My Lords, I move this Motion because these regulations introduce additional waiting days before the first payment of universal credit. The period of waiting for this first payment is added to the already-existing waiting period of one month, plus the application and approval period before the award is made. In total, it is estimated that most applicants will wait about six weeks after an application before receiving their first payment.
The Government’s own Social Security Advisory Committee produced a very powerful and thorough report on these regulations. It had full consultation and went into great detail. It recommended, first, that these regulations should not proceed; and, if they did, that housing benefit should be removed from the waiting period. In their Explanatory Memorandum the Government agree that these waiting days are a cost-saving measure. This Motion asks the Government to agree the minimum change that the Social Security Advisory Committee asked for, to deal with the harshest parts of the policy. We on these Benches believe that a primary purpose of our social security system is to provide a safety net, to provide protection for those most in need who need help when sickness or unemployment hit them.
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As well as the Social Security Advisory Committee’s report, we can also draw on the reports of the House of Lords Secondary Legislation Scrutiny Committee: not one, not two but three reports—and that on a
piece of legislation which is subject to the negative procedure. The second of its reports contains strong criticism of the Government, saying that the Government’s response to its first report was,
“disappointing in that it largely repeated material already received by the Committee from the Department. The House may … wish to press the Minister for a better explanation”.
I hope that this debate will provide an opportunity for the Minister to do just that.
The effects of this piece of legislation will be: first, to push people to use food banks; secondly, to increase rent arrears; thirdly, to turn people to payday lenders; fourthly, to produce budgetary problems for registered social landlords and private landlords; and, finally, to lead to fewer private landlords taking benefit tenants. In that respect I have recently seen in the window of a rental property a notice saying, “No DSS permitted here”. Such notices used to appear some time back and I thought that we had dealt with the issue many decades ago.
There are major differences between the current waiting days schemes for jobseeker’s allowance and employment and support allowance and the universal credit scheme proposed in this legislation. Principal among those differences is that the old system related to a single benefit during a period of unemployment. The proposal in this legislation relates to universal credit, which brings together six existing benefits. These include tax credits and housing benefit as well as support for the current jobseeker’s allowance. So universal credit, unlike jobseeker’s allowance or employment and support allowance, covers both in-work and out-of-work benefits, and spans across a range of existing benefits, some of which are not currently subjected to the waiting days regime, in particular housing benefit.
The Social Security Advisory Committee rightly pointed out that claimants faced with a long wait for their first payment will prioritise feeding their families over paying the rent. Waiting time overall for that first payment will be in the region of six weeks—much longer than the monthly payment for the in-work system which universal credit is trying to emulate. The Government’s position on monthly benefit payments replicates how most people in work receive their pay or salary—but monthly means monthly, not six-weekly. For many workers, that means receiving your pay at the end of the month even if you have started work some way through that month. Very few workers would expect to have to work for six weeks before receiving their first pay. This waiting proposal is about people having no incoming money to budget for essentials such as food, utilities and rent.
The Government have an interesting policy on exceptions to their legislation. They tell us that they want a blanket policy with a limited number of exceptions. That is their stated ambition. They say that they want a simple and fair rule and that it will be difficult to state all the circumstances in which an exemption could apply. In view of this, I wonder how the Minister reacts to the statement in the Social Security Advisory Committee’s report that,
“the Government’s decision to set out a limited set of exemptions (with no further discretion) … is unexpected”.
The Government’s stated principle for this policy as a whole is that benefits are not intended to provide financial support for very brief breaks in employment or periods of sickness. They state that they would expect people to use their own resources to fund themselves during that period. However, people will not typically have savings to cover a six-week shortfall and pay basic living costs, which will include paying the rent.
HSBC reported in a substantial report just a few years ago that,
“34% of the UK population have savings of £250 or less”.
It further states that they do not have the means to cover a week’s rent, let alone six, or living costs if the breadwinner’s job were to end. This headline on savings is backed by a number of other studies referred to in the Social Security Advisory Committee’s report. For example, the Resolution Foundation found that more than half of low and middle-income households—middle-income households are crucially important in this—had no savings at all, and that two out of three had less than enough to see them through a month, let alone six weeks.
The Government intend that the waiting days will apply only to new applicants for universal credit, and say that most will already be receiving one of the legacy benefits, and therefore will not be treated as new applicants. Those who are not, so the Government allege, will be able to cover the six-week period without any money coming in from their savings. However, the evidence for these savings is clearly not there.
Further, as this Government’s £12 billion cuts to the welfare budget are implemented, there will be further erosion of the legacy benefits such as tax credits—so, if the Government achieve their policy aim of reducing the number using tax credits, there will be an even greater chance of people making new applications for universal credit. As it is, the Government estimate that 880,000 new claims will be made each year: that is the number of households the measure will affect. This could be a substantial underestimate of the number of claims there will be when the Government’s welfare reductions work their way through.
This measure will have a number of practical effects on families, households and others. The first concerns the availability of advance payments. The House of Lords committee today published a letter from the Minister on this matter, and the Government are praying this in aid. But last year, under the legacy system of benefits, two out of every three applications for an advance on benefits to help applicants cover the period when they were without any money were turned down. The explanation provided to your Lordships’ Secondary Legislation Scrutiny Committee in the last few days offers little hope that applicants will do any better under universal credit.
Another practical effect of the measure will be to create a disincentive for people to take a job with a six-month contract as it would mean them having to put in a new application. Rent arrears will inhibit free movement of labour. If you choose to prioritise feeding your family or ensuring that you have basic utilities such as electricity and gas in your home, and subsequently
build up rent arrears, that will reduce your ability to spend money on moving around to find a job because you owe rent where you currently live, so things will be even worse for you. Similarly, it is clear that because of the variation in rents around the country, claimants in high-rental areas will suffer most.
It is also clear that there will be some fiscal displacement. Additional costs, which the Government are not going to cover, will be passed on to charities and local government, which have to cover the costs of emergency housing and of supporting people, particularly where children are involved. Basically, there will not be an absolute saving to the public purse because those costs will be passed on to other bodies and agencies, particularly hard-stretched local authorities.
In conclusion, your Lordships’ House can send a strong signal to the Government tonight that it expects this waiting-period policy to be changed because it will force people to use food banks, because it will push people towards payday lenders and because it will put people into rent arrears and into a cycle of debt. I beg to move.