Submission. Tel Date: October 2014

Transcription

1 Submission Contact: Sue Ramsden Tel Date: October 2014 Registered office address National Housing Federation, Lion Court, 25 Procter Street, London WC1V 6NY Page 1

2 The National Housing Federation is the voice of affordable housing in England. We believe that everyone should have the home they need at a price they can afford. Our members provide two and a half million homes for more than five million people. Each year they invest in a diverse range of neighbourhood projects that help create strong, vibrant communities. The Federation supports many of the principles behind the introduction of Universal Credit (UC), including making sure that work pays and simplifying the benefits system. However the scale of the changes introduced by UC, including the single monthly payment and consequent changes to budgeting patterns, digital by default delivery and changes to conditionality and sanctions will be challenging for some people and there is concern amongst social landlords around how people will manage their rent payments.. Some of the evidence set out below comes from the experience of associations working in the live running areas for Universal Credit. Although the number of claims is small overall, the geographical concentration of claims means that associations in the original live running areas have built up considerable experience of supporting people in receipt of Universal Credit. 1.0 Impact of the regulations We are concerned that these regulations will cause financial hardship and are being introduced at a time when the full impact of moving to a monthly payment system for all working age claimants is not understood. Our recommendations are: DWP should not go ahead and implement the regulations in this form because they will have a disproportionate impact on vulnerable tenants and low income families and could undermine some people s efforts to find work If the measure does go ahead then housing costs should not be included in the 7 day waiting period because they are so variable Research is needed into the impact of monthly budgeting and the current five week wait for a spectrum of different households applying for Universal Credit The current list of exemptions from the need to wait seven days is too restrictive and should be extended to include homeless people and other groups There is a need for a large scale publicity campaign to encourage people to claim their entitlement to Universal Credit The system for advance payments is currently too restrictive and needs to be better publicised. 2.0 Impact on financial hardship The loss of seven days of UC is likely to cause financial hardship for many social tenants. The Government believes that it is reasonable to expect benefit claimants to live off their earnings for an initial period of unemployment given that many people claim benefits directly Page 2

3 after a period of work. However a 2012 report 1 by Policis for the Federation, using evidence from interviews with nearly 2,000 social tenants, found that the majority of social tenants manage their budgets over short periods of time and often have very little savings; the prevalence of weekly cash budgeting is not simply a reflection of the current timing of benefit income flows, as is evidenced by the high proportion of monthly-paid social tenants in work who manage in cash. Fundamentally, weekly cash budgeting reflects the effort to ensure that, on the one hand, spending is closely controlled, by being limited to cash in hand, and, on the other, that the risk of running out of funds is minimised, by limiting the timescale over which budgets are managed. 2 The report also found that 78% had no savings, whilst the remaining 12% had only saved an average of 125. People working were better off but still under some financial pressures with three in ten (29%) having struggled to afford fuel and food in the last twelve months. A quarter (25%) had difficulty affording rent in the last twelve months. Some 45% have been behind on their rent payments, with almost a quarter (24%) of these having been eight weeks or more behind. One in four (25%) were behind on household bills. 3 The report also found that many social tenants struggle to make their budgets stretch to accommodate any unanticipated expenditure. When unanticipated expenditure arises they might face a choice between buying food or putting the heating on. Choices such as these are unsustainable for anything more than a couple of days and the addition of a seven day waiting period for universal credit could further stress people s finances meaning that those who lose their job might be faced with coping in this way for longer periods of time. The addition of a seven day waiting period could also push tenants who are already in debt even further into debt. The Policis report found that a significant minority of social tenants are under significant financial pressure with 21% having consulted debt advice. Of those who had sought debt advice, 60% were paying the minimum amount on their credit card debt whilst 56% were struggling to pay bank overdrafts. Impact on tenants Universal Credit claimants already have to wait a calendar month plus seven days for their first benefit payment to be made. The addition of a further seven days waiting time will impact disproportionately on tenants who will have an on going liability to pay rent but receive a week less money to allow them to afford this rent. The total amount lost by any one household will vary according to the social housing rent charged or the Local Housing Allowance rate for tenants in the private sector. Families are more likely to live in larger properties so are more likely than single people or couples to lose a higher total amount through the loss on one week s UC for housing costs. As rents vary across the country tenants in areas of the south of England will lose far more money than in parts of the North. Universal Credit is designed to provide a safety net to allow people to manage essential expenditure while they look for a job. A strict conditionality and sanctions regime ensures Ibid executive summary page 2 3 Ibid paqe 42 Page 3

4 that people must actively seek work and rules around income and savings ensure that only people on a low income with small savings are entitled. This measure fundamentally undermines that safety net and greatly increases the risk of tenants getting into arrears with rent and struggling to manage day to day living expenses. This may undermine the ability to find work. The experience of dealing with the month plus two week wait to receive benefit while struggling with ongoing bills may put people off taking short term or insecure jobs or starting or restarting in self-employment. How are people claiming UC managing the current month plus seven day wait? The Federation has collected evidence from the housing associations working in the first live running areas for UC. Associations with homes concentrated in these areas have the greatest experience of supporting tenants in receipt of UC and our latest report published in August gives some anecdotal evidence about UC claimants known to the association and the ability to manage the first five week gap before payment and subsequent monthly payments. A very high proportion of tenants who have claimed Universal Credit have existing arrears and other debts. New Charter Homes believes that around three quarters of its Universal Credit claimants have existing arrears, whereas Wigan and Leigh Homes stated, All bar one of our live cases had arrears prior to Universal Credit, and the vast majority have increased in arrears. Some have other vulnerabilities such as substance misuse and mental health issues. 5 Some associations have requested Alternative Payment Arrangements for between half and three quarters of their tenants claiming UC so that the DWP pays the housing cost element of UC to the landlord for a period. Nearly all of these were on the basis of the tenant reaching or exceeding the two month trigger point for arrears. Based on this evidence a month plus two week wait is likely to increase the number of Alternative Payment Arrangement. On increasing levels of poverty one housing association member of staff commented: We never used to give vouchers out, it wasn t necessary till this last twelve months, so yeah we re doing that quite regularly now. I think with Universal Credit it s that first five weeks before they get any money when they ve got no money whatsoever, I don t know how people are expected to live. Obviously they re coming in, they can have up to three vouchers, so they probably have been maxing that out in that first five week period. And Tameside floating support [might give] a little bit of help towards the gas and electric from funding that they can tap into. 6 4 Universal credit: One year in the experiences of housing assoications 5 ibid Page 24 6 Ibid Page 4

5 Access to payment advances Should claimants be unable to cope financially during the wait for the first benefit payment, they can access payment advances, which are loans against future benefit earnings and as such have to be paid back over an agreed period of time. Housing associations reported very limited take-up of advances while at the same time tenants are not making payments towards their rent. This could be due to tenants being reluctant to apply, applications being unsuccessful or claimants not knowing that an advance was possible. Associations also reported some confusion over the recovery periods. Anecdotally, associations believe that tenants are put off by the repayment terms which are too short. Claimants are therefore borrowing money from friends and families instead: then they can pay it back You borrow it off your mum then you can pay it back... One association reported that just one tenant out of fifty Universal Credit claimants had received an interim payment. One association noted that their staff look at financial products and services for tenants before looking at advance payments as they are seen as a last resort that potentially reinforce the debt cycle. Associations also reported that where an adult was still living at home with his or family and applied for an advance payment of UC the circumstances of the whole family were taken into account in determining if the applicant was in severe hardship rather than just the means of the person claiming UC. Associations are also concerned about claimants using pay day loans or loan sharks to help them cope financially during the month and seven day wait for the first benefit payment to be made. One association recently published a study 7 showing that eighteen percent of their UC claimants had bridged the gap by applying for a pay day loan. Recommendations: That the measure is dropped or put on hold until more evidence is available of the impact of UC No waiting day period for housing costs due to great variation in costs and the importance of maintaining a tenancy in being able to find work Better publicity is needed on the availability of Advance Payments and the DWP staff should not take a less restrictive approach in interpreting severe hardship 3.0 Impact on vulnerable people Many people in the All Work Related Requirement Group have vulnerabilities and the group includes people who are waiting for their conditionality status to be assessed. Some people do not come to benefits direct from employment but from being in education, training, hospital, relationship breakdown, caring for others or many other circumstances. These people do not have a monthly last wage payment to fall back on and serving seven waiting days before any entitlement to help would expose many of these people to immediate hardship. 7 As reported in 24 Housing: Page 5

6 If a single young person is homeless with no claim for benefits and is admitted to a hostel then he or she will be able to claim Housing Benefit which will be paid with no waiting day period. If the same homeless person moved into a shared private rented flat with the support of a local charity then he or she would have to wait seven days before any entitlement to help with housing costs was available. There is therefore an incentive to direct the young person towards the hostel rather than the flat with a resultant increase in the pressure on places in the hostel. It is likely that the imposition of seven day waiting period will have an impact on the demand for local welfare assistance and Discretionary Housing Payments (DHP). There is already some uncertainty over the availability of local assistance 8 in some areas past 2015 as national funding in withdrawn and there is also no certainty on the availability of DHP past It is both inappropriate and unrealistic to expect the DHP fund to plug the gap in entitlement for so many vulnerable people caught by the seven day waiting period. There appears to be no assessment within the proposals of the impact on local authorities and we would urge DWP to publish an assessment of the additional burden this measure will place on local authorities with particular reference to discharging duties under homelessness legislation. Additional groups for exemption We believe that the measure is already complicated to implement and difficult for claimants to understand. Restricting it to people in the All Work Conditionality Group does not mean that it is confined to people who have just lost a job and have a month s wage to rely on. However if it is implemented then DWP should extend the list of groups who are exempt as the current list does not include some easily identified groups who will suffer undue hardship if forced to wait 7 days for benefit. These include: Claimants coming out of long stay in hospital Claimants who were entitled to Job Seekers Allowance or Employment Support Allowance (ESA) within the previous 6 months (not 3 months as proposed as 3 months is insufficient time to have built up a saving from earnings and this exemption should match the rules for UC where a claim can lie dormant for 6 months and be revived with no waiting days) Claimants who are homeless (including people placed in Temporary Accommodation). DWP should follow the definition of homeless used in existing internal guidance on easement of conditionality rules for homeless people 8 Page 6

7 Disabled people in receipt of Disability Living Allowance or ESA to reflect the higher costs of living with a disability. Temporary accommodation at present forms a vital part of the homelessness safety net. Homeless households in temporary accommodation are liable for a reasonable charge for their accommodation, which can be covered by housing benefit if the household is on a low income. Temporary Accommodation is more expensive to procure and manage and higher levels of benefit reflect this. The loss of seven days benefit to cover housing costs would be severe for households affected. Recommendation Ensure that the list of exemptions includes all groups who will suffer undue hardship as a consequence of this measure. 4.0 Need for better publicity and take up campaigns If a seven day waiting period comes in then it is even more important for people to make a timely claim for UC. As UC is both an in and out of work benefit then any publicity campaign must have a resources behind it to reach people who might not think of themselves as needing help. People who have claimed benefits in the past will be unfamiliar with UC so any publicity must be effective in putting the message across about claiming as soon as possible and maintaining the claim even when you go back to work. When people find work they are asked to sign a new claimant commitment, which is sent to them and must be returned by post. Some people do not do this as they are no longer receiving any money, and their claim ceases. If their employment is short term then they will have to make a new claim, as the claim has not remained live for the usual six month period. DWP should consider removing this kind of obstacle to maintaining a live claim and it is difficult to see what this particular procedure contributes to the objectives of universal credit. Recommendation Effective take up campaign coordinated by DWP Removal of unnecessary barriers to maintaining a UC claim Page 7