Recommendation 3

HM Government · verbatim extract Accepted in Part

The Government did consider a greater number of lump-sum payments than the two in 2022-23 and announced on 3 January 2023 that the £900 Cost of Living Payment for means-tested benefit claimants will be delivered in three payments over the course of the financial year (in Spring 2023, Autumn 2023 and Spring 2024). This is to ensure claimants receive ongoing support throughout the financial year. The Government has prioritised making payments to customers on the lowest incomes as early as possible in 2023-24 after the Energy Price Guarantee changes and the Energy Bill Support Scheme ends. The other two payments will be made either side of the winter period. Spreading payments throughout the year may help to support budgeting. Each payment will have a different qualifying date, and this will increase the chance that those who flow onto the benefit system at some point in 2023-24 receive support. The Government does not accept the Committee’s recommendation to mirror Cost of Living Payments on the payments model used for the Energy Bill Support Scheme. Support through the Energy Bills Support Scheme is being delivered via energy suppliers to households in Great Britain with a domestic electricity connection. This support is being applied to household bills automatically in regular monthly instalments over the 6 months from October 2022 to March 2023. In contrast, Cost of Living Payments are made using DWP’s ‘Ad Hoc Payment System’. This sits outside the normal benefit delivery system and as a result, is limited in its nature – for example it can only make one payment ‘type’ at a time, and it requires specialist teams to make the payments. Further ‘mop-up’ payments for some of the qualifying benefits are also expected to be made, if an entitlement that would qualify for a payment is later established to have existed. It is not possible within the constraints of this system to make a payment each month for six months without compromising delivery of DWP’s core benefits. Therefore, the Government has concluded that three means-tested Cost of Living Payments and a single Disability Cost of Living Payment balances spreading the support throughout the year and enables sufficient time for delivery of each payment without compromising core benefit delivery. Adding further payments could delay ‘mop-up’ payments to some who have yet to have their entitlement established to receive a 2022 Cost of Living Payment. Regarding the Committee’s point around some claimants missing out on payments, the Government recognises that some people will flow on and off benefits, and the policy for Cost of Living Payments reflects that. The 2023-24 means tested benefit Cost of Living Payments are being made in three payments to reduce the chance of someone missing out completely. Those who do not qualify for one of the payments due to their changing circumstances may qualify for another one of the payments. Eligibility periods are an established principle for one-off payments like the Cost of Living Payments. For example, the Winter Fuel Payment follows the same approach. The Government also considered the payment design of Cost of Living Payments to limit any perverse work disincentives generated. In particular, in line with the approach taken for 2022-23 Cost of Living Payments, qualifying dates for each payment in 2023-24 will be announced after they have passed. The purpose of this is to deter fraud and to mitigate risks to work incentives. As individuals will not know the qualifying dates in advance, this limits their ability to change their behaviour during the qualifying period to ensure they are eligible for an underlying benefit, which would make them eligible for a Cost of Living Payment. We would also welcome analysis from the Treasury of: the work disincentive effects of different sizes and frequencies of lump sum payments, and