that he is going to lose it. My understanding, however, is that there is nothing in the Bill that would threaten that. Is that correct?
It worries me that some of the evidence reflects concerns about impacts on people that are not at all outlined in the Bill. What should we do about that?
Anne Spaight: I think that, probably, when the reform of DLA was in the media, attracting some of the high-profile media headlines, people were worried that it would affect them. If it is a benefit that has been used for their extra cost of care and their mobility, they suddenly feel that a reform might take that away. What that would do to them must be quite concerning. Reading the consultation document and the Bill might allay some fears, although I think that working that out in practice would be something that they would want to see, and that would alleviate their fear.
Similarly, if Mr Gray will permit me one last question, the savings by 2014-15 of £1 billion a year are savings relative to growth towards 2014-15. In other words, the level of spending will be very similar to the level of spending in the last fiscal year. What could be done to help people understand the savings in that kind of context?
Anne Spaight: Talking with my colleague before we came in, we were a little concerned about the level of savings anticipated. This is a benefit that benefits those who need extra help with the cost of their particular disability, and I am afraid that I do not know how it was worked out that those would be the savings, so I would have some concerns about that particular issue.
Mike Adams: I am slightly confused in terms of cost and numbers. The Bill talks about spend being forecast at £12 billion, but the evidence that I have seen from the Dilnot commission says that DLA for working-age adults is £5.487 billion, and the DWP figure for DLA is £6.2 billion. So when we talk about the saving of £1 billion, I am not entirely sure from which baseline figure that comes. The broader point in allaying fears is building trust and transparency with disabled people. Being clear about the figures is one way to do that.
May I ask a short question? We were talking about the recent rise in DLA and seeing the figures increase. One can anticipate that those figures could increase as more and more people become aware of it. More and more people are perhaps living with disabilities now. There is more awareness and a broader definition of disability, so if we cap the rise there could be a problem. Part of the need to cap that rise is an implication perhaps that some people are getting DLA inappropriately, or misclaiming DLA. Do you have any evidence that there are people currently receiving DLA who should not be receiving it? The 20% cut in caseload was one of the figures that the Government mentioned.
Anne Spaight: I have no evidence of what you purport. I would only say that one of the purposes of the reform of DLA is to ensure that you have a fair and equitable assessment process. It may be that in the assessment process for DLA, there are people claiming it now who may not claim in future. But I do not have any evidence to back that up.
Mike Adams: In preparing the evidence for today, I looked at the fraud rates. For DLA, it is 0.5%; for income support, it is 2.9%; for incapacity benefit, it is 1%; and for jobseeker’s allowance, it is 2.8%. Even the error rate for the DWP, which is 0.6%, is higher than the known fraud rate for DLA. That tells me that, of the people receiving DLA who were not eligible or whose needs had changed and who should not be receiving it, it is a small fraction. I do not see the 20%.
If you look at the explosion in the number of claimants in the past 10 years, from around 2 million to 3.2 million today, is it simply a question of awareness or is it possible that some people, if you like, recover, get better and no longer need to claim it, but that there has been no assessment machinery? I think that 127,000 or 140,000 claimants have not been seen since DLA was set up in 1992. Do you think that the issue of people recovering and getting better could account for why there are potential savings to be made in proper targeting?
Mike Adams: I would simply say that we support the need for reform, and this is one of the areas that needs to be looked at. We are concerned and worried about the criteria under which those reviews take place. We need to ensure that we are not simply talking about an arbitrary figure of a 20% reduction. I do not see the basis for that figure.
You were expressing concern earlier that people might have been unnecessarily alarmed by what they have heard about the Bill. Do you acknowledge that clause 83 states that in future people in residential care would not receive the mobility component. If they are in residential care at the moment and have a motability vehicle then they are right to be concerned.
Anne Spaight: It was my understanding that the Secretary of State was thinking again on that particular issue. If that is the case then I welcome it because I feel that it is an unnecessary concern for those in residential care to think their mobility component would be taken away. Residential care is their home, just a much as for somebody living outside in their own home, so they should therefore have the same opportunity to have a motability car as anybody else.
As we move on, just in passing, you do not both need to answer everything. We are slightly short of time, if you keep an eye on the clock, so where you agree with each other a nod will be fine.
Pushing ahead on that very issue of the mobility component, which a great many of us have had representations upon, when I have made representations to Ministers they have said, “Well, it’s our duty to look for overlap,” and indeed there is already overlap in that system: the care component of DLA is not paid to those in residential care. So first, is it right for Government to be looking for those overlaps? Secondly, do you agree with the Minister’s position that there is a huge inconsistency in how mobility is provided across the country—through local council contracts, residential care home contracts, and so on—and that some uniformity would be highly desirable?
Anne Spaight: I would totally agree that this needs to be looked at, and that there needs to be some uniformity across the patch. Because I actually ran care homes, I know that local authorities in some areas would provide a fee for mobility for a care home resident but others did not. In that case the mobility component of DLA was absolutely essential. When you are costing the running of a care home, absolutely nothing is free, and therefore one needs to make sure that fees are adequate for that resident to be able to live as full and independent a life as they possibly can.
Can I draw from what you have just said that you acknowledge that in certain places in the residential care home landscape there is duplication or overlap between provision from homes and from the Government?
Anne Spaight: Not duplication—it is instead of. If the local authority is providing an adequate fee for that resident, which would cover a certain amount for mobility, that is one thing. In other areas they are not providing the fee that allows for mobility, in which case mobility allowance is very, very important. There is inequity in that, and I think that needs to be brought into line so that it is equitable across the patch, but at the moment it is not overlap, it is instead of.
The Government have made a proposition to me which I am trying to explore and tease out with you here. Are you saying that in some places there is overlap—where the mobility component might be paid to those in care, and a fee is paid by the county or whoever? That never happens?
Mike Adams: I have been on the board of a listed private sector company involved in social and residential care for the last year, and I do not get any sense that in the negotiation for an individual, whether through a spot charge or block contract, there is an element of mobility as part of that cost. That is not to say that it is not, but I have seen no evidence. The biggest concern that has been raised by ECDP—by disabled and older people—is the mobility component for people in residential.
I am a bit confused, because I was under the impression that local authorities and residential care providers provided an element of mobility, and that the issue was the wide gap between some and others. I am surprised that you seem to be contradicting that. The issue that has been presented to me as a constituency MP is that the mobility component provided an added extra, but there was a basic level of provision. To be absolutely clear, are you saying that the basic provision is not currently there?
I want to turn attention to the assessment process and ask two quick questions. Mike, what does the current DLA application process feel like from the perspective of a disabled person —of a user?
Anne, support through DLA for individuals with cognitive impairments currently causes concern for some people—particularly mobility and higher rate mobility assessment. Is that something that you have looked at? Do the proposals in the Bill address that problem enough, or could more be done?
Mike Adams: In answer to your question, Minister, the DLA form is long—I think everyone would say that. We are right to control the trailblazer site, and we think there is real room for manoeuvre in aligning assessments across the benefits, and in part of the narrative around universal credit. The right-to-control principle wants every door to be the right door and some questions to be asked only once. If that principle were to hold for DLA, it would make a significant contribution both to the administrative charge and, more importantly, to the experience of service users.
I would go so far as to say that within social care, we are now looking very much at making self-assessments part of the process and to reviews being undertaken by third parties that are not part of the Department of Health. Such initiatives could and should equally apply to DLA in future. They would build trust and transparency as well as removing some of the cost of administering the allowance.
Anne Spaight: I think the mobility component assessment in the Bill addresses some of the issues that the DLA advisory board found when we looked at higher rate mobility, particularly for those with severe sight impediment. I am sure you will have read the report that we published a little while ago. We had some concerns about the application of higher rate mobility for severe sight impediment, but we came to the conclusion that the provision was the right way to go. I welcome the assessment of mobility by looking at what people need to get around rather than how far they can walk.
I want to ask about aids and adaptations, which, perhaps, fit into that. The consultation paper certainly suggested that if people have aids and adaptations, that should be taken into account when deciding whether they need certain aspects of the new benefit. It was not clear precisely what that meant. It would be interesting to hear your comments on that, given that the need for aids and adaptations is one cost that is associated with disabilities.
Anne Spaight: I welcome the fact that aids and adaptations have at last been acknowledged as necessary for disabled people in many instances. I would be concerned if a person with an impairment, who had a particular aid, was then penalised for having that aid in terms of the assessment process for the benefit. Take away that aid—if it were broken, lost or whatever—and that person may well be in dire need. However, it should also be acknowledged that, where aids and adaptations make life easier, then that is a good thing. I would be concerned if the benefit were not then allowed, because somebody could put their socks on using a sock putter-on-er or something of that sort, because, as I have said, if that was taken away, they would not be able to do it.
As I understand it, the aids and adaptations consideration would be for those people who already have them and not necessarily for those who may benefit from it. It might be that some advice can be given in order to suggest an aid of some sort that would help with the disability, but I do not think that we should say, “If you had this, you could do that and, therefore, you wouldn’t qualify.”
I want to move on to new penalties, and there will a new penalty for those who knowingly fail to report changes in circumstances. My direct question is whether, in your view, that new penalty will bring genuine integrity into the system? There have been a number of press reports about people claiming DLA by basically conducting fraud, and the DWP has estimated that some £220 million was overpaid due to fraud and error. In the light of some of the press reports that we have seen, it is clear that people are wrongly claiming DLA when they are actually fit and able.
Mike Adams: I would simply go back to the statistics that I gave earlier in terms of the fraud rates and where DLA sits with all the other benefits and the DWP’s error rate, and it is less. Therefore, that suggests to me that, in terms of the scope of the problem that may or may not occur, it is a fairly small problem. Within the reforms, it is clear that any reform should go hand in hand with accountability, and that that should include accountability for the individual as well. We need to build in a proportionate response to that. I struggle with the perception that all people who claim DLA are potentially benefit scroungers, and, therefore, that we are going to come down hard on them and penalise them. The evidence and the statistics would tell you a different story.
On that point, the whole purpose of the new penalty is actually to bring genuine integrity back into the system, because, in their eyes, the public feel that there is not enough confidence. They read press reports about people that are effectively claiming benefit and claiming that they are disabled when they are, in fact, not. We have had press reports in various newspapers this week to that effect.
Mike Adams: I absolutely agree. There needs to be a high degree of integrity, and the reforms must be proportionate. Where people are illegally claiming for benefits that they should not be, the law will then take over. Given the evidence that we have seen around fraud rates, the extent to which that is occurring is not as big as the media would like to make out.
Many thanks indeed. We need to move on to our next set of witnesses. I thank you both very much for taking the time and trouble to come. It is most kind and much appreciated.
Sue Bott: That is a very difficult question to answer, which is part of the problem with these reforms. The reforms are not particularly clear about what they are intended to do. It is hard to know what the impact will be. It has been estimated that approximately 850,000 disabled people who currently receive disability living allowance will no longer do so once the new system of personal independence payments comes into play.
Sue Bott: As I have said, it is extremely difficult to estimate the numbers because the consultation that was published by the Government was not very clear about what personal independence payments would entail and, specifically, who would be eligible for it and who would not. Based on the statements that were in the consultation—that if you already use particular adaptations, you would no longer be eligible—an estimate has been established. It has been extremely difficult for us to estimate the numbers, but it would be impossible for anybody else accurately to estimate the numbers of either those who will be affected or those who will not be affected.
Andrew Lee: Since the consultation went out in December, I have been to a number of conferences where I have spoken to people with learning difficulties. First, they did not know that the consultation was happening. When I told them that it was, their immediate impression was, “Right, the Government are going to take away all of my benefit and I will not have anything to live on, and what the hell is PIP?” In summary, panic sets in.
I was over at Barnet. I had been asked to speak at an annual general meeting, and I told them about the plans for personal independence payments and the changes to disability living allowance. There were 40 people with learning difficulties in the room, and when I told them what the Government are planning to do, there was a great big yell of 40 people saying, “They can’t do that.” I said, quite calmly, “The Government are doing this.” The point that came across was that they knew absolutely nothing.
If you put things on the internet, they do not reach people with learning difficulties. Last year, the all-party group on learning disability looked at people with learning difficulties and new media. I ask you to look at that information, because it showed the massive challenges that any Government will have in actually making sure that people with learning difficulties have access to and understand new media. Unless you bring people with learning difficulties together in a conference format, you are not going to give them the chance to ask questions and scrutinise people who talk to politicians— as you are scrutinising the Government now. So, panic sets in.
What is said in the media might not be the truth, but because the media say it and because that is the only form of accessible media that a lot of people with learning difficulties have, they take it as the 100% truth.
I absolutely take your point, but may I ask you about a specific aspect of the reforms, the proposals on universal credit? The Government are looking at what options there might be to offer a premium or extra cost allowance for the universal credit. Have you done any thinking about that? Do you have any proposals on that?
Andrew Lee: The first thing is again that, when I have spoken to people with learning difficulties, they do not know about the universal credit. They just know that the Government are going to get rid of housing benefit and other benefits. So, there is a massive communication problem. There is going to be a need for a massive support structure at a local and a national level for the Government’s thoughts to be explained to people with learning difficulties. If you produce information in easy read—if people want that information in jargon format, they would have to ask for it—the Government would save money, more people would know what they were trying to do and parents would be calmed.
Sue Bott: From our point of view, we are certainly not against making the benefit system a lot simpler, a lot easier to understand and a lot more responsive. The universal credit will go a long way in that direction. But we are concerned about the disabled people who may not get disability living allowance any longer, and therefore will not be passported on, as they are at the moment, to certain other benefits. I know that that concern is shared very widely and, certainly in my discussions with anyone in the Government, that issue is recognised, but it has yet to be resolved. I think it will need to be resolved, because in the worst case scenario, if the figures turn out to be correct regarding the number of disabled people who will be affected, this will have consequences not only in losing DLA, but in losing disability related premiums. I think it will need to be resolved, because in the worst case scenario, if the figures turn out to be correct regarding the number of disabled people who will be affected, this will have consequences not only in losing DLA, but in losing disability related premiums.
May I ask a question about employment and support allowance, which you have been touching on? One of the Government’s proposals is that contributory employment and support allowance will be time limited to one year. That means that some people who have already been on contributory benefit for some time will find that their contributory ESA will stop immediately once the change is introduced. What is the likely impact of that measure on disabled people and their families?
Sue Bott: I would be concerned in two ways. First, for some newly disabled people, it can take a long time to establish exactly what the prognosis is and how particular conditions are to be treated. Some things take time. A good example would be people who are receiving treatment for cancer, which could go on for longer than a year. My second concern is a general one, which is the general erosion of the national insurance system that we have seen over the years. I think it would be more honest to say that the system is no longer in place rather than to keep on eroding it. It will not have particularly helpful consequences for disabled people. There is no sense in plunging disabled people into further poverty—it just makes getting out of that situation much more difficult. I understand where the Government are coming from, but a year is too short.
Andrew Lee: I concur with that. When decisions are made, often professionals turn to doctors for advice, which is the proper thing to do. When the Disability Rights Commission did a formal inquiry into primary health care, it found a massive communication problem between doctors and people with learning difficulties, and it made some recommendations. I would hope that some of those were acted on. It would be good if you could find out whether they were.
There is a trust issue with people with learning difficulties and couples that are married. Often doctors talk to carers or the partner rather than the person with learning difficulties. Some barriers still exist. When the Government come to ask a doctor for some advice, some of the questions that I think they should ask are: how well do you know the person with learning difficulties and how many people with learning difficulties come to your surgery? I have some real concerns about how the medical profession communicates with people with learning difficulties who may have partners or children.
On the benefits that you are looking at, 65% of people with learning difficulties want to work, but after the changes that you are bringing in—because of the fear factor—I expect that that 65% of people who want to work will actually fall. Some 38% of councils are planning on making reductions to systems that help people find work. I think that that will have a massive impact. The last thing that people want to do is actively ask for help, and you can do something about that because you have enough time. A lot of situations happen when people are managing a crisis, like when someone loses their home because they were too ashamed to come and ask for help, because they valued being independent.
If I can interrupt briefly, we are keeping a close eye on the clock, because we do not have all that much time, and I want to get through a specific number of topics that we have in front of us. Forgive me if I rudely interrupt. I am not trying to be rude; it just comes naturally to me.
I would like to move on to the DLA mobility component for people in care homes. I would like your views specifically on whether you agree that there is a fair degree of overlap right now between DLA and other sources of funding, such as local authority funding. How can that be addressed?
Sue Bott: I do not believe that there is much overlap at all. We are all aware that local authorities are short on resources for spending on social care to meet the need in their areas. I have not seen any evidence to demonstrate that local authorities are paying for the mobility of people in residential care.
That is one thing, but the other thing is that I would be against this on principle. I represent the National Centre for Independent Living. Independent living is about choice and control in your life. Independent living is not just for people who live in their own homes; actually, independent living is a way of life wherever you live. People in a home—I need to emphasise that residential care is not like a hospital—live their lives; it is just that they happen to be in a residential home. It does not mean that they stay in that home all the time. They have lives. They want to socialise and go to medical appointments when they choose to go, not when a member of staff decides that they might take them. To my mind, it is an absolutely fundamental principle that people in residential care should have mobility allowance so that they can come and go, as anyone would in their home.
Some organisations have criticised the extension of the waiting period for DLA, which is currently three months, to six months for the personal independence payment. There is some evidence that people who suffer a sudden catastrophic event, besides having to come to terms with that, also get into debt during the current waiting period. What are your views on that?
Sue Bott: I would agree with that completely. For example, if you have a catastrophic event like a car accident, that affects you immediately. You cannot work, and you have a loss of earnings in many areas of employment. Unfortunately, we are not all in the kind of employment with good sickness benefits. Yes, that has an immediate impact on somebody’s living standards, I agree.
Andrew Lee: I would concur with that as well. People value being independent; being able to make choices, whatever they are; going wherever they want, mixing with their friends; and living the kind of lives that they want to. When big events, like a health condition, happen, the support that goes round you at that time is really important. It is about being able to explain things in an accessible way. It is a communications skill—support needs to be recognised as a skill. Not everybody automatically has the skills and the ability to support a person and it needs to be better recognised than it is. The best people to help people learn that skill are those whose experiences can give people the training, the knowledge and the insight that they will need in order to support well. Good support is really important; bad support is like having no support at all, whatever it is that you are dealing with.
Most of my colleagues here are visiting people with disabilities every week who are very concerned about the new assessment arrangements. At the same time we are helping people, because the current system is so broken that it does not recognise a lot of disability. There is a lot of fear around this assessment process. What more could be done to overcome the fear that people have at the moment about the assessment process?
Andrew Lee: The first thing is that local authorities are closing down self-advocacy groups; the very organisations at a local level that would be able to support people. They are doing that because they are having to make cutbacks. I think that that is a wrong move. Only two days ago I was speaking to a local councillor in Wandsworth who did not know of the existence of the local self-advocacy group that had been running for many years. It would be really helpful to make sure that every local authority person who holds the purse strings has a direct link to support groups. The contracts that they have to do good, specific work mean that you come from a user-led point of view. When a council is making those decisions, when they need support to help people through a crisis, they are coming from a user-led point of view. People give advice because they have had personal experience—they have been there, they have got the t-shirt. A lot of organisations that are not disability-led may have lots of knowledge and skills, because they have done the work for many years, but it is not the same. I am worried for the future, because people need to understand users’ needs and they need to be explained well. If they are not explained well, it is worse than not knowing anything at all. People worry a lot, when accessible information and talking to someone would help immensely.
Sue Bott: I think that assessment needs to be much more transparent, but, having said that, I also think that it needs to be more complex in taking into account people’s day-to-day, real life experiences. One of the problems with the current system is that it feels like someone comes into your home and they have a computer program. They are ticking the boxes in the computer program and it is the computer program that is coming out with the answer. That is a reflection, maybe, of this day and age in which we seem to be doing away with common sense. There needs to be a lot more common sense and a lot more human contact. My personal view is that assessments for benefits should always be carried out in the public domain—the public sector. I worry when such things become part of a private company’s bottom line, because that sends out the wrong messages, in my view. But, even accepting that that is the chosen way of doing things, then it is very, very important that whoever the contractor is who is carrying out the assessments is clearly answerable to Parliament, and that their activities are transparent.
It seems to me that the current fear is a lot to do with the fact that the current system is broken and people have had so much difficulty. It has been lacking in that transparency, so that they have really lost faith in the whole system of assessment.
Sue Bott: Absolutely. We have an information and advice line, so people contact us on a day-to-day basis. Frankly, some of the decisions are just bizarre, particularly in the past few months, where we have had wheelchair users who have said to us, “I have had my work capacity assessment and now I have been told that I’m not eligible for DLA.” Now, I am really not sure where that comes from, because I do not think that DLA has changed as yet, but it feels like its changes are already being implemented without anybody really knowing what those changes are and what the rationale for them is. I also had an e-mail just last Friday, from a father who is advocating on behalf of his son with learning disability. The same thing had happened to him, even though he has been receiving DLA for a very long time. When that sort of thing starts to creep in, people really have no faith in the system and are very fearful. It appears as if you cannot challenge the system, either. You worry that if you challenge the system, anything that you receive will be taken away from you. I can assure all of you that that fear is very much present in many families up and down the country.
On aids and adaptations, the Government’s proposal is that people’s successful use of aids and adaptations should be considered in looking at their ability to undertake daily tasks. Do you think that that is reasonable?
Sue Bott: Who pays for the aids and adaptations? That would be my question. I did not want to link this to myself personally, but I will because it is the best way of understanding what I am trying to say. I am visually impaired. I have been receiving DLA since 1992. I suspect I may not be receiving DLA in the future, but we shall see. What I need in my house is very bright light, so that I can see to get around easily. Inevitably, that bright light must be installed—
Thank you very much for coming along to give evidence to us. I am sorry to be rude. As I say, as Big Ben chimes we have to stop speaking. It is terrible, really, but thank you both very much indeed for your great kindness in taking the trouble to come and give evidence to the Committee. It is much appreciated.
We will now take evidence from Macmillan, Scope, Community Links and the TUC. It will not be necessary for all four of you to answer all the questions that are put to you, so if you want to select them judiciously among yourselves, that would be very helpful to the Committee.
For the sake of the record, perhaps you could start by identifying yourselves.
Good afternoon and thanks for coming in to see us. Part 1 of the Welfare Reform Bill provides the legislative framework for the universal credit and much of the detail is to be set out in regulations. What are your views about whether the proposals will in fact achieve the stated policy aims of simplifying the system and making work pay?
Maeve McGoldrick: The original objectives in the White Paper of simplification and fairness stood out. The difficulty with the Bill is the lack of regulations and the way that we see simplification and fairness is that a lot of the wiring must be done behind the scenes, and to the individual claimant it must be simplified. It is hard to judge the success of that, because the regulations are not there at this stage and that is something that we have really tried to urge the Committee to push for, because it is very hard to assess a number of the different clauses because of the lack of regulations.
Nicola Smith: There are a number of areas where we think that there is a significant amount of detail still to be worked through on how universal credit will operate, which will significantly affect whether or not work is able to pay. Specifically, we do not know how council tax benefit will be integrated to universal credit. It is conceivable in some areas that, depending on how that issue is resolved, people will face steeper reductions in their benefits when they move in to work than is intended at the moment. We do not know how people will be supported when they have child care costs. We know that the Government have stated that the funding envelope will be the same as it is currently. When that amount is shared among a larger number of people, it is likely that some families will receive less in child care costs than they do at present.
We do not know how passported benefits will be dealt with under the system. It is likely that there may be some cliff edges introduced, for example if large families have all their free school meals reduced at a certain point, or if people who are disabled have large amounts of prescription charge refunds taken away from their benefits at a fixed income level. We also still have a lot of uncertainty about housing costs and about the risk that, if the Government continue with their plan to uprate housing costs, particularly for tenants in the private sector, in line with the consumer prices index, the real terms value of housing costs will fall and that may leave people, particularly in the longer term, significantly worse off. Our wider concern about whether the universal credit can make work pay and alleviate poverty is that £18 billion of benefit cuts are due to come in before its implementation. Therefore, significant numbers of people may be better off at the point of transition but significantly worse off than they are under the current system, whether in or out of work.
There remains a depressing level of adult and child poverty in the country, and that can, of course, include people in work as well as out of work. What do you think the impact of universal credit will be on levels of poverty for both in and out-of-work people?
Maeve McGoldrick: I will focus on out-of-work poverty. The aim behind universal credit is to make work pay, and for people to move into work as a route out of poverty. It will not necessarily affect the levels of benefits that they are currently on, but, if they take up a mini-job, they will be able to bump up their benefits. That is a bonus, but benefit levels will remain below the poverty level at that stage.
Secondly—again, focusing on out-of-work benefits—we are concerned about the conditionality regime and the effects of sanctions on poverty levels. We think that the sanctions are much tougher. The sanctions that are being brought in before universal credit are tougher, and they apply to a system in which, as the Government have recognised, it does not necessarily pay to work. We do not understand why very tough sanctions are being applied in advance of universal credit. We are concerned that, under universal credit, people will be left in poverty. There will be a particular impact on the children in families.
The third aspect of out-of-work poverty is around the benefit cap that will be introduced. It will not affect a large proportion of payments, but it will affect a certain number, particularly those to the large families that we work with in east London. We need to consider aligning it with the child poverty strategy when we are thinking through these processes.
Nicola Smith: I would reiterate Maeve’s concerns about the impact that sanctions can have on poverty levels. I shall talk a little about in-work poverty and universal credit. We know from the Government’s impact assessment that universal credit is assessed to improve take-up of benefits, which we think is credible. It may well do that, as it proposes a simpler system.
As I said in my previous answer, we also know that independent research by the Institute for Fiscal Studies has shown that poverty levels will increase dramatically prior to the introduction of universal credit as a result of the Government’s package of benefit cuts. We do not feel that we are in a position to assess the net impact on poverty of universal credit and wider welfare reforms, and it may well be that as detail emerges in regulations of how aspects of universal credit will work in practice—for example, I referred earlier to housing costs and particular in-work conditionality requirements—we may find that there are other impacts on poverty levels that at the moment it is completely impossible to determine.
You mentioned one thing that I specifically want to highlight. In relation to housing allowance rates and the linkage to CPI, do you give much credence to the view that, in many ways, this could be an effective brake? You referred specifically to the private housing sector—I thought I heard you right on that. In the current circumstances, an unscrupulous landlord could manipulate the situation. Do you not see some actual positive benefits in trying to provide a brake on the market, which has ballooned over the past few years?
Nicola Smith: There is a large amount of evidence to suggest that the changes that we are seeing in housing benefit prior to the introduction of universal credit in the future will leave large numbers of families far worse off than they are now, and run significant risks of increasing homelessness and poverty levels. I am not in a position to assess the precise impact that the policy will have on the market—no one is—but there is that real risk. There has been no pilot of this full-scale roll-out of national policy, and if the market effects are not as intended, there will be significant risks for poverty levels. It is almost inevitable that families will see their real terms incomes drop. I do not know whether other people have views on the housing benefit changes.
One of my concerns is that, in the five years between 2005 and 2010, child poverty exploded by several hundred thousand. Looking at universal credit, it seems to me, from the regulatory impact assessments, that the poorest decile, decile 1, and the second poorest decile benefit, respectively, by increases of £4.40 and £5.40 a week. Is it not welcome and right that we should concentrate benefits and help on those who most need them?
Nicola Smith: I do not have the statistics to hand but I am not sure that I agree with the increase in child poverty levels that you said there was. I know that under the previous Government there were significant reductions in child poverty and, if there was an increase, it would have been a result of the economic downturn towards the end of the previous Parliament.
Nicola Smith: I do not have the figures to hand so I am not in a position to state on the record whether that is accurate.
We do know, from independent analysis by the IFS, that it looks likely that the benefit cuts that are being brought in before universal credit will take significant amounts of money from some of the poorest children in society—for example, the removal of the baby element from tax credits, the freeze in child benefit, the removal of the health in pregnancy grant, various other reductions in tax credit entitlements and housing benefit cuts, which affect many families with children.
At the point at which universal credit is introduced, it might be that there are benefits for child poverty with respect to increased take-up, but we also disagree that a welfare state should only concentrate on the very poorest. As a matter of principle, we believe that a safety net should be there for people throughout society, and that that is the best way to pull a sustainable welfare state into the future—concentrating on the very poorest risks marginalising welfare into the future.
Marc Bush: I echo that. In the context of disability poverty, a lot of work was done after the Budget and the CSR by the think tank Demos, which modelled the impact that the measures were going to have on disabled people and on families with disabled people, and those impacts could be quite substantial. With the measures outlined in the Bill, we are concerned that, because many of the regulations have not come forward and we do not have the necessary data for modelling or the evidence around why the changes are being made, there will be a disproportionate impact on disabled people in disability poverty, in particular around the time-limiting of ESA, the reform of DLA and things like the removal of crisis loans.
Nicola Smith: And it is fair to say that with some benefits—for example, council tax benefit or the social fund reform—despite a lack of detail about what will happen, we know that they are concentrated on the poorest people in society. With how the reforms are set—for example, council tax benefit will be reduced by 10%—it does seem inevitable, whatever the structure of the regulations that implement the change, that there will be a reduction in the incomes of the poorest people in society as a result.
Back to what Mr Elphicke said, given that it is a framework and that the detail and regulations are not there yet, that is an assumption. Surely it is scaremongering to suggest that the poorest will be worst impacted. There is so much supposition behind what you say. We have seen from the evidence in the previous session the impact that has on the most vulnerable people in our society. Surely it would be better to wait until you know the detail before you make those assumptions.
Marc Bush: Yes, but in order to be compliant with the European convention on human rights, the Bill actually needs to set out what safeguards it will make within regulation to ensure there is not a disproportionate impact on those groups who will be most affected by the legislation. We have not seen those safeguards, and we have not seen enough detail about the regulations, particularly about what the final assessments—the work capability assessment, but also DLA—will look like, and therefore it is equally suppositious to say that there is no impact as to say that there is. However, all the modelling that has been done with the data that are available suggests strongly that there will be a disproportionate impact on disabled people and their families, which will push a large number towards the risk of poverty.
Nicola Smith: It is also fair to say that we know that the £18 billion of welfare cuts that are scheduled to come in before universal credit will have an impact on the poorest people in society. We know that because the people those benefits are targeted at are, by definition, often very poor, and a reduction in their income will lead to an increase in the poverty rate. We also know that the Bill proposes the introduction of a much tighter conditionality regime, and that when people are subject to sanctions their risk of poverty increases. I think that there are a few certainties that we can talk about, and those are the points that I am trying to make.
May I ask about the £18 billion that you just cited? As the Library document seems to indicate, is it the case that of that £18 billion, between £2.5 billion and £3.5 billion is the child benefit cut for higher rate taxpayers?
Maeve McGoldrick: May I pick up on that point? I take your point about scaremongering, and I think that there is an element in this that we need to see how it pans out. However, whenever we look at our Community Links services in Newham—we run a number of welfare advice services—it is often the most vulnerable who find out first, and with the Bill we need to do a lot of modelling to ensure that it is not the people at the bottom who get hit first, and that we learn from mistakes. We are looking, for example, at the civil penalty, the hardship loans and the social fund reform, all of which will have an impact on people who are at the very bottom and need the intensive support of the welfare system. In some way, we need to factor in how they will have an impact on the universal credit model, which the majority of us are very supportive of. It will be those people at the bottom who are potentially hit.
We do not have the figures to do the modelling at the moment. There are a number of consultations out on these current reforms and they are also placed in the Bill. It makes it very difficult to assess what impact they will have because we are in consultation coming out of this stage.
Marc Bush: May I also very briefly remind the Committee that during previous stages of discussing these reforms the Government themselves said that they were not able to do specific elements of the modelling because they did not have enough data? We are really concerned about that, because effectively we would want to see at the heart of the reforms a rationale for why we are changing. We would very much support the rationale of simplification in the system—making work pay—but it is some of the objectives underneath that, and the deliverables and the implementation, that we are worried about.
Duleep Allirajah: I think that it would be useful to look at how cancer patients need to be supported by the system. They are a very good example of a vulnerable group, and the Government have pledged to support vulnerable groups. Cancer patients need the right support at the right time, and when they are undergoing aggressive, toxic treatments and are completely wiped out because of chemotherapy or radiotherapy, they need to receive ESA, or whatever will replace it, without conditions.
They also need help with extra costs. If you are undergoing radiotherapy you will be travelling to hospital. You could be going daily for five or six weeks and racking up very high travel and parking costs. You are probably not working so you have high heating bills, you might have a special diet because of the effects of the treatment, and you might need new clothes because of weight loss or gain. There are very high additional costs during treatment, and those people need to receive help there and then. When they have finished treatment they need employment support to get them back to work, and financial support during the period of getting back to work.
If we look at the provisions in the Bill, they fail the tests of safeguarding vulnerable people and fairness. You have to wait six months before you get the personal independence payment and cancer patients need that immediately. As soon as treatment stops, they have very high extra costs. It is no good waiting six months. There is a danger that they will not be protected from conditionality. Patients on oral chemotherapy are treated completely differently from those on intravenous chemotherapy, and we want that anomaly removed. Oral chemotherapy, which is becoming increasingly common, is just as debilitating as intravenous chemotherapy. Radiotherapy patients are not automatically exempt from conditionality, so the provisions do not necessarily protect them.
It takes cancer patients a long time to recover their capacity for work. As we understand it, 75% of those in the work-related activity group have been on ESA for a year, and 18 months down the line, 63% of cancer patients in that group are still there. If you time-limit contributory ESA, you are cutting off their income at a point when they are not yet ready to go to work. They could be doing everything to comply with the work-related regime—working with a personal adviser, drawing up action plans and undergoing courses to restore their coping skills—but they are penalised simply because they have not got back to work within 12 months. That fails the tests of fairness and of safeguarding the most vulnerable.
Marc Bush: As the question was also directed at me, I will respond. Working out what the greatest impact will be on disabled people is very hard for the reasons I have already stated. I would flag up the changing value of benefits, particularly the tracking of the consumer prices index. Time-limiting benefits, as my colleague mentioned, will have a significant impact on a lot of disabled people who want to work and to continue to work but need extra time to manage their condition. There is also concern about the withdrawal of levels of support on top of the value of support, for instance around the results of the work capability assessment and how that will leave disabled people, particularly those with lower-value benefits, without the right support that they need to start their journey.
One thing that I would like to highlight as having a significant impact on disabled people, but which does not affect a majority, is the DLA reform. Given the cumulative effects of removing crisis loans, restricting local eligibility for social care and removing support through DLA, and eventually through the personal independence payment, it could have a substantial impact on an individual’s ability to subsume the additional costs they face through living in society.
With the introduction of universal credit, how, in your view, should the Government design a system for passported benefit that would be obviously fair, not create a disincentive to work and be simple to administer?
Duleep Allirajah: On work incentives, with sick and disabled people, it is important to realise that the biggest incentive to get back to work is the fact that they lost their earnings while undergoing treatment. That is a pretty strong incentive, and most cancer patients we speak to and survey say that they want to get back to work. Work is a signifier of normality. They cannot live on the benefits that they get at the moment, and that is a strong enough incentive.
The problem is that they do not fully control their re-entry into the labour market. They are very marginalised. They have long-term health conditions. When cancer treatment finishes, a person can still be suffering from the long-term physical and emotional consequences for months afterwards—fatigue, depression and all sorts of late consequences. The incentive will not be what gets them back into work; it is the vocational rehabilitation, the personal adviser support and the jobs. That is what they need. You are starting from the wrong place if you think that, if you get the carrot right, they will go back to work, because they are not making those decisions fully in control of their entry into and exit out of the labour market.
Nicola Smith: This is a difficult area, and we welcome the Government’s commitment to include passported benefits in universal credit. That is a positive step forward. We do not have an ideal system designed, but we would like to see a move from the current proposal of fixed income levels at which different passported benefits are withdrawn. We think that a real risk with that is that these passported benefits have a different value for different types of family. For example, a very large family with a large number of children receiving free school meals will receive a very different drop in their income compared with a smaller family or someone with very high prescription costs. As I said earlier, they will experience a significant income drop if that benefit is withdrawn, whereas someone without prescription costs will not. It is a complex area, but we would welcome a tapered approach to the withdrawal of these benefits, rather than the proposal to withdraw them at fixed income levels.
Marc Bush: On universal credit, I would say that there are two opportunities in relation to passporting—one of them has not been looked at, and one has been looked at in part—that could strengthen the Government’s proposals. The first relates to the disability living allowance. We really welcomed the focus in the consultation that there would be a greater link-up, post-assessment, with agencies on trying to reduce additional costs. That is something to be welcomed, and it should be strengthened in the proposals moving forward.
I think that there is an opportunity missed somewhat in the reform of the work capability assessment, because it remains to be a gateway, rather than a passporting assessment, and that in many ways restricts the journey back towards employment.
You describe some of the complexities that people will face with the new system. They will need advice to get what they are entitled to under the arrangements. What do you think will be the likely availability of good advice when people get into the new system over the next couple of years?
Maeve McGoldrick: I will touch on that, because we run a number of welfare advice services in east London. At the moment, our demand is incredibly high. We have people lining up outside the door every single day, and that is with the current system. That will quadruple whenever we go through a transition period and whenever there is a lot of confusion. People are incredibly anxious about their benefits. A lot of changes and a lot of sanctions will, potentially, apply to people, and a lot of appeals are occurring from that. There will be even more demands on those welfare advice services than there are at the moment. However, the welfare advice budget has been dramatically cut, both for us at a local level and at a national level, through the legal aid budget and through our local authorities. At this stage, we have absolutely no idea from central Government funding where we are going to get advice from. At a local level, it may be taken in-house with our local authorities, where we may get a significantly smaller pot of money to deliver the services.
The thing about welfare advice is that it is independent, and that is absolutely fundamental to people coming to us, not only to access that advice, but to reveal all their hidden needs, which result in them quite often getting sanctioned. If we were to take that in-house, and if it was to be done at either Jobcentre Plus or through our local authorities, a lot of people would not declare a lot of their problems—their debts, their addictions and so on—that got them into the position that they are in. It is absolutely fundamental that that advice exists until there is no need for it. In an ideal world, we would see universal credits implemented, the system would be much simpler and people would not need to appeal the processes much; but until that stage, we would urge that there is a transition fund in place for the welfare advice services.
As you are describing, universal credit is going to change the way in which benefits are claimed and paid in the future. What do you think are likely to be the potential benefits and advantages of those changes and the potential pitfalls?
Maeve McGoldrick: To start on the negatives, I spoke to one of our front-line advisers today and they said that, for the bulk of people, it is a benefit for Government, because it will be cheaper to administer. It will be of huge benefit for people who are quite close to the labour market and capable of accessing employment, because they find it frustrating to have to go into Jobcentre Plus on a regular basis and it holds them back from looking for employment. But the people we deal with have English as a second or third language. They are under the poverty level, so quite often they do not have access to the internet. A number of additional cases have come from social services and are in temporary accommodation at the moment, or living on friends’ sofas. The online services will just not be appropriate for those kinds of people. They do not have access to them, or they would not understand them, or they might be intimated by them, not claim benefits at all and be pushed underground. It is about getting that combination right so that, as well as online services, face-to-face support is available for the people who need it most. It is also about ensuring that they can access that support, so that whenever it comes to appeals, for example, or to the claimant commitment, people with those kinds of difficulties and barriers will be able to access an individual who will guide them through the universal credit process.
Duleep Allirajah: Simplification is definitely a benefit. However, you can simplify and lose the sensitivity to needs and the tailoring to meet additional needs. There is a real risk that, if you simplify the system by levelling down, it is not flexible or responsive enough to meet the specific needs of people—disabled people, cancer patients, people with children and so on. The balance needs to be struck. At the moment, we have concerns that the balance is not being struck.
Marc Bush: I agree with everything that my colleagues have said. In respect of the real-time system capability, it is a really good move towards that real-time element. People frequently find that they have the wrong finances at the wrong time. It would be a benefit if we increased the accuracy of payments, so that they came at the times when people most needed them. I just want to flag the fact that there are many situations in which disabled people will need that personal touch to be able to navigate the system and to understand what their commitments are. I also want to flag the problem of implementing a very large IT-based system. We know the historical problems with Government projects of that nature, and delivery will be a challenge.
The Bill sets out a new conditionality and sanctions regime for universal credit. I should be grateful if you commented on the effectiveness of sanctions at getting people into work and out of poverty for the different client groups that you advocate for and on whether you agree with the Government’s proposals now that will toughen up elements of the sanctions regime. I am particularly interested to hear from Nicola and Maeve generally but from Marc about the implications for disabled people and people with long-term health conditions.
Nicola Smith: I can briefly give our general view, which is that there is not a strong relationship between financial sanctions and changing behaviour. Evidence published for the Department for Work and Pensions shows that often people who are sanctioned do not understand why they have received a sanction. If they have not understood why they have received a sanction in the first place, it is unlikely to have an impact on their behaviour. Evidence also shows that the people who are more likely to receive sanctions are those with learning disabilities, very low skills or English as a second language. Again, that points to people receiving sanctions as a result of not understanding the way in which the system operates. Sanctions cause financial hardship and, in our view, lead to a much higher risk of people completely disengaging with the system, thereby reducing their chances of moving back into work in the longer term.
Marc Bush: We would echo every point that has been made there. Our concern is that some of the measures around conditionality are effectively removing risk away from Government and pushing responsibility towards the individual. We are concerned that, in some of these measures, the necessary safeguards will not be in place to stop that risk surmounting to a position where disabled people will not be able to meet those conditions.
Maeve McGoldrick: We are coming at this from people who offer advice and who have been hit by sanctions, but also we are an employment support provider. It is quite interesting for us to comment on this. When people come under a new deal programme, sanctions play a role within that. We do not issue them ourselves, but we do pass them on to Jobcentre Plus, and we recommend that a sanction is needed in a particular situation. In effect, it is effective for us to be there. However, we very rarely use sanctions, if at all, with the people who get passed over to us. What we find more effective than sanctions is doing a really thorough needs assessment and understanding what the barriers are to these people getting into work and why we would potentially apply a sanction to them. Once we can identify those needs and overcome those barriers, there is a mentality change; people want to move into work because they are accessing the right kind of support and those fundamental barriers are being addressed. We think that that presence should be there.
There are a number of recommendations that we would make about the sanctions regime at the moment. There is a pilot in the Bill. We would like to hear more about that and how it will be synchronised with the reforms that will come in under universal credit. As the question indicates, we knew nothing about the effect on sanctions and the extent to which they will be applied. It is fundamental that we run a pilot on that so that we can understand the effects.
Also, looking at the conditionality regime, we think that currently people are being sanctioned based on what type of benefit they are on. Again, that is putting people in a box: “You’re on JSA or ESA. Therefore, you will be placed under this regime and be pushed into work.” But somebody who has been moved on to JSA may have a number of serious barriers to employment and may be extremely difficult to get into work. Therefore, the conditionality regime may not be appropriate for them, because those issues need to be overcome first.
We recommend that the conditionality regime be based on the needs assessment done with the adviser the minute that person walks in the door of Jobcentre Plus and that that is agreed to collaboratively in the claimant commitment, whereas the approach at the moment is very much, “You have to sign up to this. This is what you have to agree to.” The reason we say that, other than fairness, is to encourage responsibility. We do that very much with our work programme, which is about asking, “What would you do?” and saying, “I will support you,” as a consequence. We are not really seeing that in the sanctions regime at the moment. We support the carrot-and-stick approach, but we do not think that it is quite right in the current Bill.
Duleep Allirajah: May I add that there are two sides to the deal? If you are being required to undertake work-related activity, you should also expect tailored, personalised and appropriate support to help you get back to work. Our experience with cancer patients is that the tailoring is not working. Our benefit adviser deals with people who are terminally ill or undergoing chemotherapy who are being sanctioned. They find that the old pathways to work programmes are not helping them because they do not understand the specific problems that cancer patients face. We will have the work programme. It is untested and we do not know what it is going to be, but you cannot simply impose sanctions without ensuring that people get help that works to get back to work. That is the problem. This is entirely a one-sided deal.
Maeve McGoldrick: Self-employment is a really important issue, not because we are trying to push that through enterprise at the moment, but if the mini-jobs and the earnings disregard are to be effective, the majority of people will go into self-employment to take up those mini-jobs. We approached a number of employers in east London to ask them what the likelihood would be of them taking on long-term unemployed people, in particular, who had just come off incapacity benefit. Again, that is a major difficulty, but there is willingness. But when we say, “Would you take them on for two, three, four or five, or 10 or 15 hours?” there is horror on employers’ faces, particularly in deprived communities where employers are very small.
Self-employment is a key answer for mini-jobs to be effective. However, there is a massive difficulty with self-employment and the Department for Work and Pensions as a whole. We need to recognise how self-employment works and what problems it poses for the Department. We have done a lot of work on self-employment, particularly by very entrepreneurial people in the community. If they come from a poor background, they will need quite a long period of test trading to allow them to establish their business: even a mobile hairdresser, for example. That is very basic employment, but it can take some time to win even.
We are asking for a longer period of test trading, but the universal credit system also needs to be more responsive to how self-employment works. For example, if a home worker did 80 hours in one week but had an income of £50 coming back to them at the end of the week, we suggest that with self-employment, universal credit should recognise the actual earnings at the end of the month, whatever they may be, rather than hours worked, as was in the White Paper, although that is not in the Bill. There was an assumption of a minimum wage as a floor. I think that that will deter many people either from declaring the work that they are doing or from going into self-employment at all, because it presents a huge risk for them.
This is an area that would be incredibly supportive, and we are really keen that the Government are pushing that agenda. Our major concern is that, first, there is not enough understanding about self-employment and how to become successful, and, secondly, there is the worry about undeclared earnings with self-employment. When somebody is on benefits, first, you have a risk to HMRC, but, secondly, you have a risk to the Department around undeclared earnings and benefits, so it is an issue about how we overcome those undeclared earnings. From our experience, what we find works best is to have a business mentor or an employment support worker working very closely with that individual, so they can continually assure them and guide them to declare their earnings, to play by the book and offer that continuous support to us as a consequence.
In the light of the amount of administrative errors and fraud that takes place in the benefit system, does the panel think that conditionality would restore some integrity into the system?
Marc Bush: All the figures on error and fraud show that error on the side of the Department is higher than fraud. There are small numbers of people who commit fraud and, of course, they should be dealt with in the appropriate manner. However, I do not think that conditionality alone will tackle that low level of fraud that exists within the system.
Nicola Smith: The TUC is not opposed to conditionality in the benefits system. We recognise the need for some conditionality. Our view at the moment is that the balance of rights and responsibilities has gone too far and that claimants already have very significant responsibilities placed upon them in return for an offer that does not offer them the rights that we would think they would be entitled to—for example, very high quality labour market programmes or the promise of a labour market programme that provided them with access to an opportunity to undertake a paid job. So we certainly do not see the need for strengthening conditionality.
One change that we would like to see would be to build into the system a greater use of warnings for people who are at risk of a sanction, so that before a claimant was sanctioned they would fully understand the risk that they were taking and they would fully understand the change in behaviour that the system was requiring them to make to avoid the sanction. We think that that might actually lead to quite a significant reduction in sanctions, and it would also lead to people understanding better the conditions of their claim.
Maeve McGoldrick: We have done quite a lot of work on people who have committed fraud—people who have come through our doors in the past—and understanding their motivations. One thing that we would strongly support is universal credit, because it will dramatically reduce fraud levels, particularly fraud levels where people are doing it very much to survive and to get by and earning very small sums of money to top up their benefits. That is one of the main reasons why we are incredibly supportive of universal credit. It will reflect modern day employment where people are allowed to do many jobs, those small bits of work, and not be punished for them.
In effect, universal credit will reduce the number of smaller players who are committing fraud. We would therefore hope to see the fraud strategies in the Bill really focus on the bigger guys at the top who are earning a lot of money. I am not sure whether that is the case in the fraud strategy at the moment. We think it is still quite generalised, which of course it does need to be to an extent, but the resources should probably be focused on those who continue to commit fraud, even with universal credit in place.
You have attached a lot of importance to self-employment as a route off welfare. What is your view on the proposal that people who are self-employed should be deemed to have earned at least the minimum wage for the hours in which they are working in self-employment? One of the witnesses in the next group that is coming to us—the Tax Reform Group—says they are worried that self-employed people will get a much worse deal than they currently do. I wonder whether you would agree with that. How do you think the new system looks?
Maeve McGoldrick: Certainly, if it was based on actual earnings declared at the end of the month, I think people would get a fair deal. However, that requires a level of trust from the Department that somebody will declare exactly how much they have taken on board. A report released yesterday from the Federation of Small Businesses highlights that a lot of people who are self-employed need to keep the base amount of their money to be able to tide themselves over. There needs to be much more understanding about the nature of self-employment, how it works, and the level of income that people need to survive. We usually see a three-year period for the long-term unemployed to start making a profit out of self-employment. The first year they just about survive; the second, they start to become established and market themselves; the third year they are able to go independent. However, we think this is a really good group to focus on, because their aspirations for themselves are actually quite low, they are very realistic, and they have incredibly good budgeting skills, because they have been on benefits for some time. Those are the key ingredients to successful self-employment. We think the point you raised about actual earnings as opposed to an assumption of maximum wage will completely deter people from stepping into this. It just highlights that there is not an understanding from the Department about self-employment.
Nicola Smith: May I briefly add something? The TUC has undertaken a significant amount of work on vulnerable employment. We ran a large commission on vulnerable employment, which looked in detail at low-paid workers in self-employed jobs. That found a large number of workers in that situation were not earning the minimum wage and were often working far longer hours for far lower amounts of pay. I think it is fair to say that is the reality for a number of people who would find themselves self-employed and claiming universal credit.
We would also like to highlight the risk of false self-employment that some people face. That is an acknowledged problem when a minority of unscrupulous employers choose to define somebody as self-employed, when the worker may believe themselves to be an employee, or under employment law may actually have employee rights were they to take the case to a tribunal. We think there is a risk that a small number of people who may find themselves in the system could find, for example, that an employer is treating them as self-employed for tax purposes, while they believe they are an employee and that could lead to some difficulties for that group with the implementation of universal credit, if the employer is not compliant with the tax law. That could lead to the worker losing out twice: they do not receive the proper payment from the employer and they could also find they do not receive the benefits to which they are entitled. We would draw the Committee’s attention to the fact that there is a minority of employers, who are documented—the Department for Business, Innovation and Skills has also done work on the matter—as avoiding employment law at the moment. That group of employers may pose problems for the introduction and implementation of universal credit.
Marc Bush: The argument, specifically in terms of the special arrangements for youth, is that young people, particularly those who have more complex impairments, who have not been able to engage in the labour market, have not had the exposure that they could have, if they were not disabled, to make national insurance contributions. Our concern is that they are being unnecessarily penalised because they are disabled.
Duleep Allirajah: I would echo that. People who are incapacitated in youth have not been able to enter the labour market and build up contribution records. The old severe disablement allowance recognised that, and that route to a non-contributory, non-means-tested benefit has been removed. That is potentially a problem.
Nicola Smith: We would also echo that, and also point out our view that the cut in money involved is actually very small in the scheme of things, but for a very small number of severely disabled young people it could mean a loss, we have estimated, of up to £100 a week. The total estimated saving the Department has noted from the change is £11 million. The Government’s wider proposals would reduce entitlement to contributory ESA to one year, which the TUC opposes. Were those proposals to be introduced, it is likely the cost of retaining the youth provision would be even less. We think that is a change that could have a significant impact for a very small population of young people, and it is very unfair to remove it.
Over the past decade, we saw huge social change. The contributory principle, which had been eroded for a long time, was largely finished off and replaced by means-tested benefits. Do you not think that saying, “Look, the reality is that the system has changed,” is the right way forward? The contributory principle has been substantially eroded and is therefore arguably not entirely relevant. Parallel to that, we seem to have a possible merger of income tax and national insurance, which, perhaps, recognises a reality that has been going on for some time.
Marc Bush: Contributory-based benefits are a recognition that people want to work, have worked, and have made a contribution to the state. The Government’s rhetoric is about making work pay. But at the same time, they remove payment from people who have, with all good intention, worked and contributed, but have experienced sickness and have had to withdraw to manage their condition before re-entering work. That measure is unfair and it goes against the core principles of the legislation.
Nicola Smith: We agree. The TUC strongly supports the contributory principle and its retention in the welfare system. We also think, particularly with respect to contributory employment and support allowance, that it is extremely unfair to tell people who have built up contributions over their lifetimes that, retrospectively, the benefit to which they expected to be entitled will be removed.
People who will no longer be able to receive that benefit might be people who have retired due to ill health. They might be people who have received a payment because of an industrial injury, who might have been injured while at work. It is likely that many of those people will be close to retirement age. We think it unfair to say to such people, who have contributed throughout their working lives, that retrospectively their right to that benefit will be removed.
The Bill introduces an overall benefit cap. Do you agree with the principle that the amount a household can earn on benefits should not exceed the amount that they could earn in a low-paid job?
Nicola Smith: We do not agree with that principle; we believe that the amount a household receives in benefit should be related to its need. We believe that the benefit cap imposes an arbitrary reduction on households that inevitably have the greatest needs. It will affect very large families and will, in some cases, lead to extreme increases in poverty rates among such families, particularly for children.
Maeve McGoldrick: I would add that rather than having a general cap, we would like to see benefit depending on households and their rents. But that costs more to administer and so probably defeats the purpose of the measure. We are not in a position to comment on why the cap is being brought in; we base our view on the evidence of people who we have seen coming through the door. We would base the measure on household numbers and rent costs.
Maeve McGoldrick: I would add housing benefit, but, going back to my original point, that would defeat the cap’s purpose. From our perspective, the measure is about changing the mentalities of people on benefits and creating fairness for the taxpayer, so it is difficult to say what we would remove from the cap.
Nicola Smith: No. I suppose, reverting from my previous answer, I cannot think of a situation in which a cap would be acceptable, full stop. The reason why people receive high levels of benefit is inevitably because they have high levels of need. So it seems that the people who will be subject to the cap will be those with the greatest need. I cannot think of a situation in which a particular set of benefits should be included or excluded, because such benefits are meeting the needs of that household.
Marc Bush: I would agree. Even in the context of disability disregard, at the moment, that disregard seems quite arbitrary. Given the concerns we have about calculating the actual additional costs that disabled people face and have to pay effectively out of their own income, we are concerned that that may have been done in an arbitrary way.
I am interested in the issue of benefit levels for two single people as opposed to couples. In my constituency, there are 10% more women than men on the electoral role for one simple reason: in the benefits system, it pays to not declare that you are living as a couple. Do you think that the system we are putting in place will help us to deal with that issue? Or will it remain the same, or will it get worse?
Maeve McGoldrick: I think that the universal credit is actually quite positive in terms of removing the couple’s penalty that exists at the moment. We would be very supportive of that, and we currently see similar situations where we work, basically because it makes no sense not to. However, we would like to highlight the inconsistency with the disregards for single people and couples on JSA. Currently the disregard for JSA stands at £5. That will be increased if you are a couple on JSA, but not if you are a single person on JSA. We understand why that has been put in place—financially it evens out at a later stage—but we would like to reiterate that the reason behind bringing in a higher disregard is to allow people to take small steps back into employment when they have been unemployed for a long period.
You will have a lot of people coming off IB, going on to JSA, and they will be terrified to take up large pieces of work—they may have had mental health problems in the past and be afraid of a relapse—so mini-jobs would be ideal for them. However, because they are single, they will not be allowed to use the disregard—their benefits will be tapered off more quickly. We would like to look at how we can balance out the fairness in the disregard between single people and couples on JSA.
Unless any colleagues have further questions I think that exhausts our questions for this panel of witnesses. On the behalf of the Committee, I thank you very much for coming, and for taking the trouble to go through a fairly exhaustive series of questions. We are most grateful to you—thank you very much indeed.
Lizzie Iron: Yes. It is one of our particular concerns, and I think citizens advice can offer an overview—a wider range—of how the different impacts might affect people. The two groups we are most concerned about are people with disabilities and people with particular child care costs. The reason for our concern is that we think they are affected by several different measures. The problem with going through the Bill clause by clause is that you may not necessarily identify how a number of different clauses are going to have a cumulative impact on particular groups. How much detail would you like—a little more than that?
A little more, but a quick overview would be really helpful, particularly on what you see as the points of pressure and tension that the Government need to consider most carefully.
Sue Royston: There are three main groups of people with disabilities that we are concerned about in relation to the universal credit. The first group is those who cannot work and the second is those who can work. Some would still be found not fit for work; others would be found fit for work; however, both would have a disability. The third group is those people who suddenly have to stop work.
On the first group, those who cannot work, there are three mechanisms in universal credit—the work-related component, the support component and the disability disregard. There is no mention of the severe disability premium. We are very concerned about that. We think that the severe disability premium performs a really important function in the present system. It is given to people on a means-tested benefit who are at least receiving middle-rate care and who live alone and do not have a carer. That is because there is a recognition that people in that situation have a lot of extra costs. For instance, somebody who is registered blind would typically be on middle-rate care. If they were on a low income and living on their own, they would get the severe disability premium. If support came just through those in the support group, a lot of people who are registered blind would not be in that support group and would not get that. The severe disability premium is worth quite a lot of money, because people have a lot of extra costs if they have a severe disability.
The second group are those people with a disability who work. We do not have the information about who is going to get help within that group. It is fairly clear that if somebody is still found not fit for work under ESA, they will get the work-related component and the disability disregard. It will not be the same amount of money as permitted work, but it will fairly well reflect the present help that is available through the disability element of working tax credit.
Our concern is the group of people who are going to be found fit for work, but who still have a very significant disability. As the rules on ESA tighten, more and more people have very significant disabilities and are being found fit for work. They obviously will not get the work-related component we assume, but it is not clear whether they will be eligible for the disability disregard. A lot of that group would still be eligible for the disability element of working tax credit under the present system. If they do not get the disability disregard, they are going to be a great deal worse off. Even if they get the disability disregard, they are going to be worse off than under the present system. The present system obviously has a lot of complexities, so you cannot say at every stage how much people are going to be worse off. But we have done a number of scenarios that we are happy to share. They show that, through most stages, people who only get the disability disregard are going to be worse off than people getting the disability element of working tax credit.
We are extremely worried about the third group that I have mentioned. We are talking about people who stop work because of a sudden illness—for example, they are suddenly diagnosed with cancer and they need treatment, or they have a stroke and a serious disability. During the first six months of somebody’s illness, whether you are on SSP or ESA, you can claim working tax credit. It is not clear whether there will be anything in the present system that reflects that. Looking at the way it could be done, if the present system treated your statutory sick pay and your ESA during the first six months as earnings, you would then get any disregard that applied to your type of household. You would also get the tariff, so you would not lose all the money, pound for pound. It is really important that that is done, because people will lose out a lot compared with the present system during the first three months.
There are other things that kick in that are not in the universal credit. The proposal within the PIP to have a qualifying time of six months rather than three months means that somebody who has had a stroke, for instance, and who might after three months get middle rate care and higher rate mobility—they need that money, because they are going to have a lot of extra costs—will have to wait six months, which is a long time to wait. It is not only that; if severe disability premium is included, they also get that after three months in the present system. And going further on, they will lose their contribution-based ESA, if they have a partner who works or if they have savings.
We have particular concerns about that because CABs obviously advise on benefits and debt, and a very important reason why people come to us in debt is because of exactly that situation. We did a survey a year ago—
Robin Williamson: I was just going to add to what Sue said that one of the routes into work, and a very important route into work for people with disabilities coming through ESA, is through self-employment, particularly if more traditional forms of employment are not necessarily suitable for them. They might have difficulty getting out at a particular time and going to a particular place. Self-employment is important, and it is vital that the kind of support that working tax credit gives to self-employed people should be carried over into the universal credit. At the moment, we have proposals for a minimum income floor, and suggestions in the White Paper and the Bill that there might not be the same income measurement, which gives recognition to the expenses that a business incurs, may well be another factor weighing against disabled people wanting to work under the new system.
Thank you very much, Sue. That was very detailed, and I will just press you a bit more on those details. We will hopefully look at your work as well. There are many arguments for the universal credit and I know you see the arguments for it. If we are going to introduce it, we should try to make it as effective as possible, particularly for disabled persons, and to replicate the premium system. You have said how that would be done for people in the third category. Do you have any specific proposals on how we could do that for people in the first two categories?
Sue Royston: Yes, absolutely. We think that it performs an extremely important function. We would like to see the disability disregard, and we would like to see a mechanism for that that really looks at disadvantage in the workplace, because of the changes to the disability element of working tax credit. There are so many changes going on in the system that people with more and more serious disabilities are being pushed outside the criteria. We are very worried that we are going to see a lot of people who will not be able to access help. They will be pushed outside and lose in all sorts of ways, so we would like to see a separate mechanism. For instance, PIP is going to exclude a lot of people with lesser disabilities, but they are still at a disadvantage in the marketplace.
For clarification, do you think that more people should be brought into the universal credit system and that there should be more emphasis on disability within it?
Sue Royston: There is a lack of detail about people with disabilities. Calculations have not been done in the equality impact assessment. People say, “Well, we haven’t yet got the detail, so it hasn’t been looked at yet.” We are concerned that unless a lot more support for people with disabilities is brought into universal credit, they are going to be a lot worse off.
Lizzie Iron: We think that we are also losing the ability to define who is disabled—who has a disability—particularly in relation to their capacity for work. As Sue says, the narrowing of the criteria to achieve disability benefits has a knock-on effect to what sort of support people get who may not be eligible for the benefits, but who clearly have limited capacity in the workplace. Something that maintains that assessment and recognition of people’s limitations to work is one of the things that we are afraid is being lost and needs to be reintroduced.
The introduction of universal credit is clearly going to change the way that benefits are claimed and paid. May I ask about two points raised in Mr Williamson’s written evidence to us? First, you expressed concern that there is an over-reliance in the new system on real-time information. Will you tell us what the pitfalls there might be? Secondly, you talked a moment ago about self-employed people, who clearly cannot be dealt with through real-time PAYE information. You said in your written evidence that you think that they might get a much worse deal under the new system. Is it clear to you how, in principle, self-employed people should be treated, given that it is hard to know what their income in any given four-week period is? Will you comment on those points? If CAB has comments as well, I would be interested.
Robin Williamson: Real-time information will capture pay and tax and national insurance contributions on that pay in real time as it is paid to the employee. Income for PAYE purposes and for tax purposes may not be the same. Almost certainly, there will be some differences between the definitions and the measurements of income within tax on the one hand and within universal credit on the other. Even under tax credits, which are much closer to income tax than is the traditional benefit system, there are some small differences in how you define a benefit in kind and so forth.
If you have any major differences, you are very likely to have distortions in the transition of that information from HMRC to DWP, and from use for purposes of the PAYE system to use for the purposes of universal credit. For example, if you allow the whole of a pension contribution for tax purposes, but only half the pension contribution for DWP purposes, you are going to have to add back that extra half somewhere in the transition. We know that computers do not always do what we expect them to do, and if error creeps in during the transition from tax to universal credit, whose responsibility is that going to be? Is it going to be the responsibility of the claimant to check? If so, how are they going to check? What paperwork do they have to enable them to check? What support will be available to people who cannot cope with paperwork, lots of figures and calculations? There are enough people who find a PAYE notice of coding difficult enough. What is going to happen to benefit claimants faced with a similar document? How forgiving will the systems for recovery of overpayment of benefits and imposition of penalties be to people who simply cannot cope and cannot spot these particular types of official error?
There is another difficulty between tax and social security. Tax is based on the individual; universal credit will be based on the individual if single, or on a couple if the individual is part of a couple. That is another potential for error in the transition from one to the other. Somehow you are going to have to merge the two bits of information that the tax system is giving you. People are normally paid monthly. If the universal credit assessment period is anything other than monthly, there will have to be a further adjustment for real-time information.
Moving on to self-employment—that, as you say, is outside the scope of RTI—how do we find out what self-employed people earn? The tax system is quite good at picking this up, at assessing someone’s profit. We should bear it in mind that profit is very different from drawings. Someone might draw on a business that might be funded by a bank loan or might be living on income provided by a spouse or loans from a relative, or whatever, in the early days or at a time when the business is doing badly. However, the tax system, as I said, can pick up and assess profits quite efficiently.
The profits picked up by the tax system by and large reflect the economic reality of how the business is actually doing, and it does not assume any particular level of income. It looks at the money coming into the business and the expenditure that the business owner has to incur to keep the business afloat. It analyses that expenditure to capital and revenue, and it gives relief for losses.
It is important that universal credit recognises all those things simply to preserve the work incentives that working tax credit has. If you have information flows between HMRC and the DWP—I believe that two-way information flows are provided for in the Bill—it should be reasonably straightforward for one Department, or one computer system, to be able to transmit to the other, or for HMRC to transmit to the DWP such information as it has.
Okay, there will be a time delay at the start of the business, and there may be a period during which DWP will have to assume a level of income, perhaps based on previous year income or an estimated profit as you are going along, and make adjustments later, as and when the business owner reports to the tax authorities, but that is, in short, how I would suggest the information is transmitted.
May I ask one small question? People have recently been having difficulties in getting a pension, perhaps because they have retired early but are still working. Matching laws up does not seem to happen. Some of those people could be in their 50s, and may still have dependent children. If these things are not being matched up, people are getting tax demands because the system does not recognise them. Does that not suggest that it will be quite difficult to match everything?
Robin Williamson: A lot of work is going to have to be done to get the systems to match up. You are obviously referring to situations where people have multiple income sources. A lot of work has been going on within HMRC to introduce a new computer system that will group information by the individual rather than by the income source, so, in theory, it should be easier in the future to cope with cases where an individual has multiple sources of income. The computer systems should, in time, get better at collating all the income sources and giving the individual the correct code. We have not reached that point yet—it is fairly early days. Whether we shall have reached it by the time RTI is scheduled to start in 2013 is anybody’s guess. We think that that is a pretty ambitious timetable.
We heard in an earlier evidence session that applying for the benefit is still likely to be a complex process. Also, the Bill proposes a £50 civil penalty for claimant error. Given that, what assessment have you done, if any, on the need for advice when the process comes in? Also, given the Government’s proposals on legal aid and cuts to the advice sector, what is the likelihood of advice being available?
Lizzie Iron: That is a key question for the future citizens advice service. We are particularly concerned because, as you say, any new system will require explanation of how it works. We support the aim to simplify the system, but there is a danger of oversimplification, which needs to be considered. Therefore, there will be a real demand for advice: “What does this mean for you?” We are already seeing such concerns coming through. People are already frightened, particularly about disability benefits but also about the universal credit as it comes in. The demand for advice will go up but the supply will come down because, as you know, legal aid is a problem. We welcome the extra year’s funding for the financial inclusion fund equivalent, but the Bureau is still left with two of its three main sources of income under threat.
The impact on clients—on the people out there—is that if they do not have advice, they either will not apply and therefore will not get the benefits that they are entitled to, or they are likely to end up in the circle that you referred to of error and potential penalty. We feel very strongly that the civil penalty is inappropriate. It is likely to hit the people who are the most vulnerable—people who struggle with forms and information. We are already seeing that sanctions in the current conditionality regime tend to affect those clients of ours who are least able to cope with that sort of administration. We think that the idea of a civil penalty for clients who struggle to fill in a form that is not matched by some sort of compensation for official error is grossly unfair.
Lizzie Iron: I can see the principle, and we understand the point behind this, but, again, it is clear from our evidence that the provision that is supposed to come from local authorities in many, many cases does not. Therefore, to assume that it will be provided under the conditions under which it is supposed to be provided and therefore remove a condition where it actually is provided will have an impact on the clients. As you have heard rehearsed many times, that will trap them in residential accommodation and not give them any independence, which goes directly against the principles of the personal independence payment—a system that enables people with disabilities to share in as full a life as they can.
This is for Liz and Sue. From what you said, there seems to be a great deal of concern that the new assessment, which focuses on those with the greatest need, will exclude many disabled people currently on the lowest rates of DLA. How do you feel that that could be addressed?
Sue Royston: Yes, it is straightforward. We understand that there will be a 20% cut, and we understand that there is not going to be a cut in the higher rates. So if you keep the higher rate of mobility and—we understand—the lower rate of mobility is kept, you keep the highest rate of care. If you look at the numbers that are on the benefit at the moment, the calculations that we have done say that all the lower rate of care would go and either half of the people claiming middle-rate care would go or the amount that people got on middle-rate care would drop very substantially.
Again, on the subject of disability and people being unable to work and to go about daily tasks, the Government are proposing that aids and adaptations are factored into that. Do you think that is reasonable?
Sue Royston: Aids and adaptations are already factored into DLA. With some aids and adaptations, it is, of course, entirely right to take them into account. For example, someone may be able to walk perfectly well with an artificial leg or a stick. It is not fine to say that somebody in a powered wheelchair, for example, can therefore mobilise 100 yards and then should not get the benefit, because not being able to walk is actually a good proxy for having extra costs. They will have extra costs as a result of the powered wheelchair, and if they want to go anywhere other than their local environment, they will have many extra costs. For instance, I know somebody, who is in a powered wheelchair, who wants to retain her independence, which is what PIP is about, but that means that if she is going somewhere else, she has to get a specially adapted taxi. She cannot accept a lift from a friend, because her powered wheelchair will not go in the friend’s car. There are many extra costs, so it depends on which aids and adaptations you are taking into account.
We have 90 seconds to ask and answer this question. There will be a new penalty for those who knowingly fail to report a change in their circumstances. A concern has been raised on the impact of that change on people with multiple sclerosis or HIV, for example. What changes do you think are required in the Bill to ensure that there is fairness on that?
Robin Williamson: A lot will depend on the quality of the information that goes to people. Liz has asked what the role of official error is, and whether it is fair to charge people penalties when they have been misled by wrong advice given to them on a helpline, by some leaflet or an un-updated part of the website. We are seeing that sort of thing all the time in the world of tax, which I know is a particularly complicated subject, and universal credit will probably be similar.
Order. I fear that that brings us to the end of the time allocated for this panel of witnesses. I apologise for interrupting you in mid-flow, but the rules of the House demand it, and otherwise I would be struck off or something. Thank you very much for your kind efforts, which have been much appreciated, in giving evidence to the Committee this afternoon.