Timms complains of mis-selling of universal credit

The chair of the committee, Labour MP Stephen Timms, began the debate by moving a backbench business motion calling on the Government to increase relevant legacy benefits in line with increases to universal credit (UC), to take steps to return people who have been inadvertently left worse off under UC compared with their previous benefits, and to suspend the no recourse to public funds visa condition for the duration of the COVID-19 outbreak. The motion was agreed by the House at the end of the debate without being opposed.

Timms said ministers had made good decisions at the start of the pandemic. After a decade of cuts, the £20 increase in UC and working tax credit, and the reconnecting of local housing allowance with actual rents, were key for many to surviving the crisis. But he was dismayed that local housing allowance will be frozen, decoupling it from local rents. The spending projections show UC being cut by £20 in April, and people claiming UC are left fearing the worst, he said. He went on to say it is ‘absurd’ that people in identical circumstances, claiming different benefits (such as JSA and ESA) because of UC roll-out sequencing, are receiving different support. But Timms still said UC had been a ‘national asset’ in the pandemic.

The committee said the five-week delay between applying for UC and the first regular payment causes ‘great hardship’ and called for non-repayable starter payments to tide people over. The committee also called for ‘advances’ to be renamed ‘loans’, to make it clear they must be repaid.  Some had not realised that claiming UC meant losing tax credits, Timms added.

Some three million extra people have had to claim UC this year, but families working legally, with no recourse to public funds on their immigration status, do not have that safety net, Timms complained. He said the number affected by the benefit cap has almost doubled in the pandemic and some form of ‘cap easement’ is needed because the nine-month grace period is up in December.

Conservative Danny Kruger praised the role of UC in the pandemic, claiming that it would have been a  ‘complete disaster’ had ‘we stuck with the old system and the myriad benefits, mostly with paper-based administration’. On Timms’ claim of ‘mis-selling’ (because going on UC meant people losing tax credits), Kruger said ‘that is an exaggeration’ but suggested more can be done to explain to people what joining UC means and to make sure that they are able to check properly whether it is the right move for them.

People need more than just more work coaches, they need training, professional support and peer support, said Kruger. He urged the Government to deepen Help to Claim beyond the initial period of joining UC to create a system that works with businesses and charities. The gateway system for kickstart potentially offers a model for that, he suggested. He wants the kickstart scheme to be better than the future jobs fund which has quite a high drop-out rate. He argued for a more local and more flexible approach and one in which businesses play a central role in supporting local communities and helping people into employment.

Shaun Bailey, Conservative, warned of the ‘digital divide’ between people living in deprived areas and those who are better off, when it comes to complying with the benefits system (such as the verification of ID process). But Bailey is very impressed by the way in which jobcentres have engaged with people pre and post pandemic. He welcomed the temporary suspension of the minimum income floor which is ‘a welcome acknowledgement by the Government of the problems for the self-employed’.

On the £16,000 limit, he said ‘we must be mindful that people have not always burrowed such money away because they are well off; it is often intended to pay off liabilities, so the cash is not accessible’.

David Johnston, Conservative, said the performance of the DWP during the pandemic has been one of the unsung successes of this period, not least because it saw an increase in claimant numbers between February and August from 2.9 million to 5.6 million. Johnston said the delays to mandatory reconsiderations are a problem, though. He added: “The bottom 10 per cent saw no reduction in the income level that they received, and the Government’s package overall reduced the scale of losses by up to two thirds, in the majority of cases, for working people.”

Claudia Webbe, Labour, complained about the impact of the ‘callous’ no recourse to public funds  condition during the pandemic, saying it should be suspended for the duration of the pandemic at least, and adding that recent Home Office statistics show that the number of migrants with no recourse to public funds who have applied for destitution funds increased dramatically (by 572 per cent) in the months spanning the coronavirus crisis. Given the hostile environment for migrants, many do not know that they are eligible for any state support, she said. Separately, the MP said the Government must urgently reverse the funding cuts to regulatory bodies to ensure the safety and fair pay of those who work, and support our unions, which are championing them so ‘excellently’.

Labour’s Ruth Cadbury said there are real concerns about those people with no right to state help, apart from discretionary funds from already overstretched local authorities. Cadbury said people are using UC for the first time and having real trouble navigating a complex system, even those with a high level of IT and literacy skills. Many self-employed workers who were excluded, particularly in the creative and arts sectors, have also been denied access to UC owing to the savings threshold. She said: “Savings are not some sort of indulgence; for many, they are the fund being built up for a deposit, so that they can get on the housing ladder, now that 100 per cent mortgages are something of the deep past.”

The MP is concerned about those subject to sanctions and the reintroduction of the requirement for claimants to phone their DWP advisers or risk sanctions, which particularly impacts on those with learning disabilities or mental health issues. She wants to see an increase in legacy benefits in line with the £20 uplift to ensure that those on older legacy benefits, such as JSA, are not missing out. And she would like to scrap the benefits cap that penalises private renters, particularly in high-cost areas such as London, and suspend the savings cap.

To prevent increasing household debt, the Government should convert the advance payment loan into a grant, said Rachel Hopkins, Labour. Hopkins said it makes no sense that the Government did not extend the increase to legacy benefits, which include critical economic support for disabled people. The Government must make the benefit uplift permanent, as the economic impact of the pandemic will continue for the foreseeable future, she said.

The decision at the spending review to maintain the cash value of Local Housing Allowance (LHA) but not continue to link it to the 30th percentile of local market rents will worsen the situation by leaving LHA rates falling well behind the cost of private rents once again, Hopkins opined.

On no recourse to public funds, she argued it is not in the public’s interests to force people, many of whom are key workers and frontline medical staff, to adhere to restrictive public health guidance while also denying them access to the social security safety net.

Karen Buck, Shadow Work and Pensions Minister, responded to the debate for Labour. She said the DWP has proved its operational ability to deal with unprecedented demands, but that effort has been severely hampered by the impact of austerity over many years, by the inflexibility of UC and by a failure to co-ordinate policy across government departments.

The Government has taken a completely different approach to UC and working tax credit on the one hand, and to other legacy benefits on the other, with the latter receiving only a 1.7 per cent uprating after years of real-terms cuts, claimed Buck. This affects 1.8 million people on ESA, nearly 300,000 people on income support, nearly a quarter of a million people on JSA, and more than one million working families receiving child tax credit but not working tax credit. On present trends, next year they can look forward to a 37p a week uplift in their benefits, she said.

Wendy Chamberlain, Lib Dem, said: “The Committee’s report has rightly highlighted the failure of the Government to uplift legacy benefits in the same manner as UC. I have had a great deal of correspondence from constituents who have been directly impacted by this.”

Martin Docherty-Hughes, SNP, bemoaned that many people will not benefit from the £20 extra for UC because of the benefit cap. Docherty-Hughes said 4,100 of his constituents who are claimants have lost an average of £57, ‘which was deducted during a global pandemic’.

Responding to the debate, the Parliamentary Under-Secretary of State for Work and Pensions Will Quince stated that benefits would again rise in line with inflation at the start of the next financial year and the increase to local housing allowance rates in April this year will be retained.

On the question of whether the £20 UC uplift will stay beyond March, Quince said the Chancellor wants to “wait for more clarity on the national economic and social picture before he decides on the best way to support low-income families from April.” Discussions with the Treasury are ‘very much ongoing’, he said. He reiterated that UC will replace the legacy benefits system and that DWP continually makes improvements to the UC service in response to feedback and user research.

The minister said the fact that some people have no recourse to public funds is down to Home Office rules and ‘people without recourse to public funds can apply for a change of condition’. He said: “I stress that support has been available, including through the coronavirus job retention scheme, the coronavirus self-employment income support scheme, the contributory employment support allowance and, of course, support via local authorities, including the new £170 million COVID winter support grant, provided that the relevant eligibility criteria are met.”

The full session can be found here.

By Hamant Verma.