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The Impact of Welfare Reform

on Hastings

Nick Hopkins Consulting

December 2012

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Content Section Page

Executive Summary 3

1. Introduction 16

2. The Local Background to Welfare Reform. 19

3. The Impact of Welfare Reform on Hastings 24

3.1 The Introduction of Universal Credit 29

3.2 The Transition From Incapacity Benefit to 40 Employment and Support Allowance

3.3 Transition From Disability Living Allowance to 45 Personal Independence Payment

3.4 Support with Housing Costs/ Tax Credits 49

3.5 Localising Responsibility for Benefit: 63

DESSS/ Local Council Tax Support Schemes

3.6 Uprating of Benefits

4. Understanding the Experiences of Benefit 65

Claimants

5. Conclusions and Recommendations 89 Contact Details: Nick Hopkins,

Director, Nick Hopkins Consulting, 41 Carolside Avenue,

Clarkston, Glasgow,

G76 7AD www.nhhrconsulting.co.uk Tel: 07891 600078

E mail: nick@nhhrconsulting.co.uk Website: www.nhhrconsulting.co.uk

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Executive Summary

Introduction • The benefit system has been subject to constant change since its earliest days.

The Coalition Government’s welfare reforms, contained largely within the Welfare Reform Act 2012, have increased the pace of change hugely, and are set to bring about the most substantial changes within the system since the post war period.

• The Government’s reforms are aimed at creating a simpler welfare system, which increases the incentive to work and is more responsive to changes in individuals’

circumstances. At the same time, the reforms are designed to achieve a cut in the overall cost of the welfare system of £18bn over four years.

• There is considerable debate about the impact the reforms will have, their

fairness and the way that they have been, and will be, implemented. This report does not take a position on those questions, but presents an analysis of the likely

impact on Hastings in a neutral fashion. • The report tries to move the understanding of the reader beyond media debates

focused on:

o The benefit cap, which only affects a small number of people (around 70) in the town.

o Simple distinctions between benefit claimants and hard working families; the reforms will impact substantially on those in work as well as those out of work.

• The final version of this report reflects additional analysis done as part of the East Sussex County Council Welfare Reform Project.

Section 2: The Local Background to Welfare Reform. • Welfare reform is impacting, and will impact, on Hastings residents in a context in

which the town is already facing major challenges in the labour market, and in terms of household poverty and income, and financial inclusion.

The Labour Market

• Unemployment in Hastings has fluctuated since the start of the recession. The most recent figures suggest that over 3,100 people in the town are claiming Job Seeker’s Allowance (JSA). Over twice as many men than women claim JSA.

• The labour market in Hastings is subject to substantial flux, with over 550 people moving onto JSA every month.

• The critical role of the benefit system, not only in supporting people who are out of work for a long time, but also to assist people to cope with shorter periods of being out of work, should not be forgotten.

• The numbers of people relying on Universal Credit for a large part of their income will be higher because of higher unemployment in the recession.

• A substantial number of people per month will be submitting new claims for Universal Credit, for some of them engaging with an unfamiliar system for the first time.

• Universal Credit is being introduced over a period of time (see section 3.1). Claimants of legacy benefits whose circumstances change are being moved to

Universal Credit earlier in the process. Areas with high turnover in the labour market will therefore see more people move to Universal Credit earlier in the

process.

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Wages

• Hastings is a low wage economy. Full time wages for Hastings residents are over £80.00 per week lower than the average for the United Kingdom.

• Part time workers in Hastings work longer part time hours for less reward than the UK average.

• More than 50% of part time workers in Hastings are being paid at below the rate

that has been identified as necessary to meet the standard of a living wage in the UK, £7.20 per hour.

• At 37.9% of the workforce, a substantially higher proportion of the workforce in Hastings work part time than the Great Britain average.

• Comparatively high numbers of Hastings residents are likely to be impacted as a

consequence of the introduction of Universal Credit, which is designed to support people in low paid employment as well as those who are out of work.

• Universal Credit contains a number of changes specifically designed to support, incentivise and influence people in part time employment. These will impact on a very substantial number of Hastings residents.

• Already introduced changes to tax credits which impact on people in part time work (see section 3.5) are likely to have had a particularly significant impact on

Hastings residents.

Poverty and Household Income. • Hastings has high levels of poverty, particularly child poverty. • 50% of Hastings residents have a household income £4,500 or more below the

average in Great Britain. • Welfare reform may:

o Increase the number of people living in poverty. o Deepen the poverty of some of those already living in that situation.

• A substantial number of Hastings residents may be pushed into poverty by the

changes, or if already in poverty, may be at risk of their situation worsening further.

• Given the focus of welfare reforms on people of working age, there may be particular concerns about the prospect of an increase in the already high levels of child poverty in Hastings.

Financial Exclusion

• Hastings contains large numbers of households who may be affected by financial exclusion, which is both a cause and a symptom of low incomes and poverty.

• The impact of welfare reform may:

o Push people into debt, through reduction of the generosity of the safety net for people falling out of work, or of the support for people who are long

term unemployed or unable to work for health or other reasons. o Increase the difficulty they face accessing mainstream financial products/

thereby making them rely on more expensive ‘sub prime products’.

o Challenge their ability to manage their household budgets.

• Personal savings are unlikely to offer much protection against the negative

impacts of welfare reform, and the ability of low income households to save may be further compromised by reduced incomes.

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Section 3: Predicting the Impact of Welfare Reform on Hastings • A clear policy decision has been taken by the Government to focus the vast

majority of the benefit changes discussed in this document on working age

benefit claimants. Older people are generally explicitly protected from the changes, although they may experience the impact of the changes on the rest of

their family. Section 3.1 The Introduction of Universal Credit.

Key Changes

• Universal Credit is the flagship of the Government’s welfare reform process. • It replaces all the main income related benefits (apart from Council Tax Benefit

and the Social Fund) and tax credits. These are known as the legacy benefits.

• It is intended to be a simpler system, improve work incentives and smooth the transition into work, reduce in work poverty, reduce fraud and error, and

encourage more effective management of money. • The process of introduction will take four years, from October 2013 onwards. • Universal Credit will involve a reduced rate of withdrawal of benefit from

claimants for every pound they earn in work above a certain amount. • A number of changes will reduce entitlement for disabled people and some

families with disabled children. • Claimants will have to sign a claimant commitment, setting out their

responsibilities, and will be subject to a stricter, less flexible sanctions regime.

• Universal Credit will be paid monthly in a single payment to a nominated single member of the household, by BACS into a transactional bank account.

• The direct payment of benefit to social landlords will cease for most claimants, apart from those deemed vulnerable.

• There is a shift towards encouraging the making and managing of claims online.

Predicted Financial Impact

• An estimated 14,850 of the 41,200 households in Hastings will claim Universal Credit, this constitutes 36.1% of the total households in the town.

• The table below sets out the number of people who will gain, lose, or see their entitlement unaltered under Universal Credit.

• It must be remembered that the figures below do not account for any negative

impacts on income from the other reforms discussed in this report.

Numbers Affected in Hastings

Households Claiming Universal Credit 14,850

Households with Increased Income 5,550

Households with Income Unaffected 4,290

Households with Reduced Income 5,010

Children Affected by Changes to

Disability Related Element of Child tax

Credit.

180

Severely Disabled People Affected by

Loss of Severe Disablement Premium

500

Severely Disabled Lone Parents

Affected by Loss of Severe Disablement

Premium

50

Children Affected by Loss of Their Lone

Parent's Severe Disablement Premium

90

Households Affected by Reduced

Entitlement to Disability Related

Element of Working Tax Credit.

180

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Human Impact

• There may be particular difficulties for those affected by some of the changes; disabled people/ families with disabled children; who may not be able to meet

extra household costs as previously. • Vulnerable people may be at risk of falling foul of the stricter and less flexible

sanctions regime.

• Organisations working with vulnerable people may need to be more proactive in trying to ensure that this does not happen.

• Universal Credit will leave people having to plan their household budget over a longer period, sometimes having responsibility for more of their household expenditure and sometimes leaving them with a lower income.

• Organisations receiving payments from lower income customers may be at risk of seeing their arrears levels rise.

• There may be increases in tenancy failures, tenancy terminations and evictions, and mortgage repossessions.

• Local organisations are likely to have to be under pressure to respond to crises

where their service users cannot financially meet their basic humanitarian needs. • As the new system beds in, there will inevitably be mistakes in the administration

of Universal Credit. Given the bringing together of all the legacy benefits under Universal Credit, the impact of such mistakes in terms of temporary loss of

household income will be severe. • The move to online handling of claims will create difficulties for people with

literacy and numeracy problems, people whose first language is not English, and

people without access to the internet at home.

Section 3.2: The Transition From Incapacity Benefit to Employment Support Allowance

Key Changes • Since October 2008 people who cannot work as a result of illness or disability

have claimed Employment and Support Allowance rather than Incapacity Benefit. • From April 2011 existing Incapacity Benefit claimants have been reassessed for

their fitness to work, before being placed on either Jobseeker’s Allowance or

Employment and Support Allowance. • This reassessment process is intended to be concluded by March 2014, and is

designed to move people into a job or closer to the labour market where their condition allows.

• Claimants being assessed or reassessed will go through the ‘Work Capability

Assessment’. This will result in them being placed in one of three groups: o The ‘fit for work’ group. At this point they will be paid Jobseeker’s Allowance

rather than Employment and Support Allowance, and be required to look for work.

o The ‘Work Related Activity Group’, denoting that they are considered to have

limited ability to work at present, but that they are capable of preparing for a return to work. They will be required to undertake a variety of activities which

may include training and work experience. People in this group will claim ESA. o The ‘Support Group’ denoting that they have limited capability for work related

activity and for work. People in this group will also claim Employment and

Support Allowance and will not face any work related requirements.

People Affected • Incapacity Benefit is a benefit more commonly claimed by men than by women,

and by people of middle to late working age, but it is clearly not, as is sometimes

suggested, a benefit solely for older male manual workers parked to massage the unemployment figures.

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• Significant numbers of vulnerable people, in particular with mental health

problems will be going through the WCA process. • Research suggests that the WCA process is poor at taking account of the sort of

health conditions affecting many of those going through the assessment, in particular in relation to the challenges facing people with mental health problems or with conditions associated with pain, fatigue, and regular fluctuation of

impairment. This is discussed in more detail in section 4.

Predicted Financial Impact • In Hastings it is predicted that of the 3,540 current claimants of Incapacity

Benefit: 3,430 will complete the WCA process, 1,270 will be found fit for work and

placed on JSA, 2,160 will get ESA, of whom 1,165 will be placed in the Work Related Activity Group and 995 will be placed in the Support Group.

• On a conservative estimate, the financial losses to current IB claimants in Hastings may be as high as £1.58m.

• The WCA process may produce 520 appeals, of which 200 will be successful.

• The time limiting of contribution based ESA may affect around 790 people in Hastings may lose this entitlement, at a total loss to local claimants of £4.09m.

Section 3.3 Transition From Disability Living Allowance to Personal

Independence Payment Key Changes

• In the Welfare Reform Act 2012, the Government set out details of the creation of a new benefit, called Personal Independence Payment (PiP), for eligible working

age people aged 16 to 64 to replace Disability Living Allowance (DLA). • The aim is to target support on those individuals who need it most. • Access to the new benefit will be through a functional test which will require

applicants to score a certain number of points on a test relating to everyday activities such as food preparation, managing continence, social interaction and

planning and undertaking a journey. • Claimants will receive a combination of standard and enhanced payments relating

to ‘daily living’ and ‘mobility’. (DLA claimants currently receive a combination of care component at lowest, middle or highest rate, and mobility component at lower or higher rate)

• There will be no lifetime awards, with the average period before reassessment expected to be 2 years.

• Personal Independence Payment (PIP) will be introduced from April 2013, with the transition of existing DLA claimants beginning in October 2013. The main period of transition will start in October 2015.

People Affected

• Disability Living Allowance is a benefit that is particularly important for people of older working age, but not solely for that age group. It is claimed almost equally by men and women.

• A substantial number of people claiming DLA in East Sussex will be affected by conditions which may:

o Fluctuate. o Involve pain and/or fatigue.

• Should problems experienced with the Work Capability Assessment be replicated

in the assessment process for PIP, this may leave those people particularly vulnerable to incorrect decisions.

• Similarly, significant numbers of people will be affected by conditions that may impact upon their cognitive capacity, which may have implications for their

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experience of submitting applications, of the assessment process, and for their

ability to effectively challenge decisions in relation to their benefits.

Predicted Financial Impact • As a result of the transition to PIP from DLA, an estimated 1,080 current

claimants in Hastings will see their award increase, 570 will see their award stay

the same, 1,080 will see their award decrease, 950 will receive no award. • Over £3m less will be received by Hastings residents in PIP than would have been

received through an unreformed DLA. • Between June 2013 and the end of September 2018, the introduction of PIP may

generate 1,350 appeals of which 510 will prove successful.

Section 3.4 Changes to Support with Housing Costs and Tax Credits

• In its emergency budget of June 2010, in a further announcement in March and December 2011, and in the Welfare Reform Act of 2012, the coalition Government has introduced a series of changes to Local Housing Allowance and

Housing Benefit, the support available to people to enable them to meet the housing costs.

• These changes are aimed at controlling costs, reducing what are seen as excessively high payments to some tenants, encourage more efficient usage of

the social housing stock, and increase work incentives for renters. • Changes to Housing Benefit will affect those in the social rented sector:

o Non-dependant deductions, the amounts taken off Housing Benefit claims

where ‘non dependant adults’, typically children of the householders, share the claimant’s house have been increased. Further increases are being

phased over four years. o The ‘bedroom tax’ will be introduced in April 2013. People identified as

underoccupying their property i.e. who have one or more spare bedrooms

will have to meet some of their rental costs themselves. o The change will affect couples/ single people without children living in

properties with more than one bedroom, and some families with one or more children living in properties with three or more bedrooms, dependent on rules relating to the children’s ages and their gender.

Section 3.4 a Local Housing Allowance

• Changes to Local Housing Allowance will affect tenants in the private rented sector:

o Local Housing Allowance is now capped at set amounts based on the

number of bedrooms in the property. o The amount of Local Housing Allowance a claimant can receive is now set

based on the level of the 30th percentile local rent, rather than the median (50th percentile) local rent.

o Single people under 35 now receive Local Housing Allowance set at the rate

of renting a bedroom in shared accommodation, as was previously the case with single people under 25.

o From April 2013 Local Housing Allowance rates will be up-rated in line with the Consumer Price Index measure of inflation rather than actual rises in local market rents.

• LHA will be reduced due to the 30th percentile change for 813 recipients between January 2012 and 31st December 2012.

• The extension of the single room rate to tenants aged up to 35 is expected to impact on 230 tenancies in the period between April 2012 and March 2013.

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Section 3.4 b Housing Benefit

• Changes to Housing Benefit will affect those in the social rented sector: o Non-dependant deductions, the amounts taken off Housing Benefit claims

where ‘non dependant adults’, typically children of the householders, share the claimant’s house, have been increased. Further increases are being phased over four years.

o The ‘bedroom tax’ will be introduced in April 2013. People identified as underoccupying their property i.e. who have one or more spare bedrooms

will have to meet some of their rental costs themselves. o The change will affect couples/ single people without children living in

properties with more than one bedroom, and some families with one or

more children living in properties with three or more bedrooms, dependent on rules relating to the children’s ages and their gender.

• 386 households have been affected by the changes to non dependent deductions, with 282 of these households (73%) of working age.

• Between 629 and 1,229 out of the 2,858 working age Housing Benefit claiming

social rented tenants will be affected by the under-occupation penalty. • Losses for those affected will vary for tenants of the two biggest social landlords:

o Between £10.12 and £11.21 a week if occupying a 2-bedroom property instead of a 1-bedroom property

o Between £11.91 and £13.11 a week if occupying a 3-bedroom property instead of a 2-bedroom property

o Between £21.26 and £23.41 a week if occupying a 3-bedroom property

instead of a 1-bedroom property

Section 3.4 c Tax Credit Changes • The Emergency Budget in 2011 introduced a number of changes to Tax Credits

that came into effect on 6th April 2012.

• The most significant change increased the number of hours that couples had to work in order to claim tax credits.

• Although this change is being superseded by the introduction of Universal Credit, it will have a short to medium term negative financial impact on over 1,600 households in East Sussex if they cannot increase their hours in work, potentially

a challenge in a time of underemployment. • The impact may be as much as £4,000 per year in some cases, increasing the risk

of debt and financial crisis for those households. • 320 households in Hastings are at risk of being affected in this way.

Section 3.5 Localising Responsibility

Section 3.5a Localising Responsibility: The Social Fund • The Social Fund is being abolished in its current form from April 2013. • East Sussex County Council is responsible for the design and administration of a

new fund, the Discretionary East Sussex Support Scheme (DESSS). • This effectively replaces the Crisis Loan Living Expenses and Community Care

Grant elements of the previous system. • The scheme aims to support people in financial crisis who cannot meet basic

needs and to help people establish independent living in the community.

• The scheme will be cashless. • The budget for the scheme is limited to the amount provided by central

government for the purpose. • The scheme is likely to be particularly important for single person households,

and for lone parents.

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• Given the pressures on low income families outlined elsewhere in the report which

may increase the number of people experiencing financial crisis, there may be extreme pressure on the DESSS budget.

• This could cause additional problems if the resources are not available to support people with grants towards independent living.

Section 3.5b Localising Responsibility: Local Council Tax Support Scheme • The 2012 Welfare Reform Act devolved to local authorities the responsibility for

designing and delivering replacements for Council Tax Benefit. • In doing so, Hastings Borough Council will have to deal with a 10% cut in the

budget provided, worth around £1.1m and a requirement to maintain current

levels of support for older people. • Consultation has just finished on the common schemes proposed by the five

boroughs/ districts in East Sussex. • The new schemes aim to limit the impact on the most vulnerable households, and

avoid penalising those moving into work.

• Just under 8,000 households in Hastings will be affected by the changes. • There may be particular impacts on those on low incomes living in mid to higher

value properties, and those living with non dependent adults.

Section 3.6 Inflation Uprating of Benefits. • From April 2011 benefits are being uprated in line with a measure of inflation, the

Consumer Price Index, that is usually lower than the alternative Retail Price Index

and Rossi measures. • This will erode the value of benefits year on year.

• This will push increasing number of claimants into poverty and financial crisis. • Families with children appear to be particularly vulnerable to the change, both in

terms of facing higher than average rises in their household costs, and in terms of

greater reductions in their income. • Changes announced on December 5th in the Chancellor’s Autumn Statement,

which limit the rise in a range of benefits and tax credits to 1% per annum for the three years from April 2013, will increase this level of erosion.

Section 4: Understanding the Experience of Benefit Claimants. • This section is based on 18 interviews carried out with Hastings residents over the

period of July to October 2012. • Interviewees were selected from the following groups:

o Those had appealed/ were appealling against a Work Capability Assessment they had undergone as part their transition from claiming Incapacity Benefit to claiming Employment Support Allowance.

o Those claiming Disability Living Allowance. o Those affected by the changes to Local Housing Allowance outlined in section

3.4a. o Families who had used the Social Fund within the last year.

Management on a Low Income.

• Where people see their income reduced as a consequence of welfare reform,

household budgets that are already very constrained will become tighter still, with consequences for the quality of life of those affected.

• Interviewees who are currently coping financially are still living lives with no or little access to ‘luxuries’ and with little slack to cope with anything that goes wrong. A reduction in income may push people from coping towards being unable

to manage properly.

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• Living on a constrained income has a negative psychological impact. The loss of

income has a similarly negative impact, with people very conscious of the better times left behind.

• There are clear risks to health and well being, where welfare reform negatively impacts on the income of people who already have mental health problems, and for other vulnerable people who may experience mental health problems as a consequence of reduced household income.

Budgeting • The payment of benefits on a monthly rather than fortnightly basis under

Universal Credit may cause considerable difficulties for people used to budgeting

on a weekly or fortnightly basis. • Some claimants may run out of money towards the end of the payment period,

and face a number of days without cash as a consequence. • Financial capability support to build the capacity of people claiming benefits to

budget may have a role to play in responding to the challenges of welfare reform.

However: o The majority of interviewees believe that they have competent budgeting

skills. o Even if these claims are not taken as typical or at face value, there may be

little enthusiasm from most benefit claimants for financial capability aimed at increasing their budgeting skills.

o Some claimants may not be able to save money through traditional

methods such as trading down in terms of the cost of their purchases. Interventions may be required which focus on building skills/ knowledge

required to purchase different good and services or to use purchases more efficiently (for example cookery classes).

• Ultimately people may find the challenge of living on such low incomes to be

insurmountable.

Use of Banking Products and Use of the Internet. • Suggested responses to some of the budgeting challenges created by welfare

reform may involve encouraging people to use financial products to assist them to

budget. • In developing such responses it should be understood that:

o Their success will require large numbers people to think differently, i.e. more formally, about the way in they manage their money.

o Banks may not be the preferred providers of such services.

• The majority of interviewees did not have access to the internet at home. • Of those who did, a significant number did not use the internet for managing their

financial affairs in anything but the most limited way. • The push under Universal Credit to deal with claims on line may confront many

benefit claimants with a channel for making claims with which they are very

unfamiliar and uncomfortable, or which in many cases they cannot easily access. • Giving people the advice, support and information to deal with consumer issues

may be an intervention with a broader pay off. Attitudes towards Borrowing and Debt.

• There was a clear sense that a large majority of interviewees did not engage in borrowing that could in any way be described as reckless.

• Benefit claimants already have limited borrowing options. The impact of welfare reform may narrow those options further.

• Those who use debt to manage their income across the longer term, or whose

short to medium term debts are currently manageable, may struggle to cope if their incomes reduce as a consequence of welfare reform.

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• Arrears on household bills, including on utilities, are a critical source of debt, and

of stress on a household. • Reduced incomes under welfare reform may make it more difficult for households

to clear these debts, leading to financial stress over the longer term. Savings and Other Financial Products.

• Few interviewees had savings. • Of those who did have savings, few had sufficient cash set aside to enable them

to cope with any income loss from welfare reform or from other sources for any length of time.

• Where people do have savings, any substantial losses of income will cause those

savings to run dry within a short time. • Even fewer interviewees would be in a position to start developing a savings pot

at this stage to enable them to protect themselves from future loss of income. • Given the limited benefit and high cost of putting aside savings to cope with

income loss, it is clear that interventions should not focus on encouraging savings

for this purpose.

Experience of the Benefit System • Many interviewees experience the benefit system as being complex. To the extent

that Universal Credit simplifies the system, it may offer claimants the benefit of being clearer about entitlements and how to negotiate the system.

• However, to the extent that the ease experienced by some interviewees in

negotiating the system is the result of their familiarity with the system rather than the result of their personal capability, the sheer extent of change within the

welfare reform process will create its own problems. • The loss of benefit, through both mistake and sanction, is a very common

experience amongst interviewees, often with serious and long lasting

consequences. The numbers of people experiencing such problems may rise as a result of the bedding in of new systems and the stiffening of sanctions.

• Without support to deal with/ avoid these problems, some claimants may be left very financially vulnerable, others will be more capable of resolving issues themselves.

• The smooth delivery of the system to claimants requires positive and appropriate interactions between staff working in the system and claimants. The trust, and

possibly the appropriate attitudes, on either side may not be in place to enable such interactions.

• Some claimants used to a situation of ‘benign neglect’ in their relationship with

the benefits system will face engagement with the benefit system in the future which may be more intensive and may be experienced as more intrusive.

Incapacity Benefit to Employment Support Allowance

• The attitude of the ATOS staff delivering the assessment was generally felt by

interviewees to be poor. • Interviewees described ATOS staff behaviour variously as disrespectful and

uncaring, insulting and disrespectful. • These experiences compounded the natural reluctance of vulnerable claimants to

open up to people that they did not know in relation to personal details relating to

their condition. • Interviewees were also very aware that they were not being seen by doctors, and

felt that those delivering the tests were not sufficiently skilled to do so competently.

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• Interviewees felt that the process itself:

o Was designed to trick them to ensure that they were found fit for work, o Was delivered by assessors who were always ready to put a ‘ready for

work’ spin on the situation, to the extent that interviewees sometimes felt that a false record of the Work Capability Assessment had been taken.

o Could be described as Orwellian in that it involved being constantly

observed. o Did not deal effectively with fluctuating conditions or people with mental

health problems. o Was a conveyor belt approach, governed by tick boxes and driven by

targets to get people onto JSA.

o Did not give adequate opportunity to raise complaint. • In terms of the emotional impact of the assessments, interviewees found the

experiences of waiting for, undergoing, and awaiting the results of, the test extremely stressful, and experienced considerable emotional fall out once they had received a negative decision.

• For some vulnerable people, particularly those with mental health problems, there may be a risk that the experience has a significant negative impact on their

health and well being. • Interviewees appeared to have experienced highly inaccurate assessments,

evidenced by their initial awards of no points being completely overturned, and implied by the failure of ATOS to challenge their appeal.

• It is difficult to argue with the suggestion that if replicated consistently, the

experience of interviewees suggests a process which is not fit for purpose. • In the light of the coming transition from DLA to PIP, in which the functional

assessment will be delivered by ATOS, there may be concerns about the replication of this experience in the future.

Disability Living Allowance Claimants • Failing to access Disability Living Allowance may lead to a loss of independence

for claimants where it hits either or both their access to suitable transport, and/ or their ability to cover the costs of care.

• The impacts will be particularly serious where people are also affected by the

tightening of access to local authority care budgets. • Media coverage of the changes is both causing concern to existing claimants, and

for some is leading to a feeling that they are being negatively targeted and labelled by government policy.

• The stress engendered by such worries may become a factor impacting on

people’s health, as seen in the discussion of the transition from Incapacity Benefit to Employment Support Allowance above.

LHA Claimants: Response to the Changes

• People affected by the changes to Local Housing Allowance may face a number of

unpalatable housing choices as a consequence of the changes if they are not able to increase their income from employment or from other sources.

• These will include: o Finding the extra money from within budgets that are already highly

constrained.

o Seeking new accommodation, which may still require a contribution from within their own constrained budget, and which may not be suitable for

their needs. o Attempting to access social housing provision for which the waiting lists are

currently long, often with little priority attached to their case.

• Disabled people may be left particularly vulnerable in these circumstances.

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• If feelings about direct payment in the social rented sector reflect those amongst

those interviewees who were renting their homes privately, the ending of most direct payment for social renters under Universal Credit could prove very

challenging. Use of Social Fund.

• Community Care Grants continue to be an essential way of supporting people to set up a new home/ live independently.

• The new support scheme, DESSS, is designed to support people in immediate crisis as well as to sustain independent living. Should the burden on this part of the scheme grow considerably due to the impact of changes, particularly those

under Universal Credit, levels of support to people who previously may have claimed Community Care Grants may be under severe pressure.

Views on Local Advice Providers.

• Interviewees regarded support from advice, and other support, agencies as

essential to the effective resolution of the financial issues that they faced. • On several occasions it was clear that interviewees who may have benefited from

advice had not accessed assistance, either at all, or at a sufficiently early stage in the process.

• Some interviewees had experienced problems accessing support because of the current heavy demand on advice services.

• There was also an indication that joint working between the advice agencies in

Hastings might not always have been as effective as it should have been, a situation that the Renaissance House Hub is designed to tackle.

• Supporting an effective response to welfare reform from the advice sector may require; support for more efficient working to reduce the burden on agencies; increased or maintained capacity within the sector; and stronger referral links

with the range of organisations working directly with service users.

Section 5: Recommendations

Overarching Recommendation Hastings Borough Council should consider the business case for investment in the projects set out below, even in the current difficult climate for public spending.

This case can be seen in terms of the:

• Additional income and hence economic activity brought into the town through higher levels of benefit payments to local residents.

• The opportunity to reduce business risks and burdens faced by public sector

organisations that is offered by the preventative aspects of the project ideas targeting the negative consequences of welfare reform discussed below.

Theme 1: Ensuring the Benefit System Works as it Should for Hastings Residents.

• Recommendation 1.1 Hastings Borough Council should maintain existing levels of investment in Hastings CAB core activities and HARC, as a complement to

initiatives being taken forward by the East Sussex Welfare Reform Project.

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• Recommendation 1.2 Hastings Borough Council should take cognisance of the

fact that any resource that may be available to support action across the county under this theme will only be available for the short term, and will not cover the

whole of the period over which welfare reform will be a challenge for Hastings resident. Once the format of any additional services created under the aegis of the East Sussex Welfare Reform Project is clear, Hastings Borough Council should

be involved in discussions with the County and other partners about how such services might be supported in the longer term.

Theme 2: Dealing with the Consequences of Welfare Reform for Hastings Residents.

• Recommendation 2.1 Hastings Borough Council should work alongside ESCC, other boroughs and districts councils, and local RSLs to consider investment in

enhanced debt advice provision within the county. This would act in part to replace provision being lost as a result of the cutbacks to Legal Services Commission funding. Any additional investment should be targeted at service

users identified and referred through a number of defined routes, including services working with people threatened by homelessness/ in rent arrears, people

in need of housing support, vulnerable families, or people with mental health problems. This service would fit alongside that funded by the Lottery, should the

current bid prove successful. • Recommendation 2.2 Hastings Borough Council should explore the possibility of

making an investment in Hastings and Rother Credit Union to ensure that it can

deliver a budgeting account to an increased number of members. This exploration should be carried out alongside ESCC, and local RSLs, who have held preliminary

discussions with Hastings and Rother Credit Union about the impact of Universal Credit and budgeting accounts.

• Recommendation 2.3 Hastings Borough Council should keep a watching brief in

relation to the developing relationship between ESCC and local foodbanks. It should continue to encourage the development of joint working and referral

between its own frontline staff and Hastings Foodbank. • Recommendation 2.4 Hastings Borough Council should considers how it can

support the development of the financial capability of local residents. Its focus

should be on exploring with other partners how financial capability can be built into/ provide an added push to local initiatives focused on life skills, or health

related activities such as smoking cessation, and how frontline staff can reinforce clear messages around money management and financial resilience.

• Recommendation 2.5 Hastings Borough Council should maintain as far as

possible its current activities to tackle fuel poverty. It should explore the potential for a local initiative around ‘energy clubbing’. This involves people coming

together to offer their collective custom to a range of energy companies in return for negotiation of a lower tariff.

• Recommendation 2.6 Hastings Borough Council should convene a consultation

with the local voluntary sector through Hastings Voluntary Action to explore further creative, low cost initiatives to reduce household outgoings.

• Recommendation 2.7 Hastings Borough Council should continue its current support for employability initiatives locally. For many people, the only way to deal with the negative income consequences of welfare reform will be to find

employment.

This report was produced with the support of Mandy Littlewood Consulting, Clair Malpas and Lisa Glass. Thanks are also due to Chantal Lass for commissioning the work, to all those who recruited interviewees for the

research, and to the interviewees for their honesty and openness.

16

Section 1: Introduction

Change has been a constant in the benefit system since its earliest days. The pace of that change has intensified since the election of the Coalition Government in

May 2010. Changes set out within the Welfare Reform Act 2012, in the emergency budget of June 2010 and through a number of other statutory instruments, collectively

are creating the biggest changes in the UK social security system since the National Insurance Act of 1946.

Continuity and Change in the Themes of Reform In pursuit of twin and intertwined goals of tackling poverty and making work pay, the

1997 to 2010 Labour Government focused considerable attention on welfare reform.

Tax credits were introduced to support those with children and wages of low paid workers, Pension Credit was created to tackle poverty amongst older people by supplementing the basic state pension, and Employment Support Allowance was

brought in with the intention of increasing levels of employment amongst people with health problems.

Some of the key themes of the coalition Government’s reforms, there is considerable continuity from previous governments.

The reforms are intended to tackle a welfare system which is seen as:

• Acting as a disincentive to work. • Insufficiently responsive to changes in circumstances. • Not reflective of changes in society.

There are, however a number of significant changes in emphasis from reform

programmes carried out by previous administrations: • The reforms have the specific intent of achieving a cut in the overall social

security bill of £18bn by their conclusion, with the money saved being used to

reduce the level of cuts required in other departmental budgets under the Government’s austerity programme.

• One of the stated aims of the introduction of Universal Credit, the main plank of the Government’s reform strategy, is to simplify the way in which the welfare

system operates. This is seen as contrasting with the perceived complexity of reforms under the previous administration, and that which has grown up within the social security system since its earliest days.

• The focus of the reforms is almost entirely on people of working age and their families. Far fewer of the changes will impact on older people, who have been

insulated from the reforms as an explicit policy decision.

17

Aspects of the Reform Agenda. Three broad areas of reform can be discerned:

• Three transitions from existing benefits to new benefits:

o The gathering together of work related and means tested benefits within Universal Credit.

o The ongoing migration of existing Incapacity Benefit and Severe Disablement Allowance Claimants to Employment Support Allowance or Job Seekers Allowance and the repeated re-assessments via the Work

Capability Assessment. o The transition of current Disability Living Allowance claimants to the new

Personal Independence Payment. • The localisation of control over the Social Fund, and Council Tax Benefit. • A series of smaller changes to various benefits, including changes to uprating ,

child benefit, tax credits and Housing Benefit coming into force before the introduction of Universal Credit.

Structure of the Report Section 2 describes key aspects of the Hastings socio-economic context in which the reforms will be delivered. This allows for an understanding of:

• The extent to which Hastings might experience particularly high levels of impact as a result of welfare reform.

• The extent to which the town is experiencing difficulties relating to poverty, low

incomes and financial inclusion, prior to the introduction of major elements within the welfare reform process.

• Ways in which Hastings residents may lack or possess resilience in dealing with the consequences of key aspects of welfare reform.

• The broader anti poverty and financial inclusion context within which any

response aiming to mitigate the impact of the welfare reforms on Hastings will be delivered.

Section 3 focuses in turn on the three areas of welfare reform identified above, estimating the impact of reforms on Hastings residents in terms of the numbers of

people likely to be affected, and where possible, the extent of potential financial losses.

Section 4 presents findings from a series of interviews with people who have been affected by welfare reform, or may be affected by welfare reform in the future.

Section 5 draws key conclusions from the report, focusing on highlighting the areas in which local authorities and other local organisations may need to respond.

The Neutrality of the Report The authors of the report are keenly aware that the issue of welfare reform is politically controversial. They are not, and cannot be, immune from having personal views about the consequences of the reforms. However, they are clear that this report is as neutral a

reporting of research findings as is possible.

However, it is clear that at first sight the report may appear to have a particular slant, in that it may appear to emphasise the potential negative impacts of welfare reform. Two critical points need to be made in this respect.

18

There is huge debate about the ultimate consequences of the welfare reforms for those

affected. Critics focus on the income that households may lose as a consequence, and broader negative impacts that they fear will follow. In response, the Government

stresses its belief that the changes will incentivise work, and that, as a key part of its broader economic strategy, they will make a major contribution to the creation of a stronger economy.

This report has to focus on the impacts of reform that are more certain. It will therefore inevitably concentrate on the potential negative and positive direct income

consequences of the reforms, rather than on less predictable potential positive outcomes relating to work incentives. Even if such outcomes were more predictable, and

could be assessed with greater accuracy, questions would remain as to they were distributed so as to balance income losses.

Moving beyond the Current Media Debate Much of the debate in the media has focused on the issue of the benefit cap, the restriction of the maximum amount of benefit that can be paid to a household to reflect median household income. The limited attention paid to this within the report does not

reflect any view of the authors about the justice or otherwise of the cap, nor of the reasons for the debate focusing in that direction, rather their view that the benefit cap

has far less significance for people in Hastings than any of the other changes discussed in this report.

Much of the rhetoric used in the media when debating welfare reform also assumes a simple and lasting distinction between ‘benefit claimants’ and ‘hard working families’.

This ignores the fact that the majority of the reforms discussed in this report impact on people who are in low paid work as well as people who are out of work. It also ignores

the fact that people’s interactions with the benefit system are complex and change over time; people go in and out of work, form and leave relationships, fall ill and see their

health improve.

This leads to a final point, within the terms of the information available, it is only possible to provide a series of snapshots of particular moments in time. The statistical part of the report cannot hope to capture the complexity of individuals’ interaction with

the benefit system over time, but where possible it will present evidence that indicates that complexity, and readers should at all times bear in mind that the circumstances of

many of those affected by welfare reform will change to an even greater extent than the social security system itself.

Relationship between this Report and East Sussex County Council Report on the Impact of Welfare Reform

After completion of the initial draft of sections 2 and 3 of this report in September, the consultant was commissioned to carry out a similar piece of work for East Sussex

County Council’s Welfare Reform Project. Based on the further research that he was able to carry out for that county wide project,

much of it based on the large number of reports released since the first draft of this report was completed, the consultant has been able to carry out a substantial rewrite of

this report ensuring that it reflects the most up to date information available. This note both acknowledges the debt to that county wide work, and explains the

similarities in structure and content between the reports, both of which stand as independently valid pieces of work.

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Section 2: The Local Background to Welfare Reform.

Introduction Welfare reform is impacting, and will impact on Hastings residents in a context in which

the town is already facing major challenges. This section sets out an overview of key poverty and financial inclusion related issues

facing Hastings residents. Exploring these issues gives a sense of the risks posed by welfare reform, and particular financial problems to which people may be vulnerable as

the process rolls out. The section updates much of the work presented in the ESAP Report ‘Financial Inclusion

in East Sussex’ produced back in 2010.

It covers: • Developments in the labour market relating to unemployment, employment and

wage levels.

• Poverty and household income. • Financial inclusion issues:

o Debt. o Financial capability. o Access to mainstream financial issues.

Labour Market This section explores:

• The unemployment impact of the recession on Hastings.

• The extent to which Hastings residents move in and out of employment. • The extent of the reliance on part time employment in Hastings. • The low wages earned by Hastings residents.

Unemployment in the Recession

The ongoing recession has had a major impact on unemployment in Hastings, as elsewhere in the UK.

In October 2008, at the start of the recession, Hastings had a total of 2,002 people claiming Job Seeker’s Allowance1. This rose to a peak of 3,549 in February 2010, falling

back to 2,976 in November 2010. It rose to a further peak of 3,553 in February 2012, before falling back to 3,155 in July 2012, the most recent month for which figures are available2.

The number of men claiming Job Seeker’s Allowance in Hastings in October 2008 stood

at 1,488. This rose to 2,648 in February 2010, falling back to 2,160 in November 2010. It rose to another peak of 2,545 in February 2012, before falling back to 2,242 in July 2012, the most recent month for which figures are available.

The number of women claiming Job Seeker’s Allowance in Hastings in October 2008

stood at 517. This rose to 901 in February 2010, falling back to 803 in October 2010. It rose to another peak of 1008 in February 2012, before falling back to 913 in July 2012,

the most recent month for which figures are available.

1 Measuring the number of people claiming JSA does not capture the full extent of unemployment in an

area. However, it is often one of the headline unemployment figures used, and it is sufficient for the

purposes of illustrating the trends discussed in this section. 2 All figures in this section from www.nomisweb.net.

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Labour Market Flux

The unemployment figures discussed immediately above are measures of the stock of people claiming Job Seekers Allowance, the number of people doing so at any one time.

To focus on the stock figure gives only a partial picture, obscuring the high degree of flux within the labour market.

Looking at the number of people moving onto and off Job Seeker’s Allowance gives a more rounded picture.

In the forty six months for which figures are available since the start of the recession in October 2008, there have been:

• 25,569 experiences by Hastings residents of moving onto Job Seeker’s Allowance, an average of 555 per month.

• 17,847 experiences by Hastings men of moving onto Job Seeker’s Allowance, an average of 388 per month.

• 7,722 experiences by Hastings women of moving onto Job Seeker’s Allowance, an

average of 168 per month.

Were it not for the substantial numbers of people moving off benefit at the same time as those moving on, the numbers of people out of work and claiming Job Seekers’

Allowance would mushroom. Over the 46 months since the start of the recession, there were 24,463 experiences by Hastings residents of moving off Job Seeker’s Allowance, an average of 530 per month.

However, it should be recognised that considerable numbers of people leaving Job

Seekers Allowance do not enter full time employment when they do so. Amongst low to middle income groups, only 38% of workers on low to middle incomes leave Job Seekers Allowance for a job of at least 16 hours per week 3.

Significance for Welfare Reform

• The critical role of the benefit system not only in supporting people who are out of work for a long time, but also to assist people to cope with shorter periods of being out of work should not be forgotten.

• The numbers of people relying on Universal Credit for a large part of their income will be higher because of higher unemployment in the recession.

• A substantial number of people per month will be submitting new claims for Universal Credit, for some of them engaging with an unfamiliar system for the first time.

• Universal Credit is being introduced over a period of time (see section 3.1). Claimants of legacy benefits whose circumstances change are being moved to

Universal Credit earlier in the process. Areas with high turnover in the labour market will therefore see more people move to Universal Credit earlier in the process.

3 ‘Squeezed Britain the Annual Audit of Low to Middle Income Households’ Resolution Foundation 2012

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Box 1: Unemployment not as high as expected? Rises in unemployment across the UK have been less than might have been expected

based on the experience of previous recessions. There appear to be three non competing reasons why this is the case:

• Companies are seeking to retain highly skilled staff until economic growth

returns. • There has been a greater flexibility in holding wages steady or cutting wages than

during previous recessions. • Underemployment remains an issue in the UK economy, with around 3.05 million

people constituting around 1 in 10 of the workforce characterised as

underemployed4.

Difficulty extending part time hours may have particular relevance in the context of the impact of Universal Credit regulations placing pressure on people to increase hours of part time employment (see section 3.1).

Wages For Those in Work.

Table 1 sets out figures relating to average (median) wages for residents in Hastings and other districts in East Sussex5.

Area Median Full Time

Wage

Median Part Time

Wage

Median Part Time

Hourly Wage

Hastings £418.70 £158.30 £7.05

East Sussex £488.20 £151.10 £8.42

England £507.60 £154.30 £8.03

United Kingdom £500.70 £154.00 £8.00

It is clear from these figures that Hastings is a low wage economy. Full time wages for Hastings residents are over £80.00 per week lower than the average for the United

Kingdom, and just under £70.00 lower than for East Sussex as a whole.

Median part time wages in contrast are higher the East Sussex and UK figures. However, part time hourly wages are substantially lower. This suggests that part time workers in Hastings work longer part time hours for less reward.

More than 50% of part time workers in Hastings are being paid at below the rate that has been identified as necessary to meet the standard of a living wage in the UK, £7.20 per hour.

Part Time Employment

Hastings has 11,000 people working in part time employment, which is, at 37.9% of the workforce, a substantially higher proportion of the workforce than the Great Britain average, although fairly typical in an East Sussex context.

4 Figures from www.ons.gov.uk/ons.dcp29904_289028.pdf 5 Figures from www.nomisweb.net

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Table 2 provides more detail on these figures6:

Area Number of Part Time

Workers

Percentage of Work Force

Part-Time

Hastings 11,000 37.9

East Sussex 52,300 38.1

Great Britain 32.3

Significance for Welfare Reform:

• Comparatively high numbers of Hastings residents are likely to be impacted as a

consequence of the introduction of Universal Credit, which is designed to support people in low paid employment as well as those who are out of work.

• Universal Credit contains a number of changes specifically designed to support,

incentivise and influence people in part time employment. These will impact on a very substantial number of Hastings residents.

• Already introduced changes to tax credits which impact on people in part time work (see section 3.5) are likely to have had a particularly significant impact on

Hastings residents.

Poverty and Household Income in Hastings. Hastings has high levels of poverty, particularly child poverty. Nearly 6,000 Hastings children are living in poverty, 3 in 10 of all children in the town. Nearly 15,000

households are living in poverty, 37% of all households. Table 3 sets out figures relating to the extent of poverty in Hastings in 2009, the latest year for which figures are available7:

Area Percentage of

Children in

Poverty

Numbers of

Children Living

in Poverty

Percentage of

Households

Living in Poverty

Number of

Households Living

in Poverty

Hastings 29.3% 5,725 37% 14,787

East Sussex 18.5% 19,325 32% 74,634

UK 31%

Going beyond households classified as being in poverty, it is clear that significant

numbers of Hastings residents more generally may find life difficult financially. 50% of Hastings residents have a household income £4,500 or more below the average in Great Britain.

Table 4 sets out figures relating to average household income in Hastings:8

Area Median Household

Income

Hastings £23,946

East Sussex £27,281

South East £32,676

Great Britain £28,413

6 Figures from Annual Survey Hours and Earnings at www.nomisweb.net 7 Figures taken from East Sussex in Figures at www.esif.org.uk 8 Figures taken from East Sussex in Figures at www.esif.org.uk

23

Significance for Welfare Reform: • Welfare reform may:

o Increase the number of people living in poverty.

o Deepen the poverty of some of those already living in that situation. • A substantial number of Hastings residents may be pushed into poverty by the

changes, or if already in poverty, may be at risk of their situation worsening

further. • Given the focus of welfare reforms on people of working age, there may be

particular concerns about the prospect of an increase in the already high levels of child poverty in Hastings.

Financial Exclusion It is difficult to get accurate statistics for local authority areas which give a sense of the extent of financial exclusion amongst their populations.

This next section uses a recent report from the Resolution Foundation9 which focuses on households on low to middle incomes or which are ‘benefit’ reliant, to explore some of

the issues that, based on the figures on poverty and household income discussed above, it is certain will be facing substantial numbers of Hastings residents.

It presents statistics for this report and a small number of other sources relating to a range of financial exclusion issues facing ‘the squeezed’:

• Debt. • Exclusion from mainstream financial products. • Financial capability.

• Box 2: Who Are the Squeezed of ‘Squeezed Britain’?

The Resolution Foundation’s report ‘Squeezed Britain: The Annual Audit of Low to Middle Income Households’ sets out a vast range of statistics relating to the financial circumstances of people in the 2nd-5th income deciles of working age, for who benefits

(not counting tax credits) constitute less than 20% of their income.

The report states that there are 10.1 million adults in this group across Britain, 31% of the total working age population, and 5.2 million children, 40% of the total children in the country. The 7.4 million benefit units within the group includes 3 million single

adults, 2.2m couples with children, 1.5 m couples without children and 0.7m lone parents.

‘Squeezed Britain’ reports that

• For a typical household in the low to middle income group, 16% of income is

brought in through benefits and tax credits, accounting for 9 and 7 % of gross household income respectively.

• 38% of households in this group are claiming tax credits. • Those households claiming are in receipt of an average £4,030 per year of tax

credits.

9 ‘Squeezed Britain the Annual Audit of Low to Middle Income Households’ Resolution Foundation 2012

24

Debt.

This section sets out figures relating to: • The levels of different types of debt amongst low to middle income households.

• The triggers for debt. • How people respond to reductions in income.

‘Squeezed Britain’ provides a number of snapshots of the extent to which the financial pressure impacting on low to middle income and benefit reliant households is pushing

them into debt. This pressure can be seen in the levels of housing related arrears from these groups.

• Amongst households from low to middle income households who are social renting, 17% are behind on their rent to some extent, the equivalent figure

amongst those who are private renting being 8%. • Amongst households who are benefit reliant, 18% of social renters are in rent

arrears, 11% of those in the private rented sector being in the same position10.

Table 5 presents figures relating to the proportion of people from both groups who are

behind on bills of particular types. Expenditure Type Proportion of Benefit

Reliant Families Behind on

Bills

Proportion of Low to

Middle Income Families

Behind on Bills

Council Tax Bills 8.1% 5.1%

Gas bill 10.6% 4.1%

Electricity bill 11.2% 4.1%

Water rates 13.3% 3.6%

Telephone Bill 6.0% 2.0%

Other HP Payments 3.3% 1.1%

TV/ Video Rental or HP 3.0% 0.5%

Other fuel bills 0.6% 0.2%

Insurance Policies 0.5% 0.3%

‘Squeezed Britain’ presents a range of additional statistics, particularly relating to low to middle income families, those most reliant on tax credits:

• 11.1% are behind on at least one bill. • 58% of those with outstanding unsecured debts find repayment a burden, 14% of

those describing the burden as heavy.

Triggers for Debt

Table 6 sets out data from the report which looks at the triggers for debt. Primary Self Reported

Reason for Being in Debt

Benefit Reliant Households LMI Households

Changes in Income/ Spending 64% 53%

Reduced Income 14% 27%

Unemployment/ redundancy 46% 19%

Changes in Circumstances 20% 27%

Separation/ Divorce 6% 11%

Injury/ illness 11% 8%

Budgeting issues 12% 20%

Overcommitted on credit 5% 9%

Lack of budgeting 3% 5%

Irregular income 2% 3%

Used credit for living expenses 2% 3%

10 Amicus Horizon performance on rent arrears is substantially ahead of this.

25

Other figures from ‘Squeezed Britain’ presents figures capture the response of people to

finding themselves who report difficulties in repaying their debts. Table 7 sets out some of these.

Response Benefit Reliant Households LMI Households

Cutback in expenditure 58% 48%

Working longer Hours/ second

job/ get better paid job

10% 22%

Financial help from family 17% 15%

Use cash in savings/ other

assets

9% 11%

Enter into another debt

solution, e.g debt

management plan

2% 4%

Take out another loan 4% 4%

Sell House 6% 4%

Significance for Welfare Reform:

• Unemployment is a major cause of debt. Any reductions in the generosity of the safety net which supports people who are out of work may be put people at risk of debt if they fall out of work.

• Simple loss of income is also a major trigger for debt, any financial losses resulting from welfare reform may be put people at risk of debt.

• Injury and illness are significant triggers for debt, changes to benefits paid to people who disabled or ill may therefore also put people at risk of debt.

Access to Financial Products. This section explores the extent to which people on low to middle incomes use/ are able

to use mainstream financial products, in particular their access to credit, and their use of savings.

Borrowing The ability to access affordable credit is a key aspect of financial inclusion, enabling

people to cover large expenditures whether expected or unexpected.

Lack of access to credit can be a particularly severe problem for households on low to middle incomes, who will generally have less ability to finance expenditures from savings, have lower disposable income ‘buffers’ to cope with unexpected expenditures,

and less certain future incomes unable to support longer term saving and financial planning.

The Experience of Credit Constraint and Use of Sub Prime Credit

‘Squeezed Britain’ highlights the extent to which low to middle income and benefit

reliant households are experiencing constraints on their wish to borrow.

Data from 2011 suggests that 36% of low to middle income households and 37% of benefit reliant households, were experiencing constraint on the ability to borrow money, with 47% and 69% respectively finding it harder to borrow money than the previous

year11.

Many people who are reliant on benefits or who are on low to middle incomes the respond to difficulties accessing credit by seeking to borrow more expensively within the mainstream credit market.

11 ‘Squeezed Britain the Annual Audit of Low to Middle Income Households’ Resolution Foundation 2012

26

For others their only credit choices may be found in the ‘sub prime’ market, populated

by home credit, pay day, hire purchase and catalogue lenders. Substantial numbers of the 15,000 people living in poverty in Hastings will be borrowing from these sources.

It is estimated that over 2.3 million people in the UK are customers of home credit companies such as Provident Financial Services, borrowing at 189% APR or more 12. The

attractions of such borrowing, despite the rates of interest charged, are the immediate access to loans, access to loans for small amounts (for which banks would expect

overdrafts to be used), preparedness to lend to people with poor or no credit rating with few alternative options, and loans that appear to be affordable on a weekly basis/ the budgeting horizon of borrowers.

Typical home credit customers are people of working age who aren’t working, women

under 34 years of age, families with children, people from social classes D and E, with incomes below £13,000 per year, and renting from a social landlord13.

Some people on low incomes are considered too great a risk as customers even by home credit companies. They may find themselves using illegal moneylenders, ‘loan

sharks’, paying very high rates of interest, with repayment enforced with threats or violence.

Savings The ability to save money is also a key part of financial inclusion. Savings allow people

to meet the cost of expected and unexpected large expenditures, and to a lesser extent provide a short term buffer against reduced incomes.

‘Squeezed Britain’ presents findings relating to levels of savings amongst households on low to middle incomes/ who are benefit reliant, reporting that:

• 66% of households on low to middle incomes have savings of less than £1,500 per year, 67% hold savings equivalent to less than one month’s income.

• 53% of these households would like to be able to save £10 per month, but find themselves unable to do so.

• 84% of household reliant on benefits have savings of less than £1,500, 59% hold

savings equivalent to less than one month’s income.

Significance for Welfare Reform: • If welfare reforms significantly reduce household incomes, those affected may:

o Struggle to meet existing commitments.

o Not be able to access previously used sources of credit and be forced to trade down in the credit market, relying on more expensive forms of credit

and experiencing further drops in disposable income. • Levels of savings are unlikely provide major protection against household income

shocks for most people affected by welfare reform, re-emphasising the

importance of the benefit system as a short term as well as long term safety net. • The ability of people to save may be further compromised by reductions in

already squeezed incomes.

12 Credit Where Credit’s Due, Niall Alexander for National Housing Federation, 2007. 13 The Home Credit Market. A Detailed Analysis of Target Group Index Data, BRMB 2006.

27

Financial Capability

This section presents two sets of findings relating to the extent of financial capability amongst people likely to be affected by welfare reforms, from the Thoresen Review

baseline study carried out in 2006, which remains the best source of whole population data on the extent of financial capability amongst the general population, and from ‘Squeezed Britain’.

The survey14, defined five dimensions of financial capability; making ends meet, keeping

track of finances, planning ahead, choosing financial products and staying informed. The survey found that people on lower incomes, living in social housing, lone parents

and people who are unemployed, are more likely to keep a good track of their finances than other people, although they score less well on other aspects of financial capability.

Thoresen found that:

• 39% of people believe that they live for today in financial terms, and let

tomorrow take care of itself. • 28% of people had recently experienced a large, unexpected drop in income,

21% a large unexpected expense, but 70% had made no personal provision to protect against loss of income, 55% have not done enough to deal with a sudden

expense. • There is a considerable amount of inertia in the financial product market, with

people staying with particular products whether or not they are delivering the

best returns/ deal for them.

‘Squeezed Britain’ reports on the extent of the difficulties in managing money that people experience as a consequence of fluctuations in their income, presenting statistics from a 2006 survey of tax credit claimants which highlighted that one third of claimants

find that their income is largely stable, but with some ‘blips’ and a quarter find that their income is highly erratic. The same survey found low to middle income households with

very little room for error in their money management, with half just able to cover their outgoings and a further quarter for whom outgoings were greater than income.

Significance for Welfare Reform: • Universal Credit has been designed to change people’s financial behaviour.

• Whilst claimants are more likely to keep a good track of their finances than other people in the general population (which may raise questions about the need for this aspect of the reforms):

o Many people on low incomes will manage their finances on a day to day basis.

o Inconsistent incomes may become more difficult to manage where overall levels of income are lower.

• Attempts to support people to deal with the financial capability challenges created

by Universal Credit with new financial products must deal with a considerable amount of consumer inertia.

14 Financial Capability in the UK, Establishing the Baseline FSA, 2006

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Section 3: Predicting the Impact of Welfare Reform on

Hastings This section of the report is divided into six subsections.

The first three subsections focus on the three key transitions taking place under welfare

reform: • The introduction of Universal Credit. • The transition from Incapacity Benefit to Employment Support Allowance.

• The transition from Disability Living Allowance to Personal Independence Payment.

The next subsection focuses on:

• The significant changes that are underway to benefits supporting people to meet

their housing costs: Local Housing Allowance, and Housing Benefit that will impact on claimant’s incomes before the introduction of Universal Credit, and

recent changes to Tax Credits. The following subsection focuses on the introduction of new, localised support schemes

which will replace Council Tax Benefit and the Social Fund.

The final subsection describes the potential impact of what might be seen as the sting in the tail of welfare reform; a change to the method used to calculate the annual uprating

of benefits and tax credits in line with inflation. Format of the Subsections

Each of the subsections on the changes to specific benefits is set out in the following way:

• A brief overview of the rationale behind the changes. • A description of the timescale for the changes. • Discussion of the detail of the changes.

• Discussion of who the changes will affect. • Discussion of the extent of the impact on Hastings residents.

Throughout these subsections, discussions within separate boxes will highlight changes which are important but are not part of the key thrust of reform.

Nota Bene: Protection of Older People

A clear policy decision has been taken by the Government to focus the vast majority of the benefit changes discussed in this document on working age benefit claimants. Older

people are generally explicitly protected from the changes. There is one main exception to this general rule. Where one member of a couple is over

retirement age, and one below, the household will make an application for Universal Credit, rather than claiming through the Pension Credit system.

In terms of broader impact, all the research on money management amongst low income households suggests the importance of informal borrowing amongst family

members. Access to what is colloquially known as the ‘bank of mum and dad’ may be sought more frequently by adult children placed under pressure by the benefit changes

described in this report, an indirect impact of the welfare reforms. Some care focused organisations have suggested that in some cases, older people may even be placed at risk of financial abuse where the incomes of younger relations shrink.

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Section 3.1: The Introduction of Universal Credit Introduction

The flagship of the Government’s welfare reforms is the introduction of Universal Credit to replace all the main means tested benefits and tax credits, apart from Council Tax

Benefit. The DWP states that Universal Credit will: ‘help claimants and their families to become more independent and will simplify the benefits system by bringing together a range of working-age benefits into a

single streamlined payment.’

Universal Credit aims to: • ‘Improve work incentives. • Smooth the 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.’15

Timescale for Change.

It will take more than four years for Universal Credit to be rolled out from its commencement in October 2013.

• Between October 2013 and April 2014

o Those making a new claim for means tested or employment related benefits will receive Universal Credit.

o Existing claimants of the ‘legacy benefits’ (detailed below) will also be moved onto Universal Credit if they are already receiving one of these benefits and their circumstances change significantly.

• From April 2014. Existing claimants may be given a priority move onto Universal

Credit if it is considered that they will benefit from this. • Between the end of 2015 and the end of 2017. Those who have not been moved

onto Universal Credit already will be moved during this time.

Box 3: Four different systems side by side: During the period of the introduction of Universal Credit four systems will effectively be

running side by side serving people of working age: • The new Universal Credit system.

• The existing system of support for people on income related benefits (minus the localised Council Tax Benefit and Social Fund schemes) serving a reducing number of people.

• The existing tax credit system serving a reducing number of people. • The existing benefit system providing people with contribution-based Employment

Support Allowance and contribution-based Job Seeker’s Allowance. Key Point:

• In itself, this introduces the potential for a considerable degree of confusion into the situation.

15 www.dwp.gov.uk/policy/welfare-reform/universalcredit/

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The Detail of the Changes

The next part of the report details: • The benefits that Universal Credit

• How a household’s Universal Credit entitlement will be calculated. • The system of:

o Disregards and tapered withdrawal.

o Conditionality. o Sanctions.

o Payment and claim submission. • Specific changes affecting disabled people.

Legacy Benefits Universal Credit will replace:

• Income-based Job Seeker’s Allowance. • Income-based Employment 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 Support Allowance, though

the conditions and rules attached to these benefits will be charged to align with Universal Credit.

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.

o Rent or a mortgage costs (support for mortgage interest will only be available

to people who are not doing any paid work, and may include a waiting period and time limit).

o People with limited capability for work. o People with limited capability for work-related activity. o 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. Disregards will vary for: • Single people and couples without children;

• Lone parents with one or more children; • Couples with one or more children; and • Disabled singles or couples.

One disregard will be available per household, whichever household member’s is

greater. For each of the groups set out above, there will be higher and lower levels of disregard dependent on whether a household is receiving help with housing costs or not.

Above the household disregard level, Universal Credit will be withdrawn based on a taper of withdrawal of 65 pence for every additional pound earned.

31

The system is dependent on real time communication between the PAYE system at

HMRC, and the DWP’s computer system. This means that changes in earnings should automatically be communicated on a monthly basis to the DWP who administer

Universal Credit, meaning that claimants will not have to report changes in earnings themselves.

Conditionality- 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.

People in Group 1 [the consultant’s numbering] are subject to all work related

requirements. People from this group will have to look for work, and be immediately available for any work which pays National Minimum Wage and is within 90 minutes of home. They must attend JCP interviews and participate in mandatory employment

programmes. People in this group will be those who would currently be eligible for Job Seekers Allowance. The group therefore includes lone parents and couples with children

over the age of five, and people assessed as fit for work under the Work Capability Assessment.

People in Group 2 are subject to work focused interview and work preparation requirements. People in this group will be expected to attend work focused interviews

and take reasonable steps to prepare for work which may include undertaking training, work experience or placements, or attending a skills assessment. People in this group

will include those people placed in the Work Related Activity Group after a Work Capability Assessment, and ‘lone parents or the lead carer in a couple with a child aged 3 or 4 who are not eligible for the ‘work focused interview requirement only group [i.e.

Group 3 as described below].’

People in Group 3 are subject only to work focused interview requirements, meaning that they have to attend periodic interviews to discuss plans to find work. People in this group will be lone parents or the lead carer in a couple with a child over one but below

the still to be confirmed prescribed age, which will be set between 3 and 5.

People in Group 4 are not subject to any work related requirement. This group consists of people placed in the Support Group under the Work Capability Assessment, lone parents or lead carers in a couple with a child under the age of one, and people

with ‘intensive and regular caring responsibilities for a severely disabled person’.

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Box 4: Additional Change- Conditionality for People in Work Universal Credit has been designed specifically to increase the incentive for people to

take up employment. However, some features of Universal Credit appear to reduce the incentive for part time workers to increase their hours once they are in work. In particular, the monthly ‘real time’ communication between HMRC and DWP means that

any additional earnings will be immediately subject to the tapered withdrawal of Universal Credit. Currently, tax credit entitlement is calculated on a yearly basis people

claiming tax credits can earn up to £10,000 more than expected within a year before seeing their tax credits fall in that tax year.

To counteract this disincentive to work additional hours, 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.

Key Points There is considerable uncertainty about how the conditionality regime for people in work will play out in practice, in particular

• Whether there is the danger of people being sanctioned for failing to find sufficient hours in work when suitable jobs may not be available for them.

• How this expansion of conditionality will be supported by efforts to help people

access more work/ progress in the labour marker. • The requirements to work that will be placed on people with childcare

responsibilities, particularly lone parents.

Sanctions

The Universal Credit claimant commitment will be backed by a stricter sanctions regime, reflecting that introduced in October 2012 for people claiming Job Seekers Allowance.

The level and length of sanctions that will be imposed on claimants depends on:

• The group in which the claimant is placed.

• 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.

Claimants in Group 1, who are subject to all work related requirements:

• If they fail to take up an offer of paid work/ refuse to apply for a job or leave a

job voluntarily, they may be sanctioned for 3 months for their first failure, six months for their second failure, and three years for their third/ subsequent

failures. • If they ‘fail to undertake all reasonable action to obtain work’ they may be

sanctioned for 4 weeks for their first failure, three months for their second, third

and any subsequent failures. • If they fail to undertake ‘particular, specified work preparation action’ they will be

sanctioned until they re-engage, plus one, two or four weeks dependent on the number of times they have failed to meet their commitment.

Claimants in Group 2 will be sanctioned if they fail to undertake ‘particular, specified work preparation action’. The sanctioning will last until they re-engage plus one, two or

four weeks dependent on the number of times they have failed to meet their commitment.

Claimants in Group 3 will be sanctioned if they fail to participate in a work focused interview, with sanctions lasting until they re-engage.

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Sanctions for claimants in Groups 1 and 2 will consist of the withdrawal of 100% of the

standard personal Universal Credit Allowance. Claimants in Group 3 (plus 16 and 17 year olds in groups 1 and 2) who are sanctioned will lose 40% of the standard personal

Universal Credit Allowance. The sanctions regime will not be discretionary, a shift from the current system in which

a DWP decision maker determines the length of application of a sanction.

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. Furthermore, any payment will

be ‘recoverable’ from future UC payments once sanctions are lifted.

Key Points • Vulnerable people, for example people with mental health problems or histories of

insecure housing status may be particularly vulnerable to falling foul of the

stricter sanctions regime. • The loss of flexibility in the regime appears to further increase the likelihood of

such difficulties. • Some of these issues are picked up in more detail in section 4.

Changes Affecting Disabled People. Three 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.

• Severely disabled people living without an adult to care for them face a number of

additional cost burdens either as a disabled couple or as single people.

Reflecting this, 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

£58.20 per week per disabled adult. It will be abolished under Universal Credit.

• Currently disabled people in work are 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 £28.15 per week.

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The Number of Households Claiming Universal Credit in Hastings

The DWP states that Universal Credit will be claimed by: ‘All households who would otherwise have been on the legacy benefits or tax

credits which are replaced by Universal Credit, and those who become newly entitled as a result of the Universal Credit payment rules. The announcement of policies since the last Impact Assessment has led to an update of the [claimant]

population pool to include couples with one partner under and one over the qualifying age for Pension Credit currently on Pension Credit or newly entitled to

Universal Credit, alongside removing working age households who are on Council Tax Benefit only in the current system.’

No accurate statistics are available for the number of households who would be in this pool in Hastings. An estimate must therefore be made.

Statistics are available from the East Sussex in Figures website relating to:

• The numbers of people in Hastings claiming out of work benefits.

• The numbers of households in Hastings in work and claiming tax credits.

It is possible from these figures to work out the proportion of UK people/ households claiming out of work benefits/ in work tax credits- the two groups who will make up the

pool of Universal Credit claimants who live in Hastings. An average of these proportions is then calculated. This is weighted to reflect the

respective importance of in work tax credit claiming and workless households within the pool of Universal Credit claiming households.

This weighted average is then used with the DWP’s estimate that 8.3 million households nationally will claim Universal Credit to calculate the number of households who will

claim Universal Credit in Hastings.

This calculation suggests that 14,850 of the 41,200 households in Hastings will claim Universal Credit, 36.1% of the total households in the town.

Assessing the Financial Impact on Hastings Residents This section sets out:

• Statistics relating to the overall impact of Universal Credit on Hastings residents. • Statistics relating to the impact of Universal Credit on disabled people and

families with disabled children.

Overall Impact

The DWP’s Impact Assessment on Universal Credit claims that its introduction will have three key positive effects:

• Its greater simplicity will lead to a substantial increase in the up-take of

unclaimed benefits. • Entitlement changes will increase incomes among lower income groups.

• Increased work incentives through a lower marginal deduction rate when people begin to earn will increase the number of people in work.

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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 people16.

Based on these national figures: • Nearly 5,550 Hastings households (13.5% of all Hastings households) will see an

increase in their income under Universal Credit, 3,400 (8.3% of all Hastings households) by more than £100 per month.

• 4,290 (10.4% of all Hastings households) will see their income stay the same,

• 5,010 households (12.2% of all Hastings households) will see their income fall.

NB: These estimates are based on the changes from a point at which some aspects of welfare reform that will reduce people’s entitlement, in particular changes to Local Housing Allowance and Housing Benefit, discussed in section 3.4 below have already

been brought in.

Nota Bene: 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. Transitional protection involves the freezing of 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.

Significant changes are defined as being; a partner leaving or entering the household; a substantial drop in earnings for three months; a substantial increase in earnings; the

ending of a claim for Universal Credit; and the loss or gain of any of the elements that make up Universal Credit- including a change to fit for work status.

The extent of the flux in the labour market in East Sussex noted in section 2 provides one reason for predicting that transitional protection will not last for a long time for

many current legacy benefit claimants.

Impact on Disabled People/ Families with Disabled Children. Transitional protection will prevent existing claimants from the full effect of entitlement loss under Universal Credit. However, new claimants will not have access to the same

entitlements as those current claimants and the points above mean that the value of transitional protection erodes over time, and may be lost due to changes in

circumstances. The Children’s Society, Disability Rights UK and Citizen’s Advice Bureau 17 suggest that:

• 100,000 children across the UK live in families claiming the disability related element of child tax credit who will lose this entitlement to support.

• 230,000 single disabled people, including 25,000 single parents currently claim the Severe Disablement Premium.

• 116,000 disabled people in work currently claim the disability related element of

Working Tax Credit.

16 Universal Credit Impact Assessment, DWPO December 2012 17 The Children’s Society, Disability Rights UK and Citizen’s Advice Bureau ‘Holes in the Safety Net’

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Based on these figures, in Hastings, an estimated:

• 179 children will be affected by changes to the disability related element of Child Tax Credit

• 498 severely disabled people affected by loss of Severe Disablement Premium. • 54 severely disabled lone parents affected by loss of Severe Disablement

Premium.

• 91 children affected by loss of their Lone parent's Severe Disablement Premium. • 182 households affected by reduced entitlement to disability related element of

Working Tax Credit. Table 8: Summary of Financial Impact of Universal Credit

Numbers Affected

Across UK

Numbers Affected

in Hastings

Households Claiming Universal Credit 8,300,000 14,854

Households with Increased Income 3,100,000 5,548

Households with Income Unaffected 2,400,000 4,293

Households with Reduced Income 2,800,000 5,010

Children Affected by Changes to Disability

Related Element of Child tax Credit.

100,000 179

Severely Disabled People Affected by Loss of

Severe Disablement Premium

230,000 498

Severely Disabled Lone Parents Affected by

Loss of Severe Disablement Premium

25,000 54

Children Affected by Loss of Their Lone

Parent's Severe Disablement Premium

42,000 91

Households Affected by Reduced Entitlement

to Disability Related Element of Working Tax

Credit.

116,000 182

Box 5: Complicating Factor: Localisation of Council Tax Benefit.

One factor complicating any attempt to calculate the number of winners and losers as a result of Universal Credit is the localisation of Council Tax Benefit. The detail of local schemes may result in some of the predicted gains not materialising.

The DWP’s Impact Assessment simply sets this issue to one side -

‘Our distributional analysis assumes that individuals continue to receive 90 per cent of their current CTB award in our current system analysis and that they also receive 90 per of their current CTB alongside their Universal Credit award6. For

the purpose of work incentives analysis council tax support has been excluded from both the current system and Universal Credit – this is a modelling

assumption that is necessary in the absence of detailed information about the nature of local council tax support. The Government is currently consulting on the

localisation of council tax support.’

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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. This contrasts with the current situation in which claimants receive a number of payments, usually on a fortnightly basis. The change to monthly payment aims to reflect the

situation in the workplace of being paid a monthly salary, and is intended to facilitate the transition to work of people who will be used to being paid on a

monthly basis. • Payment will be made one month in arrears. • Entitlement will be assessed monthly, with entitlement at the end of the month

determining entitlement during that month. • Payments will only be made into transactional bank accounts (not POCA)

• The DWP have indicated that the customers payday will be one month from the date of claim.

• The single payment will be to a single member of the household. Currently,

different benefits may be paid to different household members. • The DWP intends that over 80% of claims for Universal Credit will eventually be

made online. Furthermore: o Claimants will have to report any changes of circumstances on-line.

o There will be no paper application forms for Universal Credit, anyone not wishing to 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.

A further substantial change is being made to the way that benefit is paid to those

renting their homes. The inclusion of the housing element within Universal Credit means that the direct payment of Housing Benefit to landlords will largely cease, reflecting the change to the payment of Local Housing Allowance direct to some private rented sector

tenants in April 2008.

The DWP has indicated that there will be two groups of people excepted from this change, with the housing element within their Universal Credit remaining paid direct 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 direct payments. However, the working assumption from the DWP is that people will be supported to

leave the vulnerable category, and that if they trigger direct 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. Six demonstration projects across the United Kingdom involving social landlords are

exploring the impact on landlords and tenants of the shift to direct payment, alongside seeking to establish appropriate definitions of vulnerability and direct payment to

tenants of the housing costs element of Universal Credit. These projects will assess the impact of direct payments upon landlords and claimants, as well as assist the DWP in establishing definitions of vulnerability and identifying appropriate trigger points at

which claimants should be moved to direct payment.

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Key Points • The cumulative effect of these changes will be to leave many Universal Credit

claimants responsible for more aspects of their household expenditure, having to

budget across a longer timescale, often in the context of receiving less money. Any one of these changes would by themselves constitute a significant challenge to the financial capability of those affected.

• For people whose employment patterns are erratic that they regularly drop off of benefit this means that benefit paydays will constantly change making budgeting

more difficult. • The risk of budgeting difficulties resulting in debt/ arrears is clear, and is covered

in section 4.

• Section 4 also covers in some detail: o Potential issues around digital exclusion, with only 66% of Hastings

households having access to the internet. o The risk created by the bringing together of benefit payments into a single

monthly payment, increasing the seriousness of the consequences of a

failure in the system.

Box 6: The Benefit Cap Much of the media attention relating to welfare reform has focused on the putting into

place of a cap on the amount of benefits that a household can claim.

Prior to the introduction of Universal Credit (from October 2013), the cap will apply to

the combined income a household receives from Job Seeker’s Allowance, Employment 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 • Constant Attendance Allowance • Working Tax Credit

• Employment Support Allowance(with the support component) • 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’. If someone loses

their job before the cap is introduced in April 2013, the grace period will run for 9 months from when they lost their job.

The benefit cap will be set at the average (median) net earnings for a working household, currently projected to equal the following figures in 2013; £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.

39

The actual amount of the cap when introduced will be set in the regulations and can be

changed through a statutory instrument. This means that the level of the cap can be adjusted whenever the Government believes it is appropriate; for example when

benefits are up-rated. It is estimated that 67,000 households in the UK will be affected by the cap, with those affected losing on average £83 per week18. The greatest impact is on households with

children. Calculations for Hastings Borough Council suggest that only 70 households in

the town will be affected.

18 http://www.dwp.gov.uk/docs/household-benefit-cap-wr2011-ia.pdf

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Section 3.2: The Transition From Incapacity Benefit to Employment

Support Allowance

Introduction: In 2008 the then Labour Government introduced Employment and Support Allowance

(ESA) to replace Incapacity Benefit as the benefit for people unable to work due to a health problem.

The aim of the reform was to encourage more people who were viewed as being unable to work because of a disability/ health problems 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/ is being 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 claimants in receipt of IB/IS 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

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 (an ESA 50), 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, as a result of being:

• Categorised as fit for work. At this point they can appeal the decision and

continue to receive ESA pending the outcome of their appeal or they can claim Job Seeker’s Allowance rather than Employment Support Allowance, and be

required to look for work. • Placed in the ‘Work Related Activity Group’. They will receive ESA but will be

considered to have limited ability to work at present, but that they are 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’. They will receive ESA but will be consideres as having e limited capability for work related activity and for work. .

Who is Affected by the Reforms in Hastings? This section explores the impact of the introduction of Employment Support Allowance

on two groups of people in Hastings: • Those making a new claim for Employment Support Allowance since its

introduction in 2008/ those claiming Incapacity Benefit who have already gone through the process of reassessment.

• Those who were claiming Incapacity Benefit/ Severe Disablement Allowance in

February 2012 and were therefore due to transition from that benefit through the Work Capability Assessment over the next couple of years.

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Current Employment Support Allowance Claimants.

In February 2012 there were 2,230 people in Hastings already claiming Employment Support Allowance. 1,000 of these people were women, 1,230 were men.

Of these people, 1,810 had submitted new claims since October 2008, of whom 810 were women and 1010 were men19. 410 had gone through the reassessment process,

190 were women, 1010 were men.

Table 9 shows the spread of ages amongst current ESA claimants in Hastings: Age Group Number of Claimants

16-17 10

18-24 270

25-34 390

35-44 500

45-49 310

50-54 330

55-59 310

60+ 110

National figures provide a guide to the range of health problems experienced by people claiming Employment Support Allowance; 43% are claiming because of mental health

problems, 14.7% because of musculo skeletal problems, 7.4% because they have experienced injury or accident, 6.2% because of circulatory/ respiratory problems, and

5% because of neurological conditions. Based on these figures, of the 2,230 new claimants of ESA in Hastings, it can be

estimated that: • 959 have mental health problems.

• 328 have musculo-skeletal problems. • 165 have experienced injury/ accident.

• 138 have circulatory/ respiratory disorders. • 112 have neurological conditions.

Existing Claimants of Incapacity Benefit/ Severe Disablement Allowance The most recent data available, for February 2012, suggests that at that time 3,540

people of working age were claiming Incapacity Benefit/ Severe Disablement Allowance in Hastings, 1440 women and 2,100 men. Table 10 shows the spread of ages amongst IB/ Severe Disablement Allowance claimants in Hastings:

Age Group Number of Claimants

18-24 110

25-34 420

35-44 750

45-49 530

50-54 560

55-59 650

60-64 530

National figures again provide a guide to the conditions experienced by current

claimants of Incapacity Benefit; 43.9% having mental health problems, 16.5% musculo- skeletal problems, 7.2% neurological problems, 6.2% circulatory/ respiratory problems, and 4.5% because of injury/ accident.

19 Figures in this section do not tally exactly due to rounding.

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Based on these figures, of the people who will go through the WCA in Hastings before

the transition to ESA is complete, it can be estimated that: • 1,554 have mental health problems.

• 584 have musculo-skeletal problems. • 159 have experienced injury/ accident. • 219 have circulatory/ respiratory disorders.

• 255 have neurological conditions.

Key Points • Incapacity Benefit is a benefit claimed more commonly by men than by women,

and by people of middle to late working age, but it is clearly not, as is sometimes

stated, a benefit solely for older male manual workers parked to massage the unemployment figures.

• Significant numbers of vulnerable people, in particular with mental health problems will be going through the WCA process.

• Research suggests that the WCA process is poor at taking account of the sort of

health conditions affecting many of those going through the assessment, in particular in relation to the challenges facing people with mental health problems

or with conditions associated with pain, fatigue, and regular fluctuation of impairment. This is discussed in more detail in section 4.

The Impact of the Transition on Current Claimants This section explores how the transition to Employment Support Allowance through the

reassessment process is likely to affect this group of people. It is difficult to carry out a similar exercise for new claimants of ESA, as there is greater uncertainty about future

trends in new ESA claims. Around 3% of people who enter the reassessment process terminate their claim before

the process is concluded. This suggests that 3,430 of the above claimants will actually see their claim to a conclusion.

Data on Incapacity Benefit re-assessments published by the DWP in March 2012 shows that, of the 141,100 claimants that had been through the re-assessment process, 37%

had been assessed as fit for work while 63% had migrated onto Employment and Support Allowance. The latter group were split between 34% being placed in the work-

related activity group and 29% in the support group20. Although the DWP figures are adjusted to account for the result of appeals, the time lag

involved in the determination of appeals means that the percentages are likely to change over the long run, with an increase in the number of people ultimately able to

claim Employment Support Allowance, and a commensurate reduction of those in the Fit for Work Group.

In Hastings it can therefore be predicted that of the 3,540 current claimants of Incapacity Benefit:

• 3,434 will complete the WCA process. • 1,271 will be found fit for work and placed on JSA. • 2,163 will get ESA, of whom

o 1,167 will be placed in the Work Related Activity Group. o 996 will be placed in the Support Group.

20 ‘Employment and Support Allowance- Incapacity Benefit Reassessments: Outcome of Work Capability

Assessments, Great Britain. Department for Work and Pensions Quarterly Official Statistical Bulletin’ DWP

March 2012

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Financial Impact of the Reassessment Process

There is a considerable difference between a claimant of Incapacity Benefit prior to a Work Capability Assessment, and being found fit for work and placed on Job Seeker’s

Allowance after a Work Capability Assessment. Incapacity Benefit is currently paid at £99.15 for long term claimants, all those going

through the WCA process will be long term IB claimants. Job Seeker’s Allowance is currently paid at £71.00.

Given the uncertainty about the impact of the final outcomes of appeals, modelling the potential financial impact of the re-assessment process on current claimants is difficult.

Table 11 attempts to model the financial impact of the reassessment process. Even on a

conservative estimate, the financial losses to current IB claimants in Hastings may be as high as £1.58m.

Financial Loss

Reflecting Estimate

of Numbers Found

Fit for at 1,271

Financial Loss

Reflecting 5%

Reduction in Fit for

Work Numbers

from Column 2

after Appeal

Financial Loss

Reflecting 10%

Reduction in Fit for

Work Numbers

from Column 2

after Appeal

Financial Loss

Reflecting 15%

Reduction in Fit for

Work Numbers

from Column 2

after Appeal

£ 1,859,767 £ 1,766,778 £ 1,673,790 £ 1,580,802

Number of Appeals. As has been noted above, one of the challenging aspects of making predictions about

what will happen to people going through the WCA process is the fact that the available statistics are subject to adjustment as appeals and outstanding cases are finally

determined. The DWP’s most recent figures are from February 2012, within a year of the

commencement of the re-assessment process in April 2011. Given this, and the length of time taken by appeals, it might be expected that only a small proportion of those

included within the figures presented by the DWP or the fit for work group have been allocated to that group after an unsuccessful appeal.

Figures have not yet been made available in relation to the number of appeals submitted for people going through the reassessment process, nor the success rates of

such appeals. Figures are available, however, on the level of appeals against WCA decisions for those making initial ESA claims, just over 40% being appealed, of which

38% are appealed successfully. Using the estimate of 1,271 people found fit for work, and the appeals submitted/ successful appeals statistics for new claims, it is possible to produce an upper end estimate of the number of appeals that have been/ will be generated post Feb 2012 by

the reassessment process, and the number that will be successful. This assessment

suggests that the WCA process will produce 515 appeals, of which 196 will be successful.

44

Box 7- Time Limiting Contribution-Based ESA ESA is currently paid in both income-based and contribution-based forms. From 30th

April 2012 the Government changed the rules for claimants of contribution-based ESA (and therefore also claimants on contribution-based 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. After

April 2012 claimants in the Work Related Activity Group are only 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 ESA claimants in the

Work Related Activity Group with partners in employment. It is estimated that 400,000 people will lose entitlement to ESA as a result of this

change. Around 790 people in Hastings may lose this entitlement, at a total loss to local claimants of £4.09m.

45

Section 3.3 Transition From Disability Living Allowance to Personal

Independence Payment In the Welfare Reform Act 2012, the Government set out the creation of a new benefit,

called Personal Independence Payment (PiP), for eligible working age people aged 16 to 64 to replace Disability Living Allowance (DLA).

The Government’s intention is 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

The timetable for the introduction of PIP is as follows: • From April 2013: New claims will be for PIP not DLA in trial areas in the North

West and North east of England.

• From June 2013: All new claims are for PIP, with no new claims for DLA other than for people renewing DLA claims which were due to expire before February

2014. • From October 2013: The following DLA claimants will be invited to claim PIP:

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 2014. o Those self selecting.

• Between October 2015 and December 2017

o Remaining DLA claimants will be invited to make a claim for PIP and will go through the reassessment process.

The Detail of Personal Independence Payment

Comparison of PIP with DLA PIP will have many similarities with DLA.

• In particular it will have also two components, a daily living component (which has similarities to the current care component) and a mobility component.

• PIP will also be available to people who are either in or out of work and will not be

means tested.

Unlike DLA, there will be 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.

PIP Rates The daily living component will be 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 will be paid at:

• Standard rate- if you have limited mobility. • Enhanced rate- if you have severely limited mobility.

The actual amounts that will be paid under PIP have not yet been set. It is expected however that they will be similar to the current levels of DLA Mobility and the Middle

and Higher Rate DLA Care.

46

Eligibility for PIP

PIP claimants must: • Be aged 16-64 (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).

Access to PIP will be 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 PIP claimants will have score a certain number of points on the test in relation to 11 activities relating to daily life. These include tasks like 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

As with DLA, claims for PIP will have implications for access to other benefits and support:

• The Government intends that both the daily living components of PIP will act as a

passport to Carer’s Allowance in the same way as the middle and higher rate care component of disability living allowance for people caring for someone on these

benefits for more than 35 hours per week. • It is intended that you will be able to qualify for Motability Scheme help if you are

receiving the highest mobility component of PIP.

• The Department for Work and Pensions will be working with the Department for Transport (DfT) and the devolved administrations in Scotland and Wales to decide

how people on PIP will be "passported" to help with transport needs and costs. Current Disability Living Allowance Claimants in Hastings

In February 2012, Hastings had 3,870 working-age claimants of Disability Living Allowance, 1,790 of whom were women, 2,120 of whom were men.

Table 12 shows the age profile of Hastings claimants:

Age Group Number of Claimants

16-17 130

18-24 360

25-29 270

30-34 230

35-39 280

40-44 420

45-49 560

50-54 580

55-59 630

60-64 430

47

‘Main Disabling Conditions’

National figures give a sense of the conditions that cause people to claim Disability Living Allowance.

• 22.9% of claimants are affected by arthritis, back pain or musculo-skeletal disorders.

• 22.6% of claimants are affected by mental health problems.

• 12.7% are affected by learning disabilities. • 10.4% are affected by neurological conditions.

• 6.7% are affected by circulatory or respiratory disease. • 3.8% are affected by blindness/ deafness.

Based on these figures, an estimated: • 893 of Hastings DLA claimants are affected by arthritis, back pain or musculo-

skeletal disorders. • 881 of Hastings DLA claimants are affected by mental health problems. • 495 of Hastings DLA claimants are affected by learning disabilities.

• 406 of Hastings DLA claimants are affected by neurological conditions. • 261 of Hastings DLA claimants are affected by circulatory or respiratory disease.

• 148 of Hastings DLA claimants are affected by blindness/ deafness.

Key Points: • Disability Living Allowance is a benefit that is particularly important for people of

older working age, but not solely for that age group. It is almost equally

important for men and women. • A substantial number of people claiming DLA in East Sussex will be affected by

conditions which may: o Fluctuate. o Involve pain and/or fatigue.

• Should problems experienced with the Work Capability Assessment be replicated in the assessment process for PIP, this may leave them particularly vulnerable to

incorrect decisions. • Similarly, significant numbers of people will be affected by conditions that may

impact upon their cognitive capacity, which may have implications for their

experience of submitting applications, of the assessment process, and for their ability to effectively challenge decisions in relation to their benefits.

Estimating the Impact of the DLA to PIP Transition The DWP21 estimates that nationally:

• Of those 1.75 million people on DLA going through reassessment for PIP: o 510,000 will see their award increase.

o 270,000 will see their award stay the same. o 510,000 will see their award decrease. o 450,000 will receive no award.

Based on these figures, the number of people affected and the extent of the lost income

for Hastings are significant: o 1,080 will see their award increase. o 572 will see their award stay the same.

o 1,080 will see their award decrease. o 954 will receive no award.

21

Personal Independence Reassessment and Impacts DWP Dec 13th 2012

48

The DWP’s earlier DLA Impact Assessment22 stated that he budget for working age

claimants of Personal Independence Payment will be 20% lower than it would have been for an unreformed Disability Living Allowance. This would mean that £3,318,000 less will

be received by Hastings residents in PIP than would have been received through an unreformed DLA.

Appeals It is impossible to predict with any certainty the extent to which appeals might be

generated by the transition process from DLA to PIP. Appeals will be submitted by those who are unhappy at the decision received on their

claim: • New applicants.

• Reassessed DLA claimants who are not awarded any support under PIP. • Reassessed DLA claimants who have a reduced award under PIP.

To generate as robust an estimate as possible it has been assumed that: • Rates for rejection of applications for PIP reflect those for applications for DLA.

• 20% of those who application for PIP is rejected will appeal. • Rates for appeals from no award/ reduced award reassessed DLA claimants will

echo those for new ESA applicants. • The success rate of such appeals will echo that for new new ESA applicants

This suggests that in Hastings the introduction of PIP will generate 1,350 appeals between June 2013 and the end of September 2018, of which 514 will prove successful.

22 DLA Impact Assessment, DWP May 2012

49

Section 3.4 Changes to Support with Housing Costs and Tax Credits Introduction

In its emergency budget of June 2010, in a further announcement in March 2011, and in the Welfare Reform Act of 2012, the coalition Government has introduced a series of

changes to Local Housing Allowance and Housing Benefit, the support available to people to enable to meet the housing costs that they face.

There have been a number of reasons behind the changes, the most prominent of which appear to be:

• A concern at the rising costs of this area of the benefit system. • A belief that some of the levels of housing support received by claimants in the

private rented sector are excessive, unfair and act as a deterrent to work.

• A desire to encourage more effective use of the social housing stock, with quicker access to appropriate accommodation for families on the waiting list, and to

increase work incentives for social renters. The Tenure Mix in Hastings

Table 13 sets out figures relating to the size of the private and social rented sectors in Hastings compared to other East Sussex districts and England23.

Number of

households

within

Private

Rented

Sector

Percentage

of

households

within

Private

Rented

Sector.

Number of

Social

Rented

Homes

Percentage of

Households

within Social

Rented Sector

Hastings 9,730 24% 5,620 13.9%

East Sussex 32,070 13.8% 25,305 10.9%

England

It is clear from these figures that: • Changes affecting the private sector tenants are likely to have a significant

impact on Hastings. • Although it has a smaller percentage of homes in the social rented sector than the

English average, a substantial number of Hastings residents do rent from social

landlords.

The most recent Tenant Services Authority RSR data on RSL properties, relating to April 2011, suggests that since that table was published there has been an increase in the social rented stock in Hastings, to a total of 5,921 social rented properties. 4,018 of

these properties are owned by AmicusHorizon (including all former Hastings Borough Council stock), 678 are held by Orbit South Housing Association*, 336 by Moat Homes,

198 by Hyde Housing Association, 124 by Southern Housing Group, and 114 by Brighton Housing Trust. The remaining stock is shared between 15 further landlords.

*There have been some changes since this data was reported. Orbit South now has 1,097 properties and

Amicus Horizon has 3,989 23

Figures taken from Financial Inclusion in East Sussex, East Sussex Advice Plus, 2010.

50

Section 3.4a: Local Housing Allowance

Changes to Local Housing Allowance, and Timescale for Changes

Substantial changes to the payment of Local Housing Allowance have already been brought into effect.

From April 2011

• LHA rates for shared room, 1-bedroom, 2-bedroom; 3-bedroom and 4-bedroom have been capped at £250, £250, £290, £340 and £400 per week respectively, and restriction of the bedroom entitlement to the 4-bedroom rate. The

introduction of the change for existing claimants is staggered between 1st January 2012 and 31st December 2012.

• Removal of the £15 excess paid to people whose rent is lower than the Local Housing Allowance rate in their area. The introduction of the change for existing claimants was staggered between 1st April 2011 and 31st March 2012.

From October 2011:

• Setting LHA rates as the 30th percentile of Private Rented Sector (PRS) rents. The introduction of the change for existing claimants has been staggered between 1st January 2012 and 31st December 2012.

From January 2012:

• Extension of the limitation of Local Housing Allowance entitlement to the Single Room Rate from the under 25s to the under 35s. The introduction of the change for existing claimants has been staggered between 1st October 2012 and 30th

September 2013.

From April 2013: • The annual uprating of the Local Housing Allowance will be in line with the rise in

the CPI index, or 30th percentile rents, whichever is lower.

Impact of the Changes

The DWP’s Impact Assessment24 is clear that it expects the new provisions to lead to behaviour change. It believes that tenants facing a shortfall will either enter employment or increase their hours in work, renegotiate rents downwards where they

have a small shortfall, or use their savings to cover the shortfall. Some tenants may access Discretionary Housing Payments, or move to another, cheaper, area. Given these

proposed behavioural responses, the DWP sees the impact assessment as capturing the notional impact of the changes.

Estimating the Impact Using National Data. The DWP’s Impact Assessment of the changes to Local Housing Allowance suggests that

across the country 936,960 (99.75%) of the caseload of 939,220 LHA claiming households of working age would lose out under the first four of the changes listed

above, without some form of behavioural response in terms of moving home, or rents being reduced.

100% of the 123,000 caseload in the South East of England were expected to be affected by the changes. This would amount to 3,860 households in Hastings.

24 Impact of Housing Benefit Proposals: Changes to the Local Housing Allowance to be introduced in 2011-

12, July 2010

51

The DWP also estimates the impact of three of the first four LHA changes, absent the

impact of the removal of the £15 excess payment.

This suggests that nationally 642,160 (68.3%) households out of a national caseload of 939,220 will be affected by these three changes. In the South East 81,520 (66.4%) out of 123,000 households will be affected.

Based on the South East figures this would suggest that 2,558 households in Hastings

will be affected by these changes. Actual Local Experience of the Impact

Hastings Borough Council data on those current recipients who will see their Local Housing Allowance reduce suggests that LHA will be reduced due to the 30th percentile

change for 813 recipients between January 2012 and 31st December 2012. According to current HBC data the extension of the single room rate to tenants aged up

to 35 is expected to impact on 230 tenancies in the period between April 2012 and March 2013.

From this data, it seems that the DWP Impact Assessment significantly overestimates

the impact of the LHA changes discussed.

52

Section 3.4b: Housing Benefit Changes Two significant changes to entitlements for social rented tenants have been contained within the welfare reform process:

• Unfreezing of the Non Dependent Deductions. • Introduction of the underoccupation penalty.

Changes to ‘Non Dependent Deductions’

A non-dependent is someone who normally lives with the Housing Benefit claimant, such as an adult son, daughter, relative or friend. A weekly fixed deduction based on the non-dependent’s income is made from the claimant’s Housing Benefit entitlement,

unless the non dependent belongs to one of a number of specific groups.

Non-dependent deductions had been frozen since 1999. However, in advance of the main Housing Benefit and Welfare Reform Bills, the government introduced secondary legislation to up-rate non dependent deductions (NDDs) with the aim of gradually

bringing them back up to the level they would have reached if the freeze had not been applied in 1999.

Non-dependent deductions from weekly Housing Benefit have increased by 24%

between 2011 and 2012 and will increase by similar rates in 2012/2013. The weekly deduction rates for 2012/2013 are set out in Table 14 below.

2010 2011 2012

Non-working non-dependents £7.40 £9.40 £11.45

Working non dependents

- Gross income less than

£124.00 £7.40 £9.40 £11.45

- Gross income not less than

£124.00 but less than £183.00 £17.00 £21.55 £26.25

- Gross income not less than

£183.00 but less than £238.00 £23.35 £29.60 £36.10

- Gross income not less than

£238.00 but less than £316.00 £38.20 £48.45 £59.05

- Gross income not less than

£316.00 but less than £394.00 £43.50 £55.20 £67.25

- Gross income not less than

£394.00 £47.75 £60.60 £73.85

Box 8: Non Dependent Deductions Under Universal Credit In the draft Universal Credit regulations25 the Government has indicated that they will make further changes to the way non-dependant deductions are calculated. They have

indicated there will be one standard rate of deduction applied to non-dependants unless they fall under one of the exempt categories. These categories have been altered from

the current situation, and relate to whether non dependents are under 21, claiming Pension Credit, or in receipt of certain disability/ carer related benefits, or whether the tenant and their partner is blind or in receipt of certain levels of disability related

benefits, likely to be around £65 per month.

25 Universal Credit Regulations 2012 (draft) Schedule 1 Part 3 regulations 15- 17

53

Under Occupancy Changes:

The Welfare Reform Act 2012 gives the Government the power to introduce new ‘size criteria’ for Housing Benefit claims. These criteria will mean that any working-age

household deemed to be under-occupying their home will receive Housing Benefit based on the size of property they need rather than the property they occupy from April 2013.

Size Criteria The size criteria in the social rented sector will restrict Housing Benefit to allow for one

bedroom for each person or couple living as part of the household, with the following exceptions:

• Children under 16 of the same gender will be expected to share. • Children under 10 will be expected to share regardless of gender.

• Disabled tenants or partners who need a non resident overnight carer will be

allowed an extra room. • According to recent case law, two disabled children will also be allowed to have

their own rooms.

Any household deemed to have more bedrooms than they require, as defined by the

criteria, will lose a proportion of their Housing Benefit. The deduction will be a fixed percentage of the Housing Benefit eligible rent. This will be set initially at 14% for one

extra bedroom and at 25% for two or more extra bedrooms. This loss of benefit has become known colloquially as the ‘bedroom tax’.

The measure will affect only tenants of working age, i.e. those below the Pension Credit age, at the moment 61 for women, (to be equalised in 2018 with that for men, and

raised to 66 in 2020). Estimating the Impact of Housing Benefit Changes

The Impact of Non Dependent Deductions.

Data from Hastings Borough Council on Non Dependent Deductions suggest that 386 households have been affected by the changes, with 282 of these households (73%) of working age.

The Impact of Under-Occupancy Chnrges

This next section will explore the potential impact of the Under Occupancy changes in three ways:

• Using national data and estimates

o Based on the UK wide estimate. o Based on the estimate for the South East of England

• Using local data o Provided by the social landlords. o Provided by the landlords and interpreted by the consultants.

All four calculations are presented in the report, as there is ongoing discussion about the

exact level of the impact on Hastings social rented tenants.

54

National Figures

Hastings Borough Council information suggests that in June 2012, 2,858 working-age RSL tenants in Hastings were in receipt of Housing Benefit.

• Based on the DWP estimate for the UK26 that 31% of social tenants who are on

Housing Benefit will be affected by the under-occupancy criteria, this suggests that 886 RSL tenants would be affected by the changes.

• Based on the DWP estimate for the South East of England that 22% of social tenants who are on Housing Benefit will be affected by the under-occupancy

criteria, this suggests that 629 RSL tenants would be affected by the changes. Local Data- Consultant’s Analysis.

Table 15 shows the results of the consultant’s analysis of data provided by AmicusHorizon and Orbit South. The analysis applies the DWP size criteria to working-

age tenant households on Housing Benefit.

AmicusHorizon Orbit South

Occupancy level

compared with

the size criteria

Number affected % of working age

tenants on

Housing Benefit

Number affected % of working

age tenants on

Housing Benefit

3+ bedrooms

more

20 1% 7 1%

2 bedrooms more 263 16% 65 12%

1 bedroom more 434 26% 166 30%

Total Impacted 717 (out of

1657)

43% 238 (out of

559)

43%

Between the two largest landlords, 955 tenants would be affected by the size criteria. That is 43% of the working-age tenants of these two RSLs on Housing Benefit.

Assuming that the same proportion of the working age tenants of the other landlords are affected by the changes, 1,229 out of the 2,858 working age social rented tenants

in Hastings will be affected by the changes.

Local Data- Local Analysis. Amicus Horizon have indicated that they believe the figure suggesting that 717 of their tenants will be impacted by the underoccupancy changes is too high. Their estimate is

that 345 tenants, or 20.8% of working age tenants on Housing Benefit will be impacted.

This would mean that of the two largest social landlords in Hastings, 583, or 26.8% of their working age tenants on Housing Benefit would be impacted.

Assuming that the same proportion of the working age tenants of the other landlords are affected by the changes, 766 out of the 2,858 working age social rented tenants in

Hastings will be affected by the changes.

26 Housing Benefit: Size Criteria for People Renting in the Social Rented Sector, DWP Equality Impact

Assessment, June 2012

55

How Much Are Hastings Social Rented Tenants Losing?

The rate of benefit loss will be 14% of the full rent for tenants under-occupying by one bedroom and 25% for those under-occupying by two or more bedrooms. Looking at the

average RSL rents among the two largest RSLs in Hastings27, the most commonly expected losses in Housing Benefit entitlement are likely to be:

• Between £10.12 and £11.21 a week if occupying a 2-bedroom property

instead of a 1-bedroom property • Between £11.91 and £13.11 a week if occupying a 3-bedroom property

instead of a 2-bedroom property • Between £21.26 and £23.41 a week if occupying a 3-bedroom property

instead of a 1-bedroom property

27 Orbit South and Amicus Horizon, RSR 2011

56

Section 3.4c Changes to Working Tax Credits The Emergency Budget in 2011 introduced a number of significant changes to Tax Credits that came into effect on 6th April 2012. These were designed to reduce the tax

credit budget, with the first of the listed changes designed to increase the incentive on couples to increase their hours in work.

Detail of the Changes. The changes are as follows:

• A 50% increase in the number of hours couples with children have to work. Before April 2012 couples responsible for children needed to have at least

one partner working at least 16 hours a week to get Working Tax Credit. Since April 2012 a couple with children have needed to have joint working hours of at least 24 a week to qualify with at least one of the couple working 16 hours.

• A 37% reduction in the income limit for Child Tax Credit. Before April 2012 claimants could usually get some Child Tax Credit as long as their income was not

over the limit of £41,300. From 2012 this limit has been reduced to £26,000 for people with one child, £32,000 for people with two children. (There are some exemptions which depend on individual circumstances.)

• Restrictions in changes of income. Before April 2012, if a claimant’s annual income for the current tax year went down they could often get extra tax credits

for the current year. From April 2012 if a claimant’s income goes down by £2,500 or less their payments will not change for the current tax year.

• Reduction in backdating . Before April 2012, the Tax Credit Office could pay

tax credits for up to three months before the date of claim. From April 2012 this period reduced to one month.

• Changes for the over 50 s The '50-plus element' has been abolished from April 2012. This was an additional payment of up to £39 per week of Tax Credits to people who were 50 or over on the date they started work and had been in

receipt of one of a number of identified benefits for the previous 6 months.

Impact on Hastings Residents It is estimated that 212,000 households across the UK were faced with a situation of

having to increase their hours in work or see their income reduced. Based on that estimate, 320 households in Hastings might have been expected to be in that situation.

57

Section 3.5: Localising Responsibility for Benefits

Section 3.5a Localising Responsibility For the Social Fund Replacement The Welfare Reform Act 2012 abolished the Social Fund in its current form, and handed over responsibility for the design and delivery of local welfare assistance schemes

replacing Crisis Loans and Community Care Grants to local authorities, in East Sussex the responsibility being taken up by East Sussex County Council.

The DWP perceived problems with the both the Crisis Loan and Community Care Grant element of the service. In particular:

• Crisis loan items awards were seen as growing in an uncontrolled fashion since the introduction of the telephone claim service in 2006, which the DWP believed

suggested that they were not getting to the right people. • Job Centre Plus staff were not seen as the most appropriate people to determine

awards of Community Care Grants, with other local agencies seen as better

placed to carry out these tasks.

Current Social Fund The Social Fund is made up of different components, without an understanding of which the impact of the changes will not be clear.

The Social Fund currently consists of three elements:

• Community Care Grants. • Crisis Loans. • Budgeting Loans.

Community Care Grants are used by:

• People moving from homeless accommodation • People moving out of care into their own accommodation • People requiring items that will reduce the possibility that they will need

hospital/medical care • Families under exceptional pressure

Crisis Loans are awarded to people with no other way of getting funds who need money in an emergency. Examples of situations in which Crisis Loans may be awarded include

people who have no gas/electricity and no money to buy power, or people who need an essential item for example a cooker. People who claim a Crisis Loan do not need to be

on benefits. Payments may be made to in advance of awards of benefit (alignment payments), to cover the cost of particular items, or to meet general living expenses.

Budgeting Loans are available to people on income related benefits to pay for: • Furniture and household items.

• Clothes and footwear. • Travel costs.

• Costs to improve or maintain a home, or keep it secure. • Rent up front or removal costs to get to a new place. • Costs of looking for or starting work.

• Hire purchase (HP) or other debts people may have in relation to the items above.

Budgeting Loans are repaid by deduction from benefits at source.

58

Changes in Advance of Localisation

In advance of the coming into force of the provisions of the Welfare Reform Act related to the Social Fund the Government made three immediate changes to the system they

inherited: • Crisis Loans for items were only to be available to people in the case of people

experiencing a disaster such as fire or flood.

• Crisis Loans for living expenses were to be paid at 60% of the benefit rate not 75%.

• A maximum of 3 was set for the number of Crisis Loans for living expenses that people within a 12 month period.

Retention of Responsibilities by the DWP In the new system the DWP:

• Will continue to make available Budgeting Loans to people claiming the Universal Credit legacy benefits until such time as the transition of claimants to Universal

Credit is complete. • Replaces Budgeting Loans for Universal Credit claimants with a new system of

‘budgeting advances’.

• Replaces Crisis Loan Alignment Payments with a new national scheme of short term advances, administered by the DWP.

Localisation in East Sussex- DESSS

East Sussex County Council has named its new welfare assessment scheme, replacing crisis loans and community care grants the Discretionary East Sussex Support Scheme (DESSS). The scheme is still subject to development and consultation.

As its name implies the scheme is discretionary, with no legal right to support for

claimants. It is also met from a fixed budget, with no further payments possible once that budget is exhausted.

The scheme has two purposes which can be seen broadly as reflecting the aims of the support that they replace:

• To support people in financial hardship where that hardship is creating a risk to people’s health and safety, providing a safety net to meet fundamental human needs for food and warmth.

• To help people establish themselves living independently in the community.

The scheme differs from the current situation in a number of critical ways: • No cash payments will be made, payments will be made direct to providers. • People may only access the scheme once every twelve months. Previously one

quarter of crisis loans had been granted to people who were receiving a loan on at least the fourth occasion.

People will be eligible for the fund if:

• They are in receipt of certain benefits, or in receipt of a low income. • They have a qualifying circumstance or need for assistance. • Their needs, taking all facts into account, have a sufficient priority to warrant

assistance. • They lack the income or capital to meet their needs.

59

Access to the fund will be determined based on the assessor’s understanding of:

• The remaining budget available • The financial circumstances of the applicant.

• The availability of other help from statutory, voluntary, private sector and personal sources

• The potential for a burden on the local authority if an award isn’t made.

• Steps that the person is taking to improve their financial situation. • Whether they have brought about their financial crisis intentionally.

• Whether they have previously been in receipt. The sort of crisis situations that the new payment is designed to deal with will include:

people lacking the ability to provide themselves/ their household with food, with essential goods for children or heating, people needing urgent help with travel costs,

people who have undergone major upheaval/ disaster, or who have no alternative clothing than the clothes they are wearing.

The new payment will also provide assistance to people establishing in living independently after leaving an institution or as part of resettlement programme by

paying for; beds/ bedding, heating appliances, domestic appliances/ furniture.

Both successful and unsuccessful applicants will be signposted to sources of advice and support around benefits, housing, debt and money management issues.

The scheme has been designed to avoid duplicating a range of other support available to people including Discretionary Housing Payments, the hardship support available to

people facing benefit sanctions, funeral, cold weather, winter fuel payments or sure start maternity grants, or support available to asylum seekers. It will not be usable to meet housing costs.

Table 16 in the following page sets out information relating to the current claimants of

support under the Social Fund in Hastings. Key points: The elements of the Social Fund devolved to Local Authorities are:

• Particularly important for single people, and for lone parents when they are

granted to households with children. • For people at the start of their journey towards life independence.

60

Crisis Loan

Living

Expenses

Community

Care

Grants

Budgeting

Loans

Crisis

Loan

Items

Crisis Loan

Alignments

Summary

Number of

Applications

received 2,820 1,270 3,980 600 2,380

Total expenditure £112,000 £239,500 £1,130,400 £69,400 £134,900

Number of Awards 2,240 570 2,840 260 2,190

Lone Parent Status

Lone Parent 17% 27% 36% 14% 9%

Not a Lone Parent 64% 45% 36% 68% 79%

Unknown 18% 28% 28% 18% 12%

Age of youngest

child

0-5 18% 23% 32% 13% 11%

6-8 2% 4% 5% 1% 1%

9-12 2% 5% 5% 2% 1%

13-16 2% 3% 4% 0% 1%

No children 16 or

under 76% 65% 54% 83% 85%

Age of recipient

Under 18 3% 1% 1% 0% 4%

18 to 24 30% 19% 18% 28% 38%

25 to 34 25% 24% 25% 22% 26%

35 to 44 22% 20% 23% 25% 17%

45 to 54 14% 19% 17% 18% 11%

55 to 64 4% 11% 11% 6% 4%

65 to 69 0% 3% 3% 0% 0%

70 to 79 0% 2% 3% 1% 0%

80 to 89 0% 0% 0% 0% 0%

90 and over 0% 0% 0% 0% 0%

Unknown 0% 0% 0% 0% 0%

Household type

Couple 10% 18% 16% 8% 7%

Single Female 36% 46% 55% 32% 28%

Single Male 54% 36% 29% 59% 64%

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Section 3.5b Replacement of the Council Tax

Introduction

The 2012 Welfare Reform Act devolved to local authorities the responsibility for designing and delivering replacements for Council Tax Benefit in the context of a 10%

cut in the budget provided, and a requirement to maintain current levels of support for older people.

Hastings Borough Council finished consulting on its Council Tax Support Scheme in the early Autumn.

In October 2012, the Government announced the allocation of a further £100m funding for LAs to assist them in developing ‘well designed council tax support schemes, and

maintain positive incentives to work’.

The Boroughs and Districts are currently considering how they can amend their draft schemes in the light of the conditions attached to this funding. The scheme’s final details will be announced in January 2013.

The discussion in this section reflects the proposals as they stood when published for

public consultation.

Detail of the Changes

The scheme is being designed in line with the following principles: • To be a common scheme across all of East Sussex.

• To limit the impact on the most vulnerable households. • To make sure that those who move into work are not penalised. • To require all adults in a household to contribute to paying the bill.

• To not give a discount to those with relatively large savings.

The proposals include: • Reducing to £6,000 the maximum savings that an applicant can hold if they are

to qualify for support under the scheme. • The setting of a maximum level of support of £20.00 per week, and a minimum

level of £5.00 per week.

• Disregarding the following income when calculating entitlement: o Disability Living Allowance and other disability related benefits.

o Child benefit. o The first £5-£25 from wages.

• Increases in non dependent charges.

These changes are accompanied by proposals to alter exemptions rules for people with

second homes/ empty properties. Impact on Households in Hastings.

The 10% cut in the amount made available to Hastings Borough Council, prior to additional funding from the Government means a £1.1m reduction in the relevant

budget. As indicated above, older people are to be protected under the new system. Council Tax

Benefit is currently claimed by 12,726 people in Hastings, 7,982 of these people are of working age, 62.7% of the total claimants.

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This means that if changes were solely focused on reducing entitlement to the support

scheme, the amount of money available to working age people under the new scheme would have to be cut by 16.5%.

However, changes to rules on exemptions have been designed to bring in half the £1.1m government cut. This suggests that support to people of working age will only be

cut by just over 8%. Further analysis of the impact of the changes is possible by looking at

• The non dependent deduction charges that will be introduced in April 2013.

• The impact of the setting of the maximum limit for support under the scheme to

£20.00.

Table 17 sets out the level of non dependent deductions that were initially proposed for April 2013.

Table 18 sets out the numbers of current Council Tax Benefit claimants living in

properties in different council tax bands:

Hastings Borough Council estimated that the result of the £20.00 cap on payments

under the scheme will be to see people in Band A have to pay £0.64 per week, those in Band B £4.08 per week and those in Band C £7.52 per week.

The 330 current Council Tax Benefit claimants in bands D and above will be making contributions that are greater still.

Non Dependant Deductions Current

Rate

Proposed

Rate

In receipt of State Pension Credit or in receipt of IS, JSA(IB) or

ESA(IR)

Nil 5.00

Aged 18 or over and in remunerative work

• Gross income greater than £394.00 9.90 19.80

• Gross income not less than £316.00 but less than

£394.00

8.25 16.50

• Gross income not less than £183.00 but less than

£316.00

6.55 13.10

• Gross income less than £183.00 3.30 6.60

Others aged 18 or over 3.30 6.60

Band Number of Working Age Claimants Percentage of Total Working Age Claimants

Band A 4,470 56.00%

Band B 2,487 31.15%

Band C 705 8.83%

Band D 245 3.07%

Band E 55 0.69%

Band F 18 0.22%

Band G 2 0.04%

Band H 0 0%

Total 7,982 100.00%

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Section 3.6 Inflation Uprating of Benefits. The Budget of 2010 announced changes in the method of calculation of the annual uprating of benefits and tax credits in line with inflation, which will have significant

consequences for the incomes of people claiming benefits in future years.

Previously, benefits and tax credits had been calculated using either the Rossi Index, or the Retail Price Index. From April 2011 the index used to uprate benefits and tax has been the Consumer Price Index (CPI).

There is a substantial academic debate about which index more accurately reflects

changes to the cost of living for people on low incomes that this report will not explore. Leaving that technical discussion aside, CPI is generally at a lower rate than either RPI or the Rossi Index. The move in the Budget of 2010 was made with the aim of saving

£10.6bn on benefit payments by 2015/16.

The Resolution Foundation released research in September 2012 which focused on the impact of this change in the first five years of the introduction of Universal Credit, i.e from 2013/14 to 2017/1828.

Examining the impact on all households it estimated that:

• In cash terms people in the 3rd and 4th income deciles will lose the most by the 5th year of UC, with losses amounting to over £800 per year.

• Proportionally the biggest losses will be experienced by those in the lowest

income decile, 4%. Those in the second and third income deciles will lose an estimated 3% of their income, those in the fourth and fifth income deciles 2.7%

and 1.7% respectively. • By 2017/18 the change in the method of uprating benefits will save the

Exchequer £5bn per year.

The report suggests that the impact on family households will be more severe, with

59% of the savings coming from family households in the bottom half of the income distribution.

• Families in income deciles 1 and 2 will lose 4.7% of their income as a result of the changes.

• Households that are reliant on benefits will lose nearly £800 per year or 4.6% of

their income. • Households on low to middle income will lose £725 per year on average for LMI

households, about 3% of their income. The report suggests that the impact of the changes will be felt particularly severely at a

time when wages are predicted to continue stagnate. They illustrate this further by focusing on households on low to middle incomes, suggesting that incomes for

households in this group would rise over the years to 2017/18 if benefit uprating was on the same basis as before, but are now predicted to fall, directly as a result to the change the method of indexation.

The Child Poverty Action Group’s report ‘The Cost of a Child’ 29suggests that the changes

will worsen existing trends which have seen the real cost of raising a child increase faster than inflation. For those in work, and once tax credits are taken into account, a full time job on national minimum wage currently only meets 89% of the costs of raising

a child for single parents, and 82% for couples.

28 Whittaker M ‘Shrinking Support: What Universal Credit Indexation Really Means for Living Standards’

Resolution Foundation 2012. 29 Hirsch A, Sutton L, Beckhilling J, ‘The Cost of a Child in the 21st Century’ CPAG 2012

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Additional Note

In his Autumn Budget Statement of December 5th 2012, the Chancellor of the Exchequer set out further reductions to the way that certain working benefits will be calculated.

The passages below are directly quoted from HM Treasury information accompanying the budget30.

‘Benefits uprating – Most working age benefits will be uprated by 1 per cent for

three years from April 2013. This will apply to: Jobseeker’s Allowance; Employment and Support Allowance; Income Support; applicable amounts for Housing Benefit; Maternity Allowance; Statutory Sick Pay; Statutory Maternity

Pay; Statutory Paternity Pay; and Statutory Adoption Pay. This excludes the disability, carers and pensioners premia in these benefits and the support

component in Employment and Support Allowance, which will continue to be uprated by prices. Child Benefit will be frozen in April 2013, as set out in the June Budget 2010, but will be uprated by 1 per cent for two years from April 2014.

Tax credits uprating – Uprating by 1 per cent will also extend to the Child Tax

Credit and Working Tax Credit (excluding disability elements). The couple, lone parent and child elements will be uprated by 1 per cent for three years from April

2013. The basic and 30 hour elements will not be uprated in 2013-14 as set out in Spending Review 2010 but will be uprated by 1 per cent in 2014-15 and 2015-16. All disability elements will continue to be uprated by prices each year.

Universal Credit – Parameters for Universal Credit have been set. These

parameters will be confirmed in regulations on 10 December 2012. The earnings disregards will be set for April 2013 and increased by 1 per cent in April 2014 and April 2015.

Housing Benefit – In April 2013 Local Housing Allowance rates will be uprated as

previously announced. In April 2014 and April 2015 Local Housing Allowance rates will be uprated by current policy, subject to a 1 per cent cap, with exemptions for rates in those areas in which rent increases are highest. 30 per cent of the

potential savings from this measure will be reserved to fund the exemptions in these two years.’

Key Points

• Under Universal Credit the real terms value of payments will erode year on year.

• This will push increasing number of claimants into financial problems, potentially pushing some into poverty.

30 http://www.hm-treasury.gov.uk/as2012_policy_decisions.htm#Benefits_uprating

65

Section 4: Understanding the Experiences of Benefit Claimants.

This section is based on 18 interviews carried out with Hastings residents over the

period of July to October 2012.

Initially the plan was to interview 35 Hastings residents from amongst seven categories of people:

• Those had appealed/ were appealling against a Work Capability Assessment they had undergone as part their transition from claiming Incapacity Benefit to claiming Employment Support Allowance.

• Those claiming Disability Living Allowance. • Those affected by the changes to Local Housing Allowance outlined in section

3.4a. • Families who had used the Social Fund within the last year. • Hastings fishermen subject to irregular income.

• People potentially affected by the under-occupation penalty/ already affected by increases to non dependent deductions.

• People who were part of couples affected by the requirement to increase their hours in part time employment in order to continue to claim tax credits.

18 interviews were carried out with people across the first four categories of people listed above. Intermediary organisations were unable to supply interviewees for the

three remaining categories. It has been agreed between the consultant and Hastings Borough Council that 10 further interviews will carried out over the next couple of months with people in the 5th and 6th categories listed above, and will be presented in a

separate report that will form an appendix to this one.

The interviews were all interviewed over the phone, with the duration of interviews varying between 20 minutes and 45 minutes with an average of around half an hour.

Interviews were semi structured to ensure that key issues were covered in a way that allowed flexibility in the feedback given by respondents. Questions focused on:

• Budgeting and financial management. • Use of financial products and attitudes towards financial product providers. • Borrowing and debt.

• General experience of the benefit system. • Specific use of particular benefits.

• Responses to changes in entitlements. • The experience of reassessment processes. • Views on support received in relation to dealing with the benefit system.

The interviews were designed to:

• Give a sense of the choices and difficulties that will be faced by people impacted by welfare reforms, both in general and in relation to specific benefits.

• Give a sense of how people are experiencing particular aspects of the welfare reform process.

• Throw light on key issues in welfare reform, for example those which may drive

changes in budgeting behaviour, that are difficult to capture statistically.

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Management on a Low Income.

Interviewees were asked about: • How difficult they found managing on a low income.

• The restrictions placed on their lives by having a low income. • Their attitude to being on a low income.

Experience of Financial Difficulties. A majority of interviewees indicated that they were experiencing a situation in which

they felt they were barely keeping their heads above water, i.e. a chronic shortage of money across the longer term:

‘We don’t have enough to live on. After food and shopping we’ve got less than a tenner....it’s charities that help us survive.’ (F)emale, 19, Couple with Child

(CWC) Claiming Social Fund (SF)

Interviewees with children often focused on the particular difficulties they face in

providing for their children in the way that they felt was appropriate:

‘I can’t pay for after school stuff, things like that. I’m really conscious that I can’t give them what they want....school uniform, that’s another struggle to pay for’

(M)ale, 42 CWC SF ‘We don’t go on family days out. It’s food and bills and that’s it’ F 17 CWC SF

Other interviewees highlighted the broader difficulties created by not finding enough

money: ‘We can’t afford a cooker at the moment, and I haven’t had new clothes for ages’

F 19 CWC SF

‘When we’re in college we can’t buy anything to eat....Clothes for me and my wife are all from charity shops.’ M, 42 CWC SF

Some people set the difficulties they are experiencing in the context of lost employment and reduced income, with previously affordable ‘luxuries’ often proving impossible to

continue to enjoy. One respondent reported that his own medical retirement, and his wife’s redundancy,

had left them struggling at precisely the wrong time:

‘That was seventeen hundred gone [when his wife was made redundant] and costs just keep on going up, it’s really had when we’ve got our daughter’s uni to pay for as well.’ M 54 (C)ouple Adult Non Resident Children (ANRC) claiming

Disability Living Allowance (DLA).

Another interviewee highlighted the impact of the loss of her partner’s Disability Living Allowance on the family:

‘We lost £300 a month, that was massive for us, that means no travelling anywhere’ F 17 CWC SF

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Managing to Cope

Other interviewees felt that they managed reasonably on the benefits that they received, although it was clearly the case for all of those in this situation that this had

required the adjustment of their expectations, or continuation of low expectations, and that it had taken time for them to learn to cope:

‘I was skint when I was married, and I’m skint now....but I still have a nice home, nice furniture and a nice telly’ M 32 (S)ingle, claiming Local Housing Allowance,

(LHA). ‘I don’t live in luxury by any means, I can’t do holidays, but I’ve adjusted my

lifestyle to my income’ M 49 S DLA.

‘I have enough for a roof over my head, gas electricity and food in the cupboard’ F S 32 LHA

The last interviewee quoted above identified the impact of the coming cut to her LHA as being the factor that would change everything from a situation in which she was coping,

to one in which she might not be able to.

Another interviewee who felt that he was currently coping with his financial situation also highlighted what he felt was the precariousness of his situation:

‘We’ve got all that we need, it’s if something happens....’ M 31 CWC Incapacity Benefit (IB) to Employment Support Allowance (ESA) transition.

Another felt that he had adjusted himself to his current situation, but felt considerable sadness at the loss of his previous life:

‘I’ve accepted that I’ll never go on holiday again. It’s something I used to do

quite a lot’ M 62 S-ANRC IB ESA That same interviewee gave further evidence of the precariousness of some people’s

financial situations:

‘It’s tougher in Winter when we’re using more fuel, I worry about running out of cash then’

Attitudes to Being on Low Incomes Interviewees’ attitudes to being on low incomes and facing the challenge of money

management in that context were consistently negative. Paying fuel bills was reported consistently as a particular worry, above all where people feared falling behind:

‘I don’t stop thinking and worrying about the bills’ F 45 Single Parent Resident Children (SPRC) IB ESA

‘I’m constantly worrying about fuel bills, we can’t get the house heated properly- it’s an old Victorian one’ M 54 C-ANRC DLA

‘It’s the energy bills, those guys are like wild dogs...’ M 31 CWC IB ESA

For some, the financial difficulties they were facing engendered above all a sense of resignation:

68

‘You have to get on with it. I don’t worry about things that I can’t change’ M 49 S

DLA

Key Points: • Where people see their income reduce as a consequence of welfare reform,

household budgets that are already very constrained will become tighter still, with

consequences for the quality of life of those affected. • Interviewees who are currently coping financially are still living lives with no or

little access to ‘luxuries’ and with little slack to cope with anything that goes wrong. A reduction in income may push people from coping towards being unable to manage properly.

• Living on a constrained income has a negative psychological impact. The loss of income has a similarly negative impact, with people very conscious of the better

times left behind. • There are clear risks to health and well being, where welfare reform negatively

impacts on the income of people who already have mental health problems, and

for other vulnerable people who may experience mental health problems as a consequence of reduced household income.

Budgeting

Interviewees were asked about: • Their own assessment of their effectiveness as budgeters. • The importance they placed on the budgeting skills that they have.

• The period over which they planned their finances. • The practical methods through which they budget.

Assessment of Budgeting Skills Interviewees generally saw themselves as effective budgeters:

‘I’m pretty much a genius with numbers’ M 39 S Shared Resident Children(SRC)

IB ESA Often this was justified by reference to their purchasing behaviour:

‘I buy everything as cheap as I can’ F 19 CWC SF

‘I get store brands, and everything as cheap as possible... I look around for the best deals on the gas and electric’ F 45 Single Parent (SP) IB ESA

A minority suggested that they struggle to budget effectively, often handing

responsibility to other members of the household:

‘I leave it all to him [reference to second cousin] , I couldn’t cope without him

doing it’ F 60 S-ANRC IB ESA

‘I’m no good really, if I get money it’s gone again in 20 minutes... I let the boss [his partner do it all for me’ M31 CWC IB ESA

Questions might be raised about how well budgeting was being done by the cousin of the first of the two interviewees quoted above, given her indication that she was facing

a £2K water bill.

69

One interviewee suggested that she had previously been very poor at budgeting, but

had managed to turn that around, based on the support she’d received:

‘It’s only the last couple of years [i’ve been sorted]... I was always in debt. The CAB sat me down and sorted my problems out and showed me how to do it better’ F 32 S LHA

Importance of Budgeting

Budgeting was universally seen as an essential life skill to possess. One interviewee highlighted the particular importance of budgeting for people in his situation:

‘I’m very much on the ball. I’ve been there, I’ve not had enough money to pay for that [the support and services required to live independently with his disability]

and I can’t go there again.’ M 57 S DLA. Many interviewees were clear that their ability to budget could only take them so far in

dealing with money issues:

‘It’s not about budgeting, I can do that. It’s that as soon as the money comes in, it goes out again, food, milk vouchers...I end up getting money from mum and

dad to buy me nappies’ F 19 CWC SF Period of Financial Planning/ Method of Budgeting

People varied in terms of their manner of budgeting. Some did their budgeting entirely in their head or wrote down a budget for a week/ fortnight/ month and did their day to

day budgeting in their head. Others did the opposite, or acknowledged that their budgeting style varied:

‘I think of all the bills in my head, I write stuff down day to day’. M 32 S LHA

‘Occasionally I write things down, the rest of the time it’s up here’ F 57 S DLA.

‘Everything that comes in, I write it down’ F 17 CWC SF

One out of the eighteen interviewees reported budgeting using a computer spreadsheet.

Interviewees budgeted over different timescales. The majority planned their finances over a weekly or fortnightly period, often connected with the period over which they

were paid benefits.

A small number budgeted over a longer period: ‘I go month to month, even though it’s fortnightly I get paid’ M 57 S DLA.

Payment of benefits on a fortnightly basis was felt by some respondents to be helpful to

their financial management:

‘I like that the money comes in every other week, it means I don’t have to go too

long without’ F 17 CWC SF

All interviewees had a clear sense of the priorities for their expenditure. For the majority this was reflected in the way that they thought about their expenditure:

‘I live by the mantra ‘Pay your bills first’ M 39 SPSRC IB ESA

70

Others had developed systems using bank accounts which formalised this way of

thinking:

‘All my bills get done by direct debit, then I know I’ve got what’s left. I’ve got two accounts, one for bills, one for other stuff’ F45 SPRC DLA.

‘Bills come straight out of the account, then it’s mine’ M 57 S DLA

Despite their understanding of budgeting issues, some interviewees reported that they could only survive by juggling their finances:

‘Sometimes I pay a little bit to everyone because I can’t manage the full bill’ F 19 CWC SF

‘I have to skip a bill every time’ M 29 SPNRC LHA

There was limited support for the idea of budgeting classes amongst interviewees, although three interviewees did suggest that such might prove useful/

Key Points:

• The payment of benefits on a monthly rather than fortnightly basis under Universal Credit may cause considerable difficulties for people used to budgeting on a weekly or fortnightly basis.

• Some claimants may run out of money towards the end of the payment period, and face a number of days without cash as a consequence.

• Financial capability support to build the capacity of people claiming benefits to budget may have a role to play in responding to the challenges of welfare reform. However:

o The majority of interviewees believe that they have competent budgeting skills.

o Even if these claims are not taken as typical or at face value, there may be little enthusiasm from most benefit claimants for financial capability aimed at increasing their budgeting skills.

o Some claimants may not be able to save money through traditional methods such as trading down in terms of the cost of their purchases.

Interventions may be required which focus on building skills/ knowledge required to purchase different good and services or to use purchases more efficiently (for example cookery classes).

• Ultimately people may find the challenge of living on such low incomes to be insurmountable.

Use of Banking Products and Use of the Internet. Interviewees were asked about their:

• Views on, and experience of, banks. • Their use of banking and internet banking services.

• Their use of other on line shopping and price comparison services. Views on Banks

Views on banks were very mixed. Some interviewees had reasonably positive views of banks:

‘They’ve been OK with me, I’ve got a regular income so they are happy enough’ M 49 S DLA.

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‘[when her endowment had come through] they spent three hours talking me

through all the options I had.’ F 57 S DLA

Others felt that they had experienced both sides of banks:

‘When you’ve got cash they are all over you, they chuck money at you. When

you’ve not got any, they aren’t interested. I needed an overdraft to get things sorted- Nah, not interested.’ F 45 SPRC IB ESA

Some interviewees felt that banks were not designed for customers like them:

‘I’ve never really dealt with them. I’m a head in the sand type bloke, I don’t go down there, I think they’d just make me feel small in front of people, so I avoid

them’ M 31 CWC IB ESA. ‘I’m a bit naive about them. They’ve changed so much since I was younger, I just

don’t understand them any more’ F 32 S LHA.

Some had very negative general views about banks:

‘Banks should be more responsible. I know it’s people’s fault as well, but the banks don’t help’ F 41 C DLA.

Negative Experiences Several interviewees had fallen foul of bank charges levied when they had gone into an

unarranged overdraft:

‘Money didn’t get to my account in time. They stung me for 25 quid for two direct

debits’ F 19 CWC SF

‘I had a couple of purchased I didn’t approve that went through so they charged me. Even when it was sorted and explained they still charged me’ M 29 SP NRC LHA.

The former of the two interviewees above felt that she had been able to deal with the

situation:

‘A friend told me about the direct debit guarantee. I got back in touch with them

and said about this. They backed down’

Use of Banking Services The previous section reported on the number of interviewees that used their bank accounts as a tool to assist in their budgeting through paying at least some bills by

direct debit. More commonly, accounts were used by interviewees simply as a way to receive benefit payments and withdraw that money immediately:

‘Money comes right in, and then it goes straight back out again’ F 37 SPRC SF.

‘It comes in Tuesday and it’s out by Wednesday, I just use it to take cash in’ F 17 CWC SF

A significant minority of interviewees do use internet banking services. This is often primarily to keep an eye on the money that they have available to them:

‘I keep tabs on what’s in there’. M 29 SPNRC LHA.

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‘Internet’s very important for keeping on top of your money’ M 54 CANRC DLA

Of those interviewees that didn’t use internet banking services, a number had a clear antipathy to the idea:

‘Too complex for me, it’s hard enough doing my mobile’ F 60 SANRC IB ESA

‘It’s too technical for me’ M 32 S LHA

‘I’ve been hacked so I steer clear, my mobile dongle isn’t secure’ M 39 SPSRC IB

ESA

‘I get frustrated with it and just log off’ M 31CWC IB ESA. Use of Other Online Services

The last interviewee quoted was one of a significant minority of interviewees who used, or had used, online shopping services.

‘The computer’s opened up the consumer world to me, I don’t like going out, I

get panicky, and I can just sit here and shop.’ M 31 CWC IB ESA. ‘I go on Amazon get things cheaper there’ M 29 SPNRC LHA

Others had used online services when they had previously had access to a computer

within the home: ‘I used to do a weekly shop with my housemate’ F 19 CWC SF.

Interviewees were asked about whether they used any of the price comparison websites

that offer customers the opportunity to access cheaper deals on utilities etc. Not one of the interviewees indicated that this was part of their financial management behaviour. The internet was a source of cheap goods for some, but not as yet a source of cheap

deals on financial services or utilities.

Key Points: • Suggested responses to some of the budgeting challenges created by welfare

reform may involve encouraging people to use financial products to assist them to

budget. • In developing such responses it should be understood that:

o Their success will require large numbers people to think differently, more formally, about the way in they manage their money.

o Banks may not be the preferred providers of such services.

• The majority of interviewees did not have access to the internet at home. • Of those who did, a significant number did not use the internet for managing their

financial affairs in anything but the most limited way. • The push under Universal Credit to deal with claims on line may confront many

benefit claimants with a channel for making claims with which they are very

unfamiliar and uncomfortable, or which in many cases they cannot easily access. • Giving people the advice, support and information to deal with consumer issues

may be an intervention with a broader pay off.

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Attitudes Towards Borrowing and Debt.

Interviews explored: • The attitudes of interviewees to borrowing money and being in debt.

• The sources from which they borrowed money. • The other sources of debt they had.

Attitudes Towards Borrowing For a majority of people borrowing was something to be avoided. Sometimes this

stemmed from an ingrained sense of it not being a wise route to travel: ‘I won’t do that. I’d worry about not being able to repay.’ F 37 SPRC SF

‘I’ve steered clear, I’m not clever enough to fish in that pool’ M 31CWC IB ESA

Other interviewees had changed their borrowing behaviour over time, one in response to a sense that his circumstances had changed:

‘I knew I was going to reach that point [of being seriously disabled] I decided that

when I go there I wanted it [the debt] to be cleared.’ M 57 S DLA

‘I used to have a credit card, in the past. I think it cost me more to run than the benefit I got from it, so I jacked it’ M 49 S DLA

‘I had a credit card. I got rid of it, it’s part of things being tighter for me’ M 62 SANRC IB ESA

One interviewee quoted above indicated concern about a particular source of credit:

‘Those sub prime guys you mentioned are scary stuff. They don’t let you go’ M 49 S DLA.

People had sometimes had very negative experiences of being in debt that they were very keen to avoid repeating:

‘We’ve had the bailiffs at the door. That was horrible’ F 19 CWC SF.

The experience of being in debt could be extremely distressing for those involved, as witnessed by the previous interviewee quoted:

‘My partner and I nearly split up lots of times over it..They’ve had me in tears’

Where debts had become problematic in this way, there appeared to be a determination amongst interviewees, and in some cases a desperation, to deal with the situation and

move on.

Using Debt as a Way of Managing Money Long Term For a significant minority of interviewees, debts were a way of managing their money across the longer term, in some cases the loan outlasting their memory of the reason it

was taken out. For some, outstanding loans were a considerable amount, others had borrowed much smaller amounts that they were happy to pay off more slowly, or did

not feel able to pay off more quickly:

‘I’ve got a credit card debt around £9K. It stays about the same, just ticks up at

Christmas time, buying presents things like that’ M 54 CANRC DLA

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‘I’ve got a couple of loans, one from the Provident and one from Loans4U. They

aren’t much of a headache, I’ve had one of them since 2006’ M 32 S LHA

‘I’m paying off a couple of loans which I can just about manage. I’ve got £141 per month on a consolidation loan which covered catalogues things like that, there’s £40 from someone else, I can’t remember what I took that out for’ F 57 S DLA.

‘I’ve got a bank overdraft, I’m trying to bring it down gradually’ F 45 SPRC IB

ESA. Sources of Borrowing

Some interviewees were very aware of their limited options in the credit market:

‘I’ve never gone to them [the banks, for a loan]. I reckon they’d run a mile with my record, I must be blackballed.’ M 31 CWC IB ESA

‘I’ve got a £300 loan from the Provident. I know it costs, but who else is going to give me cash?’ F 60 SANRC IB ESA.

Families remained an important source of financial support, sometimes with gifts but

often with low level assistance that was paid back flexibly. Friends were also a source of small loans for some. It was clear that even borrowing from friends and family did not always come without psychological cost:

‘A family member cleared my debt, and then helped me going forward’ F 32 S

LHA ‘I need to borrow from my family to help me get through’ F 17 CWC SF

‘[I borrow for] Gas, electric, that sort of thing. I don’t have to pay back straight

away but it’s still stressful’ M 29 SPNRC LHA ‘We do sometimes borrow from friends....but it’s awkward, you don’t want people

thinking that you just want to get money from them’ M42 CWC SF

The Importance of Arrears on Household Bills A consistent theme of the interviews was the extent to which debts were not the consequence of borrowing, but a result of getting behind with bills. The interviewee who

spoke about the bailiffs being in her home and the resultant stress on her relationship identified the key source of her household’s difficulties.

‘My boyfriend is paying off money on the electric... it comes straight out of his JSA now..he’s paying off rent arrears as well’ F 19 CWC SF

On some occasions arrears appear to have arisen as a result of misunderstandings

between the interviewee and a company, sometimes with consequences across the longer term:

‘We’re paying back a water bill, they didn’t bill us when they should have and then suddenly they sent us a massive one’ M 42 CWC SF

‘I’ve got debts with BT, EON and 3 [the mobile phone provider]..it was to do with cancellations, it’s happened twice....we didn’t really get it sorted and it’s left us

struggling’ M 31 CWC IB ESA.

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Key Points: • There was a clear sense that a large majority of interviewees did not engage in

borrowing that could in any way be described as reckless.

• Benefit claimants already have limited borrowing options. The impact of welfare reform may narrow those options further.

• Those who use debt to manage their income across the longer term, or whose

short to medium term debts are currently manageable may struggle to cope if their incomes reduce as a consequence of welfare reform.

• Arrears on household bills, including on utilities, are a critical source of debt, and of stress on a household.

• Reduced incomes under welfare reform may make it more difficult for households

to clear these debts, leading to financial stress over the longer term.

Savings and Other Financial Products. Interviewees were asked:

• Whether they saved.

• If so, how they saved/ what was the source of their savings. • Whether they purchased any other financial products or savings.

The majority of interviewees felt that whilst saving was something that they would like

to do, they couldn’t afford to set money aside from very limited budgets: ‘I opened this ISA but I never used it. Never could afford it’ F 41 C DLA.

A minority of interviewees had savings. Some were managing to save for specific

purposes:

‘I’m putting away some money so that I can cope with it [the loss of LHA]’ F 32 S

LHA

‘I started saving in July for Christmas’ F 17 CWC SF Others were saving for more general purposes:

‘I’m putting aside money for a rainy day’ M 57 S DLA

For a number of interviewees, the savings that they possessed had been set aside in times when they had higher incomes, or had come from their families, often through

legacies:

‘I’ve an endowment that’s coming to maturity, I couldn’t cope on benefits without it....I took out an ISA when I retired and used it for building work’ F 57 S DLA

‘My grandfather and my father left me money, which I put into an ISA. It gives me comfort to know that it’s there’ M 49 S DLA

One interviewee in this position had recently experienced some financial difficulties which had cut into his savings, leaving him very aware of their importance to him:

‘I’ve got this nest egg, about three thousand. It’s like my insurance policy....I had

to take money out of it recently though and I need to build it up again’ M 49 S DLA.

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Those that were currently saving were doing so in different ways:

‘I let it build up in my current account, I can fall back on that if I need to, if I

have a difficult couple of months’ M 57 S DLA ‘I put some in a jam jar, and give some to my parents to keep for me’ F 17 CWC

SF

Interviewees were asked about which insurance products they held. A minority reported that they had home contents insurance. No interviewees owned any other type of insurance product other than car insurance:

‘I’ve got car insurance. You’ve got to have that legally, otherwise I don’t think I’d

bother with it.’ M 31 CWC IB ESA. Key Points

• Few interviewees had savings. • Of those who did have savings, few had sufficient cash set aside to enable them

to cope with any income loss from welfare reform or from other sources for any length of time.

• Even fewer interviewees would be in a position to start developing a savings pot at this stage to enable them to protect themselves from future loss of income.

• Given the limited benefit and high cost of putting aside savings to cope with

income loss, it is clear that interventions should not focus on encouraging savings for this purpose.

Experience of the Benefit System Interviewees were asked about:

• Their general experiences within and views of the benefit system. • Their views on the complexity/ simplicity of the system.

• Any difficulties they had had relating to the interruption of slow payment of benefits.

General Views There was a huge variety of views expressed by interviewees about the benefits system

and their experiences within it. The consultant would observe that those with a more positive experience formed a higher proportion of interviewees than has been the case in previous research that he has carried out.

For some interviewees the experience of the benefit system has largely been one which

might be described as benign neglect ‘They leave me alone, and I leave them alone’ F 32 S LHA.

‘Once I’d applied and it was all sorted, they left me in peace’ F 57 S DLA.

One interviewee in particular highlighted a range of help that he had received from DWP staff:

‘They helped with me with my forms, and they told me about other help I could

get because I was on DLA.’ M 57 S LHA However, even this interviewee reported a mixed experience with the system:

‘At first the staff didn’t want to know.....’

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For some interviewees, their engagement with the benefits system had been very

negative at times, particularly because of the attitude of the staff that they had encountered:

‘They [the staff] are really unapproachable. It feels like you’re looked down on all the time...I hate it every time I have to deal with them... They are supposed to

help you when you’re making an appeal by giving your copies of your papers but they just didn’t’ F 45 SPRC IB ESA

‘They make you feel like the smallest thing possible’ M 42 CWC SF.

The first of these two interviewees drew an explicit contrast between the treatment she had received from different parts of the system:

‘It’s not like that with the tax credits people, because you can get them when you’re in work. They [staff from Job Centre Plus] just look at you like scroungers

and low life’

The second of those interviewees felt let down by the actions of Job Centre staff:

‘They said to go away and find a course and come back. When I did, they said ‘Oh sorry we can’t fund you on that’

Complexity of the System There were different views on the complexity of the system. A minority felt that it was

reasonably easy to find your way around the system, but many of those still found the process irritating:

‘I’ve become familiar with it over time, it’s not that tortuous’ M 49 S DLA.

‘It’s not so much complex, just tedious and taxing, all that filling in forms’ F 60 SANRC IB ESA

‘It was really tedious at the start, but I used direct.gov.uk and that helped’ M 54 CANRC DLA

Others found the system difficult to navigate:

‘I’m used to the forms because of the job I did [a mental health nurse], and I know how difficult they are to fill out’ F 57 S DLA.

‘Really complex. There’s been so many changes over the years you don’t know where you are’ F 45 SPRC IB ESA

‘It’s not just what they decided [her partner had received a negative decision on a

claim]. They push you from here to there, all round and about’ F 17 CWC SF This had not always been helped by what was seen as a lack of knowledge amongst

staff of the system that they were supposed to be administering:

‘I’m on an unusual benefit....they don’t always get the complexity of my situation’ F 32 S LHA.

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Others had worries about how the system was going to work going forward into some of

the major changes:

‘It [the benefit system] is generally OK, but I don’t know how it’s going to be when it all shifts’ F 41 C DLA

Difficulties with Payments A significant minority of interviewees had experienced difficulties in connection with the

payment of benefits, often seeing benefits cut or a considerable amount of time passing before claims were determined. Sometimes these difficulties appeared to be the result of mistakes, sometimes as a consequence of sanctions. Problems had not always been

rapidly resolved:

‘They stopped the claim because he missed a couple of appointments. For a month we were living off child tax credit and child benefit and food baskets’ F 19 CWC SF

‘It was three months before our benefit came through, it was really difficult’ F 37

SPRC SF

‘They stopped my benefit for no reason, I went down and complained and got it started again’ M 49 S DLA

Other interviewees reported that the experience of pursuing your own rights within the benefit system could be overwhelming:

‘I’m too tired to keep pushing for things...too stumped to fight the system’ F 32 S LHA

Key Findings

• Many interviewees experience the benefit system as being complex. To the extent that Universal Credit simplifies the system, it may offer claimants the benefit of being clearer about entitlements and how to negotiate the system.

• However, to the extent that the ease experienced by some interviewees in negotiating the system is the result of their familiarity with the system rather

than the result of their personal capability, the sheer extent of change within the welfare reform process will create its own problems.

• The loss of benefit, through both mistake and sanction, is a very common

experience amongst interviewees, often with serious and long lasting consequences. The numbers of people experiencing such problems may rise as a

result of the bedding in of new systems and the stiffening of sanctions. • Without support to deal with/ avoid these problems some claimants may be left

very financially vulnerable, others will be more capable of resolving issues

themselves. • The smooth delivery of the system to claimants requires positive and appropriate

interactions between staff working in the system and claimants. The trust, and possibly the appropriate attitudes, on either side may not be in place to enable such interactions.

• Some claimants used to a situation of ‘benign neglect’ in their relationship with the benefits system will face engagement with the benefit system in the future

which may be more intensive and may be experienced as more intrusive.

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Incapacity Benefit to Employment Support Allowance

All of the interviewees recruited because of their experience of the Work Capability Assessment had initially been in receipt of a negative decision. The focus of discussion

in this section is therefore on experiences that were almost uniformly negative. Such was the passion and length of these parts of the interviews that the consultant has

decided to included edited versions of their stories below.

Within these stories is clear that: • The attitude of the ATOS staff delivering the assessment was generally felt to be

poor.

• Interviewees described ATOS staff behaviour variously as disrespectful and uncaring, insulting and disrespectful.

• These experiences compounded the natural reluctance of vulnerable claimants to open up to people that they did not know in relation to personal details relating to their condition.

• Interviewees were also very aware that they were not being seen by doctors, and felt that those delivering the tests were not sufficiently skilled to do so

competently. • Interviewees felt that the process itself:

o Was designed to trick them to ensure that they were found fit for work, o Was delivered by assessors who were always ready to put a ‘ready for

work’ spin on the situation to the extent that interviewees sometimes felt

that a false record of the Work Capability Assessment had been taken. o Could be described as Orwellian in that it involved being constantly

observed. o Did not deal effectively with fluctuating conditions or people with mental

health problems.

o Was a conveyor belt approach, governed by tick boxes and driven by targets to get people onto JSA.

o Did not give adequate opportunity to raise complaint. • In terms of the emotional impact of the assessments, interviewees found the

experiences of waiting for, undergoing, and awaiting the results of the test

extremely stressful, and experienced considerable emotional fall out once they had received a negative decision.

• Real anger was expressed at the Government for designing the current system and commissioning ATOS.

Julie’s story: ‘I was awarded zero points – I was literally totally dumbstruck. I don’t have a

named condition, but I do have problems with my sciatic nerve, it gets trapped 3 or 4 times a day. There are no warning signs, and I am a liability to myself and other people when it does.

The lady [carrying out the WCA] showed no caring for me. I was asked to lay on

the couch, and when I asked for help the woman gave me a stool. When I said that it wasn’t enough, that I needed assistance, the woman refused and said ‘we’ll just have to do it standing up’, and was huffing and puffing about it, saying

‘surely you can get a bit lower’.

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Not once did she ask how I was feeling. I bent down further than I would

normally but that was just sheer force – I was made to feel very stupid, they daid stuff like ‘surely you can, just get down a bit lower’.

I tried to do everything as quickly as possible, just through pride, and because I wanted to get out of the room

When I came home and I cried my eyes out, and after the assessment, I couldn’t

get out of bed for three days I felt so bad.

My assessment said that I should be moved onto JSA, that I was completely fit

for work, and that although they recognised that I’ve got spinal problems they felt they would not hinder me working.

That’s not right, not right at all. I can just be watching telly and not be moving and something will go wrong, I’ve knocked my teeth out during a previous

episode. Once when I was crossing the road I had an attack, and cars had to swerve round me. A bus stopped, and passengers got off to help me get across

the road.

I’ve heard that the assessors have a quota of how many pass and how many fail – I feel like I just got them on a day of too many passes.

I had a shoulder bag on, and it was so small I could only fit my keys and purse in it. However, the woman said I was able to lift a bag with both hands without

difficulty!’ Ian’s story:

‘I found it terrifying – ATOS were saying I am fit for work but I’m not – I’m in chronic pain 24/7.

I’ve trouble walking, standing and sitting, but they tell me I’m fit for work because I can put my hand over my head.

You go there [to the ATOS office] and they’ve got you on CCTV straight away and

they sit you in a waiting room on a chair with no arms on it and see how you react, and they watch you on video walking from the chair to the office.

I didn’t know how to answer some of the questions and the woman was going mad, banging her hand on the desk, rolling her eyes. I thought I was going for

an examination not to be insulted. They asked me to lie on a bed, but they put it too high and I couldn’t get on it so

the woman got me a little box to try to stand on to get up. She kept saying ‘of course you can get on that bed’.

In the assessment process, the woman said

‘what do you do when you get out of bed in the morning?’

‘Nothing really’. ‘Hang on a sec, you must do something’.

‘I don’t know, I look out a window, make a cup of tea’. ‘There you go, that is something’.

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I felt intimidated and tricked. Another example was when they said,

‘How do you get your shopping?’ ‘My daughter lives round the corner, she takes me up to the supermarket’.

‘How often’. ‘Whenever, once a week or once a month’. ‘You must know’.

‘Ok, once a week I guess’. ‘How long does it take you to walk round?’

‘I don’t know’. ‘You must know, 30 minutes?’ ‘I suppose so.’

When I went to the court [the tribunal]– it was all written down: ‘Ian is capable of walking around the supermarket for 30 minutes on his own once a week.’ It was

really wrong, like the assessor had been intimidating me, and making me feel like a little kid.

Bob’s story: I got a letter through saying it was a month until the [WCA] appointment, and I

had all this worry, stress and anxiety for the full month. I had my fingers crossed for a bad day on the day of the assessment – I felt like I had to prove that my life

sucks, it was lucky I was having a bad day. The medical itself was a lot less to worry about than I had worked myself up for.

The lady was very nice, and explained everything well. She was just doing her job with no ulterior motives or anything.

We sat down and went though the questions, and I didn’t have to give a physical exam. I get the shakes pretty bad sometimes, and I was having a bad day – the

assessor said she could see it would be too much trouble to do the physical part, so they could just skip it.

I had to go in on my own though, and I wanted my partner to be there. I fall over a lot and so I felt very vulnerable – like I was at a police station, and we

were being separated so we couldn’t make up stories. It was probably the assessor following protocol but it didn’t do anything to put my anxiety at ease, I

wish I’d known beforehand.

I think the whole medical is flawed, especially for people with mental health

problems.

There are people whose lives suck – and they shouldn’t be forced to work, feel depressed, ring in sick, then get sacked, and see their whole families suffer as a result.

Andy’s story

‘They said I was fit for work, total joke.

I got no points on the assessment, because the ATOS idiot, I mean lovely person decided to completely ignore the facts and just make it up as she went along.

The whole assessment was hateful. They were really derogatory, it was like they were reading off a script. They didn’t examine me properly – they never went

near my injury. The eye test was cursory at best.

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I even had to go to the ATOS centre twice – the first time I was left in the waiting

room for 45 minutes before being told to leave as there was no staff member available to do his assessment.

The medical documents were full of contradictions, one minute saying I could walk such and such a distance and the next minute saying I can’t.

I’ve got lots of other medical problems, mostly down to stress. I’ve been stuck on

a heavy dose of antidepressants for a long while now. This is because I’ve been through the appeal process before, 15 years ago when I moved from Invalidity Benefit to Incapacity Benefit when the same thing happened – I went for a

medical then was taken off the benefit. This time I go so wound up as soon as I heard I was having a medical as I knew what was going to happen.

Caroline’s story:

After my ATOS assessment they cut my money altogether. I’ve been to several doctors before and they have always upheld the decision. But this woman, she

was a health worker, not a doctor.

The woman was the first person that I’d come across that I didn’t like, I didn’t like her attitude or the way she spoke to me. I didn’t feel like I could open up about all my medical issues, and she didn’t ask me about them. I couldn’t tell her

that I was incontinent, and that I have Hep C. I just assumed she’d have all this in the notes.

At one point, I told about the trouble I was having with my teeth and dentist – but the woman then wrote that all I talked about was her teeth. The woman

wrote I walked in unaided, and that I gave eye contact, and so I was fine – but I think everyone would give eye contact, unless they were rude.

I wasn’t given any physical assessment, I just sat for 10 or 15 minutes and was asked questions. I was told to sit in a certain seat in a certain way – I wasn’t

sure why.

When I got a letter saying that all my money was stopped, and that I could now apply for JSA I was worried, beside myself with worry. I suddenly had no income whatsoever, and I didn’t know what the hell to do.

Experience of Appeals.

Interviewees were at different stages of their appeal against their Work Capability Assessment outcome; three were still in the process of appeal, two had won their appeals.

Interviewees reported that the appeal process is slow, one of those whose appeal had

now been resolved had seen eight months pass between the date of his assessment and his winning of the appeal. His experience was echoed by another interviewee, still waiting for a determination of his claim after several months.

Both of those who had won their appeal had witnessed ATOS failing to turn up to fight

their case, with only the head of the tribunal and a doctor being present for the hearing.

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One of the interviewees, Andy from the stories recorded above, described his experience

as follows:

‘It [the tribunal] was in Brighton. Lucky my dad took me, I couldn’t have gone by public transport.....

I hobbled in, answered a few questions and was then told that I could go, I’d won.

It was like they were scratching their heads at the original decision.’

Interviewees were clear that support from HARC had made/ was making a difference to their case. However, it was also clear that the location of some tribunals in Brighton was

limiting HARC’s involvement in some appeals to the preparation of documentation. Key Points

• The experience of going through a Work Capability Assessment can clearly prove traumatic for some of those involved. For some vulnerable people, particularly

those with mental health problems, there may be a risk that the experience has a significant negative impact on their health and well being to which support

agencies may need to respond. • Interviewees appeared to have experienced highly inaccurate assessments,

evidenced by their initial awards of no points being completely overturned, and

implied by the failure of ATOS to challenge their appeal. • It is difficult to argue with the suggestion that if replicated consistently, the

experience of interviewees suggests a process which is not fit for purpose. • In the light of the coming transition from DLA to PIP, in which the functional

assessment will be delivered by ATOS, there may be concerns about the

replication of this experience in the future.

Disability Living Allowance Claimants Disability Living Allowance Claimants were asked about:

• The use to which they put the benefit, with the aim of exploring how the loss of

DLA might affect their lives. • General fears for the future.

• More specific fears about potential losses resulting from the changes. Use of Disability Living Allowance

Several interviewees focused their use of DLA on the purchase of transport:

‘I buy my motability scooter that way, and paid for my new wheelchair’ F 57 S DLA

‘I can take taxis, including for work, and not worry because I can just say to myself, well that’s what that’s for’ F 41 C DLA

‘It pays for transport for my carers and taxis for me’ M 54 CANRC DLA.

Some were (also) using DLA to contribute to their general household budget:

‘I think of it as part of my mainstream budget, I use it that way’ F 57 S DLA.

‘[as a disabled self employed person] I’m dependent on DLA. I can’t always work

and keep money coming in that way so it’s a reliable source of income for me’ F 41 C DLA

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For one interviewee DLA was critical to his ability to continue to pay for the care on

which he depended, particularly in the context of cuts to funding from the local authority for that purpose:

‘I pay for care. They asked me to contribute £420 a month...I got a hundred knocked off on appeal, but because I have an occupational pension I get charged.

It’s not really a care system for younger people’ M 54 CANRC DLA.

Comments on dealing with the benefit system by people claiming DLA have been reflected in the previous section. For some people, dealing with DLA claims has proved a battle, others have generally found the system reasonable to negotiate.

Fears for the Future

There was considerable nervousness amongst interviewees about the consequences of the coming reforms on their entitlement to benefits. This appeared to be generated by a combination of media coverage and more direct understanding of the difficulties being

experienced under the Incapacity Benefit to Employment Support Allowance transition:

‘It’s a huge worry. Some of my friends have been through ATOS [the Work Capability Assessment] and it’s probably going to repeat all that’ M 49 S DLA.

‘You see what’s on the TV about it, and you start to think about how it might hit you’ M 57 S DLA

Interviewees were worried about changes to DLA in the context of other changes

impacting on them:

‘I think some people will lose it and will totally fall out of the net if they can’t get

council support either. The council are becoming tighter’ F 41 C DLA

‘Some people will just go through a hole in the ground’ M 54 CANRC DLA There was a degree of anger about the way the issue had been portrayed in the media:

‘You’d think they handed it [DLA] out willy nilly.... all this, it makes you feel like

you are being targeted’ M 54 CANRC DLA One interviewee referred to an area which may see the biggest conflicts under the

process of transition to PIP:

‘Lots of people at HARC and at the local DWP office say that they don’t understand why I don’t get DLA. I think that its basically because I can usually make a meal on my own without being a danger to myself.....But sometimes

this isn’t the case – I can be physically and mentally exhausted so making that meal is actually the hardest thing in the world to do.... by the time I’ve cooked it,

I can be so exhausted I don’t have any energy to eat it.’ F 32 S LHA Fears for Specific Losses.

Interviewees were sometimes explicit about what they thought they might lose under reform, or what they had lost when DLA had been taken away from them:

‘I wouldn’t be able to go out without my scooter....I can’t even walk down steps by myself’ F 57 S DLA

‘We used to go on family days out. We can’t now’ F 17 CWC SF

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‘I’d lose my life outside the house without DLA’ M 39 SPSRC IB ESA.

In addition to the anger expressed by a couple of interviewees a number of other responses were discussed, some active, some displaying a degree of resignation:

‘I’ll get all the information that I can so I can think through the consequences.’ F 41 C DLA.

‘I could tell people my thoughts and what I think about things....but [because of my condition] I’m not going to be in a position to fight my corner’ M 57 S DLA

‘Working isn’t an option for me [because of my health]. I don’t like to worry about

things I can’t control, so I’ll just have to adapt.’ M 49 S DLA Key Points

• Failing to access Disability Living Allowance may lead to a loss of independence for claimants where it hits either or both their access to suitable transport/ their

ability to cover the costs of care. • The impacts will be particularly serious where people are also affected by the

tightening of access to local authority care budgets. • Media coverage of the changes is both causing concern to existing claimants, and

for some, leading to a feeling that they are being negatively targeted and labelled

by government policy. • The stress engendered by such worries may become a factor impacting on

people’s health, as seen in the discussion of the transition from Incapacity Benefit to Employment Support Allowance above.

LHA Claimants: Response to the Changes Interviewees affected by changes to Local Housing Allowance were asked about:

• The impact of the changes on their finances. • The way in which they were likely to respond. • Their views on the importance of direct payments to the landlord.

Impact of Changes

The financial impact was often quite significant: ‘We have to find £14 top up at the moment to pay the rent’ F 19 CWC SF

‘It’s £27 a week I’m down’ M 32 S LHA

The latter interviewee was clear about the housing consequences of the changes:

‘I’ll lose my flat’

Another spoke about this worry in more detail:

‘I can’t afford my flat, I’ll have to go to a hostel and sell all my stuff’ M 29 SPNRC

LHA.

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Two of the interviewees facing reductions in their Local Housing Allowance were facing

additional difficulties, and worries about the prospect of having to share a home because they were disabled:

‘It would help if my DLA came through OK....I can’t cope with the idea of a hostel or a shared house. My illness makes that difficult, I don’t think people who don’t

know me would understand’ M 29 SPNRC LHA.

‘I’m going to lose £26 per week... The place [her current home] is perfect, it’s very specific to my health needs....I’ve looked into flatshares and they won’t work because of certain things about my disability.

There’s nowhere to go in Hastings I could move for £65 – they are renting

garages in Hastings for £85 a week. All the housing association waiting lists are too long’ F 32 S LHA

Response to the Changes The latter interviewee was trying a twin track approach in response to her desire to stay

in her current property, negotiation and saving:

‘I’ve been in contact with my landlord . He’s been round and seen the place and knows it’s my home. He said he can’t put the rent down but he doesn’t want me to move and he’ll try to be flexible. He’s being very accommodating but it means

I’ll still be in debt.

I’ve been saving to make up the shortfall. I’ve looked at my incomings and outgoings and can put aside £10 a week, £15 at a push. I’m hoping that the savings I make will cover the £26 until I’m 35 [in 2 years time]’

Others only saw the future as involving a major step backwards:

‘I’ve been a lodger before. I’m used to being independent. I don’t want to go back to that’ M 32 S LHA

Direct Payments

There were mixed views on the issue of direct payments to landlords, although all three interviewees expressing a clear view on this issue were currently having their LHA paid directly to their landlord:

‘I’m not worried [by the idea of the ending of direct payments] I’d cope OK’ M 32

S LHA ‘I’d prefer it to go straight to the landlord, then he wouldn’t have to come and

chase me for it’ M 29 SPNRC LHA.

‘If the situation arose where there was no alternative I’d have to. But I’d prefer I didn’t have to pay it myself, just another source of temptation’ F 32 S LHA

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Key Points • People affected by the changes to Local Housing Allowance may face a number of

unpalatable housing choices as a consequence of the changes if they are not able

to increase their income from employment or from other sources. • These will include:

o Finding the extra money from within budgets that are already highly

constrained. o Seeking new accommodation, which may still require a contribution from

within their own constrained budget, and which may not be suitable for their needs.

o Attempting to access social housing provision for which the waiting lists are

currently long, often with little priority attached to their case. • Disabled people may be left particularly vulnerable in these circumstances if they

do not qualify for the Severe Disablement Premium. • If feelings about direct payment in the social rented sector reflect those amongst

those interviewees who were renting their homes privately, the ending of most

direct payment for social renters under Universal Credit could prove very challenging.

Use of Social Fund.

Interviewees who had received awards from the Social Fund were asked about the use to which these had been put.

Much of the focus of discussions related to Community Care Grants, which had clearly been important in recipients setting up home, despite what some perceived as

limitations:

‘It made my house a new home. I got beds for the kids and a sofa for the living

room’ F 37 SPRC SF.

‘We got a grand. We didn’t have anything ourselves because we were homeless before, we got everything second hand’ M 42 CWC SF

‘Without the [Community Care] Grant, we’ve have had nothing but a TV. It helped us get things sorted....Everything we got was a little bit broken though, it

was all second hand from Hastings Furniture Service.’ F 19 CWC SF Two interviewees had received a Crisis Loan to help them cope with short term

difficulties:

‘It was about £300. I’m still paying it back £20 a week. It was for nothing really, just to help me get by.’ F 60 SANRC IB ESA

‘We didn’t have anything to live on [because the benefits hadn’t come through yet, so it helped us’ F 17 CWC SF

Key Points:

• Community Care Grants continue to be an essential way of supporting people to

set up a new home/ live independently. • The new support scheme, DESCSS, is designed to support people in immediate

crisis as well as to sustain independent living. Should the burden on this part of the scheme grow considerably due to the impact of changes, particularly those under Universal Credit, levels of support to people who previously may have

claimed Community Care Grants may be under severe pressure.

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Views on Local Advice Providers.

Views on local advice providers were generally very positive. HARC in particular came in for praise:

‘They [HARC] were a lifeline for me, they were there when I needed it the most. The staff make you feel like you are somebody’ F 60 SANRC IB ESA

‘‘I feel in a better position because of HARC- they champion my cause I know that

I can pick up the phone if I’m in trouble and they will be there. They even visit me at home because I get shaky if I come into the office’ M 31 CWC IB ESA

A number of interviewees clearly identified HARC support as being essential to their success at appeal.

Feedback about Hastings CAB was also positive:

‘They took the stress away from me. They made sure that the companies couldn’t walk all over me any more’ M 31 CWC IB ESA

There were a small number of interviewees whose experiences of local advice agencies

were less happy. One interviewee had experienced problems because of the pressure currently on services:

‘HARC couldn’t help, they weren’t taking on new people. I had to go to Eastbourne to get the help I needed.’ F 41 C DLA

Another felt that she had gone to the wrong agency:

‘I went to the CAB first, they’d never even heard of ATOS’ F 60 SANRC IB ESA

A number of other front line staff were praised for the support they had provided with the claiming of benefits, including staff from Hastings Borough Council Homelessness Team, some DWP staff, and family resource workers associated with children’s centres.

Key Points

• Interviewees regarded support from advice, and other agencies as essential to the effective resolution of the financial issues that they faced.

• On several occasions it was clear that interviewees who may have benefited from

advice had not accessed assistance, either at all, or at a sufficiently early stage in the process.

• Some interviewees had experienced problems accessing support because of the current heavy demand on advice services.

• There was also an indication that joint working between the advice agencies in

Hastings might not always have been as effective as it should have been, a situation that the Renaissance House Hub is designed to deal with.

• Supporting an effective response to welfare reform from the advice sector may require; support for more efficient working to reduce the burden on agencies; increased or maintained capacity within the sector; and stronger referral links

with the range of organisations working directly with service users.

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Section 5: Conclusions and Recommendations

This report has detailed the significant impacts on the residents of Hastings that will occur as a result of welfare reform.

The main issues identified may be summarised as: • The vulnerability of claimants transitioning from IB to ESA, and making new

claims for ESA, to poor decision making. • The potential for these problems to manifest themselves again during the DLA to

PIP transition.

• Under Universal Credit: o The vulnerability of some disabled people/ families with disabled children to

financial loss. o The increased pressure on financial management created by the move to

monthly payments.

o The increased risks of mistakes and income loss inherent in a new system built on single monthly payments and stricter conditionality and sanctions.

• The unpalatable choices faced by many who rent their home if they are not able to increase their income through employment.

• The challenges that will be involved in the bedding in of new localised systems for supporting people in crisis, people looking to live independently, and people needing support to pay their Council Tax.

• The gradual erosion of the real term value of benefits under changes to the uprating of key benefits and tax credits.

• The potential for all these changes to increase poverty and financial exclusion, with knock on effects such as reduced housing stability and increased mental health problems for those impacted.

The consequences for local agencies can be summarised as being:

• Greatly increased demand on advice agencies to deal with: o Appeals. o The submission of applications using unfamiliar forms.

o Administrative mistakes made within a new system. o Withdrawal of benefits under stricter conditionality and sanctions.

o Debt and the other broader consequences of welfare reform such as housing problems.

• Increased burden on support agencies working with vulnerable people, if their

health, wellbeing and ability to support themselves are compromised by reduced incomes/ the stress of assessment processes.

• Increased burden on support agencies to work to prevent service users falling foul of sanctions regimes.

• Increased business risks, costs and pressure on eligibility and charging policies if

people’s ability to meet their current share of the cost of care is compromised. • Increased difficulty for those working with homeless people in sourcing affordable

accommodation from either the private or social rented sectors, with rents rising and affordability falling in the latter, and demand and waiting lists growing in the former.

• Increased business pressures in terms of rent arrears, tenancy failures, court actions and evictions on social landlords. Long term affordability will become a

much bigger part of discussions with tenants/ potential tenants at the time of allocation of properties

• There will be increases in demands on homelessness services if landlords cannot

cope with these pressures. • Increased pressure on homelessness services as a result of growing difficulties

paying mortgages.

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• Increased risk of Council Tax debt owed to local authorities.

• A growing requirement on local authorities and other organisations to support local people to deal with financial crisis, often by responding to basic

humanitarian needs, and build their financial resilience over the longer term. • A requirement on local organisations to facilitate access to appropriate IT.

Ability to Respond Three local agencies will be at the heart of the response in Hastings to the challenges

presented by welfare reform; Hastings Advice and Representation Centre (HARC), Hastings CAB and Hastings and Rother Credit Union.

Advice Agencies HARC is the specialist provider of benefits advice in the town, although 20% of its work

is done in Rother District, partly through some outreach work. HARC employs 7 x FTE specialist advisers although funding cuts will reduce the staff complement to 4 x FTE in the new financial year. HARC staff, and their small number of volunteers, dealt with

5,500 separate cases last year.

Hastings CAB currently has four debt advisers, reducing to one from April with LSC cuts. It is also facing cuts in the number of its debt advice administrators. The organisation

uses 50 volunteers in various roles, around 30 of whom work on the provision of a triage/ gateway service, around 6 as generalist advisers.

Co-location between HARC and Hastings CAB at Renaissance House in St Leonards has strengthened joint working. HARC report picking up clients who would previously have

been referred from the CAB, but not actually made it through their door. CAB generalist volunteers now provide a gateway service for HARC as well as for their

own advisers, dealing with basic benefits issues, such as the sending out of letters, and enquiries and passing more complex issues across to HARC. DLA applications will be

often be done by CAB generalist advisers themselves, appeals will be passed onto HARC.

HARC report a heavy burden on current services. Waiting times to access HARC services have risen to up to four weeks for support with ESA/ DLA appeals and ESA application

form completion, up to six weeks for DLA renewals and up to 12 weeks for DLA applications.

Credit Union. Hastings and Rother Credit Union serves Hastings and Rother districts from an office in

central Hastings and outreach points across the areas. It has 1,200 members, and handles £1.2m of transactions every year.

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Recommendations

Two Overarching Themes for the Recommendations

Two broad themes can be identified in the response to the challenges posed by welfare reform:

• Making the system function for claimants as it should.

• Dealing with the consequences of welfare reform.

The former theme encompasses action, and support for action, to: • Help people access appropriate support at an early stage in the development of

their problems/ in their engagement with the benefit system.

• Ensure that people submit benefit applications that are appropriately completed. • Support people in the pursuit of appeals against benefit decisions.

• Rectify administrative mistakes that are made as new systems are introduced. • Support people to meet requirements placed on them under the benefit system. • Carry out such benefit take up work as remains after the introduction of Universal

Credit, particularly in relation to disability benefits.

Dealing with the consequences of welfare reform may involve: • Support to deal with problem debt.

• Support for people dealing with financial/ humanitarian crisis. • Building life skills, financial capability and financial resilience. • Work which reflects the fact that poverty may be tackled by reducing outgoings

as well as increasing income. • Looking at alternative sources of ‘income’, goods and services.

Recommendations Context 1: East Sussex Welfare Reform Project These recommendations are made in the context of the work of the East Sussex Welfare

Reform Project.

That project is being taken forward under the oversight of a project board, which includes officers from ESCC and each of the boroughs/ districts, with the aim of co-ordinating a county wide response to the challenges created by welfare reform.

The project has identified time limited resources which may be used to support a variety

of work under the first theme above, including: • Provision of additional support to clients of Supporting People services in the

county.

• Provision of additional support, advice and information to: o People affected by the transition to new disability related benefits.

o People more widely affected by other aspects of welfare reform. • Creation of a phone line to provide second tier advice to front line staff working

on benefits issues.

• A training programme targeted at front line staff from the community, voluntary and statutory sectors to enable them to play an appropriate role in responding to

the needs of their service users impacted by welfare reform in line with their expertise and capacity, for example providing basic information, form filling, or identifying and referring people to specialist advice.

• A communication strategy aiming to ensure that both frontline staff and the general public have access to accurate information about welfare reform and

about how to deal with its consequences.

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The project has also identified a number of other initiatives which it wishes to see

developed, and which it has requested that the East Sussex Financial Inclusion Steering Group progress.

These include:

• Enhanced investment in debt advice.

• Support for the county’s credit unions to enable them to provide budgeting accounts targeted at people who are claiming Universal Credit.

• Support for local foodbank initiatives to assist them to deal with barriers to growth and sustainability that they face.

• Consideration of the role that financial capability, and the development of broader

life skills can play in helping people deal with the consequences of reduced incomes under welfare reform.

• Support to increase the access of benefit claimants to IT, and to assist in that access, aimed at enabling claimants to deal with the challenges of making and managing claims online.

Recommendations Context: Lottery Bids

There are currently two bids to the Lottery’s Reaching Communities Fund from the local advice sector on which decisions are awaited:

• Hastings CAB is part of a consortium of CABx submitting a bid to the Lottery for a debt advice project focused on people with health problems. If successful, Hastings CAB hopes to be able to employ 1 x FTE specialist debt advisor to deliver

services to people with an identified range of long term conditions. The bid has currently passed the first stage of the Lottery’s assessment process, with the

second stage bid due to be submitted at the end of January. • HARC is bidding to the Lottery for 1.5 FTE staff to serve Hastings and Rother

providing specialist benefits advice to people affected by the transitions to new

disability related benefits. The outcome of HARC’s first stage application is expected imminently.

Overarching Recommendation The consultant recommends that Hastings Borough Council at all times considers the

business case for investment in the projects set out below, even in the current difficult climate for public spending.

This case can be seen in terms of the:

• Additional income and hence economic activity brought into the town through

higher levels of benefit payments to local residents. • The opportunity to reduce business risks and burdens faced by public sector

organisations that is offered by the preventative aspects of the project ideas outlined below targeting the negative consequences of welfare reform.

Theme 1: Ensuring the Benefit System Works as it Should for Hastings Residents.

Recommendation 1.1 The consultant recommends that Hastings Borough Council maintains existing levels of

investment in Hastings CAB core activities and HARC, as a complement to initiatives being taken forward by the East Sussex Welfare Reform Project.

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Recommendation 1.2

The consultant recommends that Hastings Borough Council takes cognisance of the fact that any resource that may be available to support action across the county under this

theme will only be available for the short term, and will not cover the whole of the period over which welfare reform will be a challenge for Hastings residents.

Once the format of any additional services created under the aegis of the East Sussex Welfare Reform Project is clear, Hastings Borough Council should be involved in

discussions with the County and other partners about how such services might be supported in the longer term.

Theme 2: Dealing with the Consequences of Welfare Reform for Hastings Residents.

Recommendation 2.1 The consultant recommends that Hastings Borough Council works alongside the county,

other boroughs and districts, and local RSLs to consider investment in enhanced debt advice provision within the county. This would act in part to replace provision being lost

as a result of the cuts to Legal Services Commission funding.

The consultant recommends that any additional investment is targeted at service users identified and referred through a number of defined routes, including services working with people threatened by homelessness/ in rent arrears, people in need of housing

support, vulnerable families, or people with mental health problems. This service would fit alongside that funded by the Lottery, should the current bid prove successful.

Recommendation 2.3 The consultant recommends that Hastings Borough Council explores the possibility of

making an investment in Hastings and Rother Credit Union to ensure that it can deliver a budgeting account to an increased number of members.

Budgeting accounts support disciplined money management by:

• Receiving agreed amounts from customers each week/ month, usually the totality

of the benefits/ wages received. • The account provider paying an agreed set of bills by direct debit on behalf of the

account holder. • The remainder of the money being loaded onto a pre paid debit account, or paid

into another bank account for access by the customer.

This exploration should be carried out alongside ESCC, and local RSLs, who have held

preliminary discussions with Hastings and Rother Credit Union about the impact of Universal Credit and budgeting accounts.

Recommendation 2.4 The consultant recommends that Hastings Borough Council keeps a watching brief in

relation to the developing relationship between ESCC and local foodbanks. It should continue to encourage the development of joint working and referral between its own frontline staff and Hastings Foodbank.

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Recommendation 2.5

The consultant recommends that Hastings Borough Council considers how it can support the development of the financial capability of local residents. Its response should take

into account: • Consistent research messages that ‘classroom’ based approaches to financial

capability are ineffective without being built on the back of other activities in

which participants already engage. • The fact that many local residents will already be effective financial managers, or

will already be bearing down in expenditure as hard as they can. • The extensive communication work that will be taken forward under the East

Sussex Welfare Reform Project.

The focus of Hastings Borough Council should therefore be on exploring with other

partners: • How financial capability can be built into/ provide an added push to local

initiatives focused on life skills, or health related activities such as smoking

cessation. • How frontline staff can reinforce clear messages around money management and

financial resilience.

Recommendation 2.6 The consultant recommends that Hastings Borough Council maintains as far as possible its current activities to tackle fuel poverty.

This might be accompanied by exploring the potential for a local initiative around

‘energy clubbing’. This involves people coming together to offer their collective custom to a range of energy companies in return for negotiation of a lower tariff.

Recommendation 2.7 The consultant recommends that Hastings Borough Council convenes a consultation with

the local voluntary sector through Hastings Voluntary Action to explore further creative, low cost initiatives to reduce household outgoings.

This could involve work such as links being drawn between community gardens/ community food initiatives, allotments and the anti poverty agenda.

Whilst not all the initiatives that will arise out of these discussions will work for all those affected by welfare reform, collectively they offer the prospect of creating a substantial

response.

Recommendation 2.8 The consultant recommends that Hastings Borough Council continues its current support for employability initiatives locally. For many people, the only way to deal with the

negative income consequences of welfare reform will be to find employment.