WELFARE RIGHTS AND WRONGS:

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1 WELFARE RIGHTS AND WRONGS: A Good Practice Guide To Welfare Reform Produced with financial support from the Scottish Government We re Housing Scotland November 2013

2 Credits The SFHA gratefully acknowledges the financial support of the Scottish Government for the production of this guide. The author would like to thank the advisory panel for their input to the guide: Tim Calderbank Caledonia Housing Association Jeremy Hewer Scottish Federation of Housing Associations Clair Malpas Cassiltoun Housing Association Rhona Penman Link Housing Association Joy Watson Hillcrest Housing Association And to those who agreed to be interviewed and provided case studies for the guide. The guide was written by Nick Hopkins of Nick Hopkins Consulting ( The Housing and Welfare Reform Library and the Knowledge Hub This library is accessible on the Housing and Welfare Reform Library: This guidance is also accessible on the Scottish Government s Housing and Welfare Reform Knowledge Hub: It is hoped that social landlords will promote both the Housing and Welfare Reform Library and Knowledge Hub to all their staff and that managers and their teams will help make it dynamic by uploading information about their own practice approach or wider examples they have come across.

3 Introduction. Welfare reform confronts social landlords and their tenants with massive challenges at a time of pressures on budgets and economic turmoil. Social landlords have a duty to take action in response, whether as a housing association with specific social, often charitable objectives, or as local authorities charged with promoting the well being of local residents and, in their landlord role, with providing an effective service for their tenants. They also face a business imperative to respond, if they are to sustain tenancies, prevent homelessness, effectively manage their income streams and protect the levels of service they provide. This guide is aimed at helping social landlords be as effective as possible in that response, mitigating the impact of welfare reform through better and deeper engagement in promoting financial inclusion amongst their tenants. Who is the Guide For? The guide aims to be of use to: Housing managers operating at a strategic level. Housing managers managing frontline staff. Frontline housing practitioners. Frontline financial inclusion staff. Members of management committees/ local elected members. Policy makers in national and local government. Funders of social landlords carrying financial inclusion work. The Guide is not intended to be read from cover to cover, but used as a resource dependent on the needs of the reader Building on the Previous Guide. This is an extended and revised version of the Guide to Housing Associations and Welfare Rights published by the Welfare Rights Officers Forum and Scottish Federation of Housing Associations in 2009 which was based on a study of housing association engagement in welfare rights in Scotland and a comprehensive literature review. The Guide has been extended to place it specifically in the context of the challenges created by welfare reform, and to include more in depth discussion of a greater range of the financial inclusion issues facing social rented tenants, and the appropriate responses to those issues. The guide was informed by a new series of interviews with housing association managers working both at a strategic and frontline level and welfare rights officers/ financial inclusion workers/ managers, and a review of the literature relating to good practice in financial inclusion and housing management literature, and of the developing research literature relating to the impact of welfare reform. A Guide for All Social Landlords. The Guide has been informed by interviews with practitioners in the housing association sector. Some of the messages it contains are targeted at that sector, rather than local authorities in their social landlord role. However, the vast majority of the guide is applicable to landlords in whichever part of the social rented sector they sit. 1

4 1. Understanding the Issues Produced with financial support from the Scottish Government

5 Understanding Welfare Reform sets out an overview of welfare reform and the key themes within it. It describes the major changes under each element of welfare reform, their impact on tenants, and their significance for social landlords. Understanding the Financial Problems Facing Tenants sets out the context, in terms of the money/ financial inclusion issues affecting tenants, in which welfare reform is set.

6 1.1. Understanding Welfare Reform. Introduction Every government since the founding of the welfare state has made changes to the benefits system. In that sense, welfare reform is nothing new. What is new, is the scale and pace of reform currently being undertaken. The Welfare Reform Act 2012 brings into force perhaps the biggest set of changes to the benefit system since the National Insurance Act of There is some continuity from previous governments in the concerns that are driving reform. The new reforms are designed to: Deal with disincentives to work. Make the system more responsive to changes in circumstances within a household. Make the system more reflective of changes in society. However, there are significant differences: The reforms are designed to be a key element in the government s austerity agenda, with targets for the overall savings they are to achieve. The reforms are intended to create a simpler system, easier to navigate and understand for claimants, in which income is more predictable, contrasting with a current system that it is argued is excessively complex. Previous reforms have involved both older people and people of working age. In contrast, the current UK Government is committed to insulating older people from the impact of cuts to the benefits bill, and has instead focused on benefits for people of working age. Elements of Change. There are three main elements to the changes being brought in; Three key transitions involving the replacement of benefits by another benefit, immediately for new claimants and gradually for existing claimants of the legacy benefit. A number of salami slice cuts being taken from entitlements. The devolution/ localisation of some benefits. General and Specific Impacts. In the discussions that follow of each of these elements there is discussion of the specific impacts of particular changes to the benefit system. There will also be a series of impacts common across the changes, with tenants at risk of: Being pushed further towards poverty, Being placed at greater risk of experiencing debt and other financial problems, Having reduced ability to pay their rent, unless they can find employment, increase their hours in work, find other ways of increasing their income or somehow reduce household outgoings. NB: Extended Timescales, and Continuing Complexity Welfare reform is taking place across a long period of time. The introduction of Employment and Support Allowance began in 2008, and it will be at least the end of 2017 before current reforms are fully implemented. Further change, particularly in the context of changes in Government or constitutional change, cannot be ruled out beyond that point. The incremental way in which reforms are being rolled out means that although we are by now about half way through the welfare reform process in terms of time, we are still in the early stages in terms of its impact, despite those effects already being felt by tenants. 2

7 This extended timescale means that at different points over the next few years: Some tenants will have made the transition to new benefits, whilst others will not. Some tenants will have made the transition to some new benefits but will still be awaiting their transition to others. Further complexities will result from particular aspects of the changes: Not all unemployment or income related benefits are being parcelled up into Universal Credit. Some older people are not entirely protected from welfare reform under Universal Credit. The devolution of control over the replacements for Council Tax Benefit and the Social Fund. For those engaging with tenants on benefits issues, this means that: Understanding the benefit system will require knowledge of both before and after systems. Understanding where a tenant sits in the benefit system now, and where they may sit in the future, is more of challenge. Predicting tenants financial future may become more of a challenge. Supporting tenants to access their entitlement may mean dealing with a number of different processes and systems, in a way that may be at least as, or even more complex than, under the current system. 3

8 1.1.1 Transition I: The Creation of Universal Credit. The importance of the introduction of Universal Credit for social landlords cannot be overstated. Given the income profile of social rented tenants, the vast majority of social rented tenants of working age will be reliant on Universal Credit for some of their income. Rationale Behind Universal Credit Universal Credit will replace most means tested benefits and the tax credit system, aiming to: Bring together a range of working-age benefits into a single streamlined payment. Help claimants and their families to become more independent. Improve work incentives. Smooth transitions into and out of work, supporting a dynamic labour market. Simplify the system, making it easier for people to understand, and easier and cheaper for staff to administer. Reduce in-work poverty. Cut back on fraud and error. Universal Credit has also been designed explicitly to encourage people to manage their money differently, and to take responsibility for more elements of their household expenditure. Timescale for Change. The timescale under which Universal Credit will be delivered continues to be uncertain. Implementation of the transition has slipped due to problems with IT and a range of other issues. The Government remains committed to completing the transition to Universal Credit by However, it has acknowledged that only a small proportion of potential claimants will have made the transition to the new system by March The focus is currently on the piloting of transition to Universal Credit in a small number of Job Centre in the North West of England, with a further six Job Centres, including Inverness as the Scottish pilot, becoming involved between October 2013 and March Further updates on the situation with Universal Credit will be posted on the SFHA website. Entitlement Legacy Benefits Universal Credit will replace: Income-based Job Seeker s Allowance. Income-based Employment and Support Allowance. Housing Benefit. Local Housing Allowance. Working Tax Credit. Child Tax Credit. Income Support. Even after the full introduction of Universal Credit, people will continue to claim contribution- based Jobseeker s Allowance and Employment and Support Allowance, though the conditions and rules attached to these benefits will be changed to align with Universal Credit. Calculating Entitlement A household s Universal Credit entitlement will be made up of: Personal amounts for a single claimant or couple; Additional amounts for: o Children (or qualifying young people), with additional amounts for disabled and severely disabled children. 4

9 o o o Rent (or, to a limited extent, mortgage) costs. People with limited capability for work or work-related activity. People with regular and substantial caring responsibilities for a severely disabled person. Disregards and Tapered Withdrawal of Entitlement. People will be allowed to earn a certain amount before their Universal Credit begins to be withdrawn. These earnings disregards will be set at different amounts dependent on household composition, with one disregard available per household. Disregards will vary for: Single people and couples without children. Lone parents with one or more children. Couples with one or more children. Disabled singles or couples. Above the household disregard level, Universal Credit will be withdrawn based on a taper of withdrawal of 65 pence for every additional pound earned. Conditionality and Sanctions The Claimant Commitment All Universal Credit claimants, including those in work, will have to sign a claimant commitment. The responsibilities they have under that claimant commitment depend on which conditionality group they are placed in, largely determined by the level of their caring responsibilities, or the impact of their health on their ability to work. As an illustration those judged to be work ready, i.e. those currently eligible for Job Seekers Allowance will be required to: Look for work. Be immediately available for any work which pays National Minimum Wage and is within 90 minutes of home. Attend JCP interviews Participate in mandatory employment programmes. More detailed information is available on claimant commitments for different groups at New Sanctions Regime The Universal Credit claimant commitment will be backed by a stricter sanctions regime (already introduced for Job Seekers Allowance claimants in October 2012). The sanctions regime is also becoming less flexible, no longer being discretionary, a shift from the previous system in which a local DWP decision maker determined the length of application of a sanction. The level and length of sanctions that will be imposed on claimants depend on: The extent to which the person is job ready. The particular way in which they have failed to meet their claimant commitment. The number of times that they have failed to meet their claimant commitment. The most job ready claimants may be sanctioned for 3 months for their first failure to take up an offer of paid work/ refusal to apply for a job, or if they leave a job voluntarily. Second and third sanctions for these actions are six months and three years respectively. Sanctions for other failures are less severe. Sanctions for more vulnerable groups will last for less time, assuming they re-engage with the system. Again, more detail is available at: 5

10 Hardship Payments Hardship payments will be available for who are sanctioned. However: These payments will only be made on condition that those sanctioned have complied with all work-related requirements in the previous compliance period. Any payment will be recoverable from future UC payments once sanctions are lifted. Accessing payments may involve a waiting time. Additional Change- Conditionality for People in Work People in work claiming Universal Credit will be subject to a conditionality regime, a significant change from the current tax credit system. People with weekly earnings less than those obtainable from a 35 hour a week job paid at minimum wage will be expected to seek to increase their hours/ find additional work. Piloting of this approach begins shortly. There remains considerable uncertainty about how this aspect of the reforms will work out in practice. There are concerns that it will penalise people who are underemployed, i.e. who want to work more hours, but cannot find jobs which allow them to do so. Monthly Assessment and Real Time Communication The Universal Credit system requires real time communication between the PAYE system at HMRC, and the DWP s computer system, allowing the automatic communication of changes in earnings to the DWP without involvement from the claimant. Universal Credit will be paid monthly and in arrears. The monthly assessment period will run from the effective date of the claim, and each subsequent assessment period will begin on the same date of each month. Monthly assessment will mean that payments will only be made to claimants with a full month s entitlement. The effect of changes in circumstances on entitlement will be calculated as if they had occurred at the beginning of the month. Universal Credit and Financial Behaviour Universal Credit has been explicitly designed to change the behaviour of claimants: Encouraging them to manage their money on a monthly rather than fortnightly or weekly basis. Increasing the number of payments over which they are responsible, in particular making them responsible for the payment of their rent if they are a social rented tenant. Pushing them towards making claims and undertaking key money management tasks online. Changes in Payment and Claiming Methods The introduction of Universal Credit will see a number of changes to the methods of payment and claiming. Payment will be made in a single lump sum on a monthly basis. The change to a single monthly payment aims to reflect the situation in the workplace of being paid a monthly salary, and is intended to help the transition to work of people who will need to become used to being paid in this way. The single payment will be to a single member of the household. Currently, different benefits may be paid to different adult household members. The DWP expects to make the vast majority of payments through BACS transfer into bank accounts. The DWP intends that over 80% of claims for Universal Credit will eventually be made online 1. There will be no paper application forms for Universal Credit, anyone not wishing to 1 The Work and Pensions Committee reports the DWP as referring to take up of online access on the following trajectory, 50% in 2013, 55% in 2015, 80% in The Committee report suggests that it is not clear what the DWP means by take up of online access. Referenced from Universal Credit Implementation: Meeting the Needs of Vulnerable Claimants House Of Commons Work and Pensions Committee 22 nd November

11 make an online claim will have to make phone contact with the DWP, and will have their details taken and inputted into a digital claim form. Payment to Tenants not Landlords Universal Credit includes a housing element, replacing Housing Benefit. This will be part of the monthly payment made directly to the tenant, who will then be responsible for paying their own rent. The DWP has indicated that there will be two groups of people excepted from this change, with the housing element within their Universal Credit being a managed payment to the landlord: People who are classed as vulnerable. People in significant arrears who reach a particular trigger point, at which the landlord can request to have managed payments made to them. The assessment of vulnerability on which the decision to have a tenant s rent paid through managed payments will be made based on two sets of factors, which will also be looked at when considering if it will be necessary to pay a claimant more than once a month, or to make a payment to more than one person in a household. Tier one factors, indicating a probable need to be placed on managed payment, include people who have/ are: Drug / alcohol and / or other addiction problems e.g. gambling. Learning difficulties including problems with literacy and/or numeracy. Severe / multiple debt problems. In temporary and / or supported accommodation. Homeless. Affected by domestic violence / abuse. A mental health condition. Currently in rent arrears / threat of eviction / repossession. Young, either a 16/17 year old and / or a care leaver. Families with multiple and complex needs. Tier two factors, indicating a possible need to remain on managed payment, include people who have/ are: No bank account. Subject to third party deductions from their benefit (e.g. for fines, utility arrears etc.). A refugee. A History of rent arrears. Previously been homeless and / lived in supported accommodation. Affected by a physical disability or sensory impairment. Just left prison. Just left hospital. Recently bereaved. Poor English language skills. Ex Service personnel. NEETs - Not in Education, Employment or Training. The working assumptions from the DWP are that people will be supported to leave the vulnerable category of claimants, and that if they trigger managed payment through their level of arrears, they will be returned to personal receipt of the housing element of Universal Credit once those arrears are reduced. 7

12 Lessons from the Direct Payment Projects. The DWP has been exploring issues around direct payment with six pilots, in Oxford, Southwark, Shropshire, Torfaen, Wakefield, including a Scottish pilot with Edinburgh s Dunedin Canmore Housing Association. Ten Learning Points from the Pilots 2 : 1. Rent arrears are very likely to increase. 2. Engaging with tenants may prove more challenging than expected. 3. There are substantial resource challenges involved in reaching all the tenants who may be affected, and in providing them with appropriate support. 4. The data currently held by landlords is unlikely to be enough to enable the assessment of the extent to which they are at risk from being responsible for paying their rent. 5. The DWP s tool for assessing tenants as vulnerable may require further refinement. 6. The vast majority of tenants have bank accounts, and clear strategies for money management, though those strategies may vary considerably. 7. All areas involved in the projects saw rent arrears rise. Arrears are likely to rise, not solely amongst tenants with existing arrears problems, but also amongst tenants who are currently not in arrears. 8. Tenants do not like automated payments as much as landlords, and use short budgeting cycles to manage cash. There may therefore be limits to the extent that landlords can get people paying by direct debit. 9. There remain issues for unbanked tenants in opening bank accounts, including around identification. 10. The direct payment projects have been in part dependent on the relationships between social landlords and local authority Housing Benefit departments. These will disappear under Universal Credit. Financial Impact of the Changes on Tenants 3. Potential Positive Impact The DWP s Impact Assessment on Universal Credit claims that its introduction will have three key positive effects: Greater simplicity of the benefit will lead to a substantial increase in the take up of unclaimed benefits. Entitlement changes will increase incomes among lower income groups. Increased work incentives with increased incomes through a lower rate of withdrawal of payments when people begin to earn. For social landlords it may also be possible that moving in and out of work becomes less disruptive of tenants payment of rent, no longer involving moves on and off Housing Benefit. The DWP s estimates that the overall effect of the transition to Universal Credit will be: A higher entitlement to benefit for 3.1 million people with 1.9m gaining by more than 100 per month. No change for 2.4 million people. Lower entitlement to benefit for 2.8 million people. Transitional Protection Transitional protection is being put in place for existing claimants of Legacy Benefits who move to Universal Credit to ensure that they do not suffer an immediate substantial financial loss as a result and do not fall off a financial cliff. 2 Direct Payments Demonstration Projects: Learning the Lessons Six Months In, Department for Work and Pensions, May 2012, and interview with representative from Dunedin Canmore HA. 3 This section makes considerable use of Tarr A and Finn D Implementing Universal Credit, Will the Reforms Improve the Service for Users? JRF/ Centre for Social and Economic Inclusion,

13 Transitional protection freezes the cash value of the claimant s current award, and stays in place until the cash value of entitlement to the new benefit has caught up, unless there are significant changes in the claimant s circumstances. These include substantial changes in earnings, a partner leaving or entering the household, and the loss or gain of any of the elements that make up Universal Credit- including a change to fit for work status. Given the extent to which tenants in low paid employment may be likely to move in and out of jobs, it is possible that transitional protection will not last for a long time for many of those who will lose from Universal Credit. Even where transitional protection is in place, new claimants, with the same needs as longer standing claimants, will not be able to access levels of support previously considered appropriate for their needs. Sanctions. A significant number of tenants are likely to fall foul of the conditionality requirements under Universal Credit, or are already falling foul of the conditionality requirements under Job Seekers Allowance or Employment and Support Allowance. Those who are vulnerable or live chaotic lives will be particularly at risk. The sanctions placed on them as a consequence may push them into financial crisis. NB: One critical and simple task that staff, particularly those delivering tenancy support services, are well placed to undertake is to remind and encourage tenants subject to conditionality requirements to fulfill them. This may make the difference between a tenant being able to cope financially, and a tenant being in financial crisis. Changes under Universal Credit Affecting Disabled People. Four changes under Universal Credit will affect disabled people/ families with disabled children: Under the current tax credit system, families with disabled children in receipt of Disability Living Allowance are entitled to additional support through the disability related element of child tax credit. Unless a child is registered blind or is on a high rate of DLA, that entitlement will reduce under Universal Credit from 57 to 28 at current rates. People claiming middle or highest care component of DLA can currently claim the Severe Disability Premium on top of any income related benefits that they receive. The Severe Disability Premium is currently paid at per week. It will be abolished under Universal Credit. Disabled people in work are currently able to claim the disability related element of Working Tax Credit, which is payable to people with a disability or condition that makes it more difficult to fill and sustain employment. This is worth 54 per week. Under Universal Credit anyone requiring additional support because they are disabled will have to undergo a Work Capability Assessment. If found fully fit for work they will get no extra financial help within Universal Credit. Currently people who have health issues and are also carers can claim both a carer premium and a work related activity premium on top of any income related benefits. Under Universal Credit they will only be able to receive one of these (whichever is higher). This is a potential loss of per week. 9

14 Financial Capability Impact of the Changes on Tenants Change to Direct Payments Many tenants are worried about the consequences of becoming responsible for rent: The main concern centres on the fear of being tempted/ pushed into overspending on other items, leaving too little money to pay the rent. Tenants are concerned about falling into arrears with consequences for their ability to sustain their tenancy. Managing bills can be a stressful experience for many tenants. Making people more responsible for keeping a roof above their heads may increase this stress. Monthly Payment in Arrears The shift to monthly payment may cause problems for many tenants 4 : Significant proportions of tenants budget on a weekly or fortnightly basis, often in line with the frequency of their benefit payment. The payment of benefits on a fortnightly or weekly basis is seen as a protection against being without money for any length of time, as an effective way to ration expenditure and avoid temptation to spend too much at once. The making of a large one off payment at the start of the month may present a psychological challenge to effective budget management. Even tenants in work may not be used to managing money monthly, only 51% of those earning less than 10,000 per annum are paid monthly. Although many people who will claim Universal Credit are effective budgeters, budgets can be thrown into disarray by unexpected costs, or simply be too restricted to make effective management possible. Tenants moving from a job paid weekly to a monthly Universal Credit payment will be dependent on benefit advances in the early stages of their claim. There is likely to be an increase in the number of tenants who regularly run out of money and do not have the money to afford household basics, including food, baby supplies, and key meter / payment card top ups for utilities. This may result in an increased usage of informal borrowing from friends or family, or from expensive non mainstream sources. The shift to monthly assessment means that: o Claimants experiencing a reduction in entitlement during a month will lose that entitlement for the whole month. o Predicting future income based on entitlement for the coming month may become difficult, adding to the budgeting challenges facing claimants. Single Payment to Single Household Member The consequences of mistakes being made in the payment of benefits are raised when the majority of payments received by a household are rolled into one. This may be of particular concern in the early stages of the introduction of Universal Credit when teething troubles are likely. Many tenants hypothecate particular benefits, i.e. set them aside for use on particular expenditure items. It is not clear that the calculation of Universal Credit presented to claimants will explicitly state the elements from which the overall payment is made up, potentially removing from some a budgeting tool on which they rely. Organisations working with people affected by domestic violence have expressed concern that this change increases the opportunity for financial abuse. Expenditure on children is lower in families where benefits are paid to male parents. 4 Keohane N Shorthouse R Sink or Swim- The Impact of Universal Credit Social Market Foundation

15 The Benefit Cap Prior to the introduction of Universal Credit the cap will apply to the combined income a household receives from Job Seeker s Allowance, Employment and Support Allowance, Housing Benefit, Child Benefit, Child Tax Credit and Carer s Allowance. Once households have been transferred to Universal Credit, it will apply to their combined income from Universal Credit and other benefits including Child Benefit and Carer s Allowance. Households will be exempt from the cap if a member of the claimant household is claiming; Disability Living Allowance; Personal Independence Payment; Attendance Allowance; Working Tax Credit; Employment and Support Allowance(with the support component) or War widows/widowers pension. There will also be a nine month grace period for those who have been in work for the previous 12 months and lose their job through no fault of their own. The benefit cap has been set at the current average (median) net earnings for a working household; 500 per week ( 26,000 per annum) for lone parents and couples with or without children, and 350 per week ( 18,200 per annum) for single people without children. The level at which the cap comes in can be changed through a statutory instrument. This means it can be adjusted whenever the Government believes it is appropriate. It is estimated that 67,000 households in the UK are affected by the cap, those affected losing an average 83 weekly 5. Many more people are affected by the benefit cap in the private than in the social rented sector, but there are a small number of larger social rented households in Scotland living in large social rented properties who are affected. The number of social rented tenants affected will grow if the cap does not increase in line with rents. Case Study: Dunedin Canmore Housing Association. Dunedin Canmore Housing Association has around 5,500 tenants, mostly in Edinburgh, but also elsewhere in the Lothians and Fife. The association hosted one of the DWP s six Direct Payment Demonstration Projects, the only one in Scotland, taking part in the project in an effort to get ahead of the game developing its response to Universal Credit. Dunedin Canmore have found the collection of rent from people not used to paying themselves to be a big challenge. Making contact with tenants in the project and working with them to ensure the payment of rent has been a very resource intensive exercise. The focus of the organisation s work in relation to the Demonstration Project has been on providing tenants with budgeting advice and support. Unexpectedly, around half of those identified as needing the budgeting support offered by the Money Advice Service refused it. There was not as much demand for support opening new bank accounts for tenants as had been expected, the vast majority of tenants involved in the pilot had existing accounts. The association s welfare rights service, made up of four welfare rights officers, has backed up the offer of budgeting support by receiving referrals. The service has also continued to deal with a heavy burden of existing work, for example with ESA appeals, and played a critical role in providing training to staff, and contributing to the development of the organisation s strategy. Amongst the other financial inclusion work that Dunedin Canmore is involved in: Housing officers have been issued with referral guidelines to support their identification and referral to support of tenants whose circumstances have changed. CHAI, a local voluntary organisation, is commissioned to deliver tenant sustainment support, including a substantial financial inclusion element

16 Universal Credit- Key Points Universal Credit is the flagship of the Government s welfare reforms, replacing most means tested benefits and all tax credits for people of working age. It aims to create a simpler system, with improved work incentives and eased transitions back into work. Other gains may include a reduction in levels of underclaiming. The benefit cap, which will be part of Universal Credit, will, initially at least, only affect very small numbers of social rented households with large numbers of children. The implementation of Universal Credit has now begun, although at a slower pace than planned, and with a timetable that may be subject to further slippage. Claimants will be subject to a claimant commitment, and a stricter, less flexible sanctions regime. Universal Credit entitlement will be calculated monthly, based on communication between the DWP and HMRC. Social rented tenants claiming Universal Credit will be moved from managed payments to their landlords under the current system, to direct payment to them of the housing related element to Universal Credit. Exceptions will be triggered when tenants are vulnerable or hit certain levels of arrears. The Direct Payment Demonstration Projects have highlighted a number of challenges managing this new situation, the greater risk of rent arrears created, and an increased workload for social landlords. The change to monthly payment and payment to a single member of the household are, like the move to direct payment of benefits, intended to change the financial behaviour of claimants. As such they will also create considerable challenges to the financial capability of tenants, although vulnerable people may again be exempted. 12

17 1.1.2 Transition II: The Replacement of Disability Living Allowance with Personal Independence Payment The focus on preparing for the arrival of Universal Credit and dealing with consequences of the Bedroom Tax may have meant less attention being paid by social landlords to another aspect of welfare reform with real significance for many tenants. In the Welfare Reform Act 2012, the Government set out details of the creation of a new benefit, called Personal Independence Payment (PIP) to replace Disability Living Allowance (DLA) for eligible working age people aged 16 to 64. The Government s intention was that Personal Independence Payment: will focus support on those individuals of working age who experience the greatest challenges to remaining independent and leading full, active and independent lives. Timescale for Introduction From April 2013: New claims were for PIP not DLA in trial areas in the North West and North East of England. From June 2013: All new claims are now for PIP, with no new claims for DLA other than for people renewing DLA claims which were due to expire before February From October 2013: The following DLA claimants were to be invited to claim PIP (implementation has been delayed due to capacity issues): o Children turning 16. o Those reporting changes of circumstances which will affect their rates of payment. o Those DLA claimants with fixed term awards expiring from Feb o Those self selecting. Between October 2015 and December 2017, after an evaluation of the first stage of PIP implementation: o Remaining DLA claimants will be invited to make a claim for PIP and will go through the reassessment process. Basic Features Like DLA, PIP: Has two components, a daily living component (which has similarities to the current care component) and a mobility component. Is available to people who are either in or out of work and will not be means tested. Unlike DLA, there are no life awards. The DWP expect most people to be awarded PIP for 2 years with the maximum award likely to be 10 years. At the end of this period, claimants will have to go through an additional daily living and/or mobility activities test. The daily living component is paid at: Standard rate if you have a limited ability to carry out daily living activities. Enhanced rate if you have a severely limited ability to carry out daily living activities. The mobility component is paid at: Standard rate- if you have limited mobility. Enhanced rate- if you have severely limited mobility. 13

18 Eligibility for PIP PIP claimants must: Be aged (People will not be able to claim PIP once they are 65 years old but will be able to stay on PIP if they claimed/received it before they reached the age of 65.) Satisfy the daily living and/or mobility activities test for 3 months prior to claiming and be likely to continue to satisfy this test for a period of at least 9 months after claiming (this 9 month period is called the prospective test). PIP Assessment Access to PIP is through the daily living and/or mobility activities test, an assessment carried out by an independent health professional. Claimants are likely to be asked to attend a face-to-face consultation. In order to qualify for the respective components of PIP, claimants have to score a certain number of points on tests of their ability to carry out activities relating to daily life and mobility. The 11 daily living tasks looked at include tasks such as preparing food and drink, managing therapy and monitoring, managing toilet needs or incontinence, communicating, engaging socially, planning and following a journey (used in the test for the mobility component). Relationship between PIP and other Benefits PIP will act as a passport to other benefits /support: People can qualify for help under the Motability Scheme if they are receiving the highest mobility component of PIP. Both levels of the daily living components of PIP act as a passport to Carer s Allowance. Tenants who are claiming the Daily Living Component of PIP are exempt from non dependent deductions from Housing Benefit and the new Council Tax Support Scheme. People claiming the Daily Living Component of PIP at standard or enhanced rates are able to claim a National Entitlement Card - a free bus pass, and a companion card for someone to travel free with them. Impact of the Changes. Impact in Numbers There are currently 203,400 people of working age claiming Disability Living Allowance in Scotland, about 10.9% of the UK total of 1.859m 6. Based on that percentage and estimates from the Department of Work and Pensions, o Around 192,000 people in Scotland will go through the assessment 7. o Around 207,000 new applications will be made in Scotland over the period of transition from DLA to PIP. The transition will affect 51,000 people with mental health problems, 44,000 people with musculo skeletal problems, 24,000 people with learning disabilities, 23,000 people with neurological conditions and 17,000 people with cardio vascular disease. Based on DWP estimates, of those current DLA claimants in Scotland will go through the assessment process: 55,750 will see their award increase. 55,750 will see their award decrease. 29,500 will see their award stay the same. 49,240 will get no support under the new system. 6 All claimant figures in this subsection from 7 All estimates on this and the next page based on Personal Independence Reassessment and Impacts DWP Dec 13 th

19 The Human Impact Claimants currently use Disability Living Allowance and Personal Independence Payment in a variety of ways including to: Purchase personal care, or pay for a variety of less intensive support/ meet expenses incurred by informal carers in delivering care. Enable claimants to travel, including paying for taxis or accompaniment by a carer. Pay for equipment or other additional costs experienced as a result of disability, for example increased laundry bills due to continence issues, or increased heating bills due to lack of mobility. Cover work related costs relating to having a disability. Some claimants will also use DLA to cover general household expenditure or as a guaranteed source of income if their broader income is less stable. The loss of DLA, and its associated/ passported benefits, threatens to create problems for disabled people who fear: Struggling to manage financially. Being more isolated, and less able to engage in social activities. Being less able to engage in any activities outside the home. Being less able to maintain themselves in employment. Many are concerned that these constraints on their lives will have a severely negative impact on their health and wellbeing, some that they will be forced to seek extra support, others that they may no longer be able to live independently, or that they will be forced to give up work. PIP Key Points The process has now started of Personal Independence Payment replacing Disability Living Allowance for new applicants of working age, although the timetable for people moving from DLA to PIP is subject to slippage. Access to PIP will involve the assessment, mainly face to face, of people s ability to carry out a range of daily living and mobility tasks. PIP, like DLA, will be a passport to other benefits and entitlements. Unlike under DLA, there will be no more lifetime awards, meaning all claimants will have their cases reconsidered at some point. PIP will be an important benefit for tenants with mental health problems, musculo skeletal problems, learning disabilities, neurological and cardio vascular conditions. The assessment process may be very stressful for vulnerable tenants who may have been reliant on DLA for a long time. Tenants may fear the transition may mean a loss of ability to pay for support/ care, a loss of independence, a loss of ability to engage in social activities or maintain employment, or simply a loss of essential household income in the context of higher outgoings because of ill health/ disability. 15

20 1.1.3 Transition III: Incapacity Benefit to Employment and Support Allowance In 2008 Employment and Support Allowance (ESA) was introduced to replace Incapacity Benefit (IB) as the benefit for people unable to work due to ill health. The aim of the reform was to encourage more people who were viewed as being unable to work because of a disability/ health problem to get or seek work, and to offer more support to those able to work/ able to begin to prepare for a job. Timescale for Transition The new benefit has been brought in on the following timetable: Since October 2008 all new claimants have claimed ESA rather than Incapacity Benefit. In April 2011 the migration began of all existing claimants in receipt of IB and Severe Disablement Allowance (SDA) to the new benefit. The migration process is due to conclude in March 2014, at which time Incapacity Benefit and Severe Disablement Allowance will effectively be abolished. The Work Capability Assessment (WCA) To access ESA, new claimants and those migrating from IB, are assessed for their fitness to work. This requires them to complete an initial questionnaire, and in most cases will involve a face to face medical with a health professional employed by ATOS, the company contracted to deliver the assessments on behalf of the DWP. The Work Capability Assessment results in claimants being assigned to one of three groups: The Fit for Work Group. People in this group claim Job Seeker s Allowance rather than Employment Support Allowance, and are required to look for work. The Work Related Activity Group. People in this group receive ESA. They are considered to have limited ability to work at present, but to be capable of preparing for a return to work. People in this group are likely to be re-assessed every 6 months 12 months. Placed in the Support Group. People in this group receive ESA but are considered as having limited capability for work related activity and for work. Those placed in the Work Related Activity Group or Support Group may be recalled for reassessment at any time after an initial assessment. Time Limiting Employment and Support Allowance ESA is currently paid in both income-based and contribution-based forms. In April 2012 the rules changed for claimants of contribution-based ESA (and therefore also claimants on contributionbased IB who are migrated over to ESA). Prior to April 2012 claimants of contribution-based ESA continued to be entitled to the benefit for the duration of the period that they satisfied the medical conditions. Since April 2012 claimants in the Work Related Activity Group have only been entitled to contribution-based ESA for a maximum of 365 days. After that point they must claim income-based ESA, to qualify for which their household income must be below a certain threshold. This will impact on the income of households containing an ESA claimants in the Work Related Activity Group, who has a partner in employment. 16

21 Impact of the Reform Impact of the Reform in Numbers As of February 2013, there were 177,650 people in Scotland claiming Employment and Support Allowance and 73,070 still claiming Incapacity Benefit 8. Figures on the main reasons for claiming give a sense of which tenants may depend on ESA: 85,900 ESA claimants are claiming because of mental health problems. 22,900 because of musculo skeletal problems. 11,220 because of circulatory/ respiratory problems. 10,700 because of neurological conditions. 9,100 because they have experienced injury or accident. Human Impact Much of the discussion about the human impact of this transition centres on issues with the outcomes, format and delivery of the Work Capability Assessment. Those will be picked up in more detail in section below. The consequences of those difficulties can mean considerable stress for those going through what is often experienced as a frustrating and frightening process, and anger for those subject to a decision they consider unfair, stigmatising and reflective of official disbelief about their application. People may also find themselves subject to work related requirements that they are not capable of fulfilling. A further financial consequence for individuals of the outcome assessment process must be noted; someone found fit for work receives less benefit than someone claiming IB or ESA. Change to the Appeal Process. The DWP has changed the appeal process for all benefits for those dissatisfied with a decision, for the stated purpose of resolving more cases before the tribunal stage. A new, mandatory reconsideration phase has been introduced in the appeal process, with claimants now having to request that the DWP reconsider a decision before they submit a formal appeal. Amongst the largest groups of people affected will be those unhappy with the decision they received under the Work Capability Assessment. Whilst a decision is under reconsideration, claimants must sign on for Job Seekers Allowance, with all the work related requirements that involves, if they wish to receive work related benefits during this time. There are concerns that: This may reduce the willingness of claimants to appeal despite having a good case. Given the pressures on the system, the reconsideration process may be slow. Some claimants will not be able to fulfil the work related requirements for JSA, and may be trapped between being judged too fit for work, and not fit enough for JSA. Claims for Housing Benefit will be impacted unless action is taken by the claimant. 8 All claimant figures in this subsection from 17

22 Key Points- ESA. Since 2008 people unable to work because of ill health have claimed Employment and Support Allowance rather than Incapacity Benefit. The transition of existing IB claimants to ESA is due to conclude in March People applying for ESA go through a Work Capability Assessment, WCA, which decides whether they are fit for work (and therefore entitled to Job Seekers Allowance), capable of undertaking activity to prepare for work, entitling them to ESA and placing them in the Work Related Activity Group, WRAG, or if they are not capable of preparing for work, entitling them to ESA and placing them in the Support Group. Changes to the appeal process, introducing a reconsideration phase before an appeal can be launched have left people unhappy with a WCA, in a particularly vulnerable position. The assessment and appeal processes are stressful for claimants, who will be concerned about the possibility of losing income or being required to undertake work related activity when they do not consider themselves fit to do so. 18