Fourth Report - The Benefits System in Wales

The demographic, economic and geographic challenges we have highlighted set the context for the benefits system in Wales. While it is a reserved competence, that does not mean the environment in which it operates is identical to that elsewhere in Great Britain. While the evidence shows that the key challenges for the benefits system in Wales are broadly similar to those in the other nations and regions of the UK, there are some important demographic differences that mean that some of the challenges facing the benefits system are more prominent in Wales. There are pressures here which underline the need for the UK Government to be conscious of the Welsh context when deciding welfare policy. (Paragraph 42) Lessons from the pandemic for the UK social security system

The pandemic demonstrated how resilient the UK social security system can be in the face of significant challenges. Despite the huge surge in demand, Universal Credit continued to function and benefits were paid out to a markedly increased pool of claimants. That Universal Credit was able to withstand these pressures was a result not only of digitisation, but also the immense efforts of DWP staff, and also to the leadership of the DWP. We want to pay tribute to their commitment and hard work in facing such unprecedented challenges.

We were concerned to hear that welfare rights advisors believe that Universal Credit’s explicit consent model has impeded their ability to help claimants and has led to some people sharing personal data such as passwords. We would welcome the UK Government reviewing its decision to end the implicit consent model of the legacy benefit system.

The DWP should run a consultation with welfare rights advisors on Universal Credit’s explicit consent model and examine whether any changes are necessary.

The UK Government must urgently review the level at which Statutory Sick Pay (SSP) is set. At only £96.35 per week, it is equivalent to only 20 per cent of the average wage—compared to 100 per cent in Germany and 90 per cent in France. In the interest of public health and to ensure that nobody is forced to choose between keeping themselves and others safe or putting food on the table, the UK Government must commit to increasing the level of SSP. The DWP should write to the committee with an update on progress within 6 months.

Given the comparatively high proportion of low paid workers in Wales, we were concerned to hear of issues regarding the eligibility criteria for Statutory Sick Pay. While we acknowledge that there may be other support available to unwell workers, the pandemic has highlighted the dangers of someone attending work when they are unwell. Sick pay benefits wider society, not just the sick, and we would welcome the UK Government reviewing the eligibility criteria for this benefit. (Paragraph 82) The Benefits System in Wales 43

We welcome the swift changes to the financial support many claimants received during the pandemic, as well as to the operation of the overall system. We received evidence of the significant difference that the temporary £20 uplift made to those eligible claimants, as well as other support measures such as the increase in the Local Housing Allowance percentile. However, we received evidence of concerns about the impact of these temporary measures coming to an end.

We acknowledge that the UK Government has difficult choices to make in ensuring that the benefits system is financially sustainable in the long-term. We welcome its reduction of the taper rate and increase in the work allowance in the autumn Budget.

However, in light of concerns about the rising costs of living, there is a need for a discussion about how to ensure benefits are adequate, affordable and sustainable. On the basis of the evidence presented there is a need for an urgent review of: ending the £20 UC uplift; the 5 week wait for UC; the benefit cap and the two-child limit; bedroom tax; shared accommodation rate (of Universal Credit) for under 35s; freeze of LHA rate at March 2020 levels.

It is clear that current benefit levels are inadequate. In the short term, the £20 uplift should be reintroduced at the Budget in March 2022 and extended to legacy benefits.

Without the uplift, benefits for the unemployed are at their lowest real-terms level since the early 1990s. Had they grown in line with GDP per capita since 1990, they would be £40 a week higher. The future value of benefits is also being reduced given the increasing cost of living, as inflation is predicted to rise above 7% by April, but benefits for those in work and unemployed are only rising by 3.1%.

We urge the UK Government to use nearer-term forecasts to increase benefits in line with the actual rate of inflation that will apply in April 2022. As a long-term solution to these issues, the DWP should outline what the benefit system is trying to achieve and how this can be measured, particularly in relation to ending poverty. The DWP should then develop and publish clear metrics for determining benefit levels, based on this overall strategy.

Around 39% of claimants are in work. Many of those who became eligible for Universal Credit during the pandemic will have done so through losing income while on furlough rather than through losing a job. For those whose pay is supplemented by Universal Credit, the issue is not finding work, it is finding higher paid work. Accordingly, we welcome the changes in the autumn Budget to the taper rate and work allowance, putting more money into the hands of working households, and urge it to keep under review further changes which would benefit those in work.

The UK Government should take forward the recommendations of the In-Work Commissioner and review how the taper rate and work allowances can best support in-work progression.

We welcome the extent of support that the UK Government provided during the pandemic, but we note that not all self-employed people were eligible. We welcome 44 The Benefits System in Wales the UK Government’s acknowledgement that it has “learned more” about the issues with capital limits and we would welcome more details from the DWP about the lessons it has learned. (Paragraph 108) Intergovernmental relations

We welcome the extent of joint working between ministers throughout the pandemic, including meetings between the Secretary of State for Wales and the First Minister and other Welsh Government Ministers, as well as multilateral meetings chaired by various UK Ministers. This reflected not only the gravity of the situation but also the value of regular meetings at ministerial level. However, we would welcome information from the Wales Office about how it intends to facilitate the working relationship between the DWP and the Welsh Government going forward.

We welcome the establishment of an Interministerial Group on Welfare, as part of the recently published Review of Intergovernmental Relations. However, while this will provide an important forum for bringing together the four UK governments to discuss welfare and social security issues, we believe this should be underpinned by a bilateral intergovernmental body for the UK and Welsh governments to engage on welfare policy.

The two governments should establish a UK-Welsh government Inter-ministerial Advisory Board on Social Security. Such a Board could build on the good examples of joint working which were seen during the pandemic. Minutes of its meetings should be published.

UK Government ministers should consult with the Welsh Government in advance of new social security policies being implemented, especially in areas linked closely to devolved areas of competence such as housing and skills. The UK-Welsh government Inter-ministerial Advisory Board on Social Security would be a suitable vehicle for managing these discussions.

We received evidence regarding a lack of awareness among the wider public of key benefits, most notably Pension Credit. The UK Government should address this directly through a UK-wide income maximisation campaign and design its messaging so that it not only raises awareness of the benefit but also addresses any reservations some older people may have about claiming it.

The DWP and Welsh Government should work together with local authorities to run a take-up campaign on Pension Credit, with messaging designed to both raise awareness but also address any reservations some older people may have about claiming it.

We welcome efforts to improve awareness among claimants of all UK Government, Welsh Government, and local authority support, but written evidence suggests that there is still a long way to go. People requesting help need to feel confident that they have been informed of all the benefits and grants available to them, rather than miss out on any because they didn’t know what questions to ask or found the system too The Benefits System in Wales 45 complex to navigate. Evidence we have received suggests that the approach taken in Scotland, where the UK Government and the Scottish Government worked together to produce a toolkit for Work Coaches, could prove a useful model.

The DWP and Welsh Government should work together to improve the signposting of benefits, grants, and allowances by producing a toolkit for Work Coaches. It should cover all devolved and local authority support. The DWP should report back to us in six months with an update on progress.

While we note the positive comments regarding the Welsh Government’s response to the pandemic via the Discretionary Assistance Fund, we also heard concerns about the application process for various Welsh Government and local authority grants and allowances. We welcome the fact that the Welsh Government is seeking to streamline their systems and make the system more accessible. Should any of this work require DWP cooperation, then we urge both governments to work closely in order to deliver the best outcome for claimants.

39% of Universal Credit claimants are already in work: the issue for them is not finding a job but finding a higher paid one or more hours. We welcome the UK Government’s commitment to providing claimants with in-work support and look forward to hearing further details about how its Progression Champions will work with employers, local authorities and skills providers. As employment support, local government and skills are devolved, for this to be successful in Wales, the UK Government must work closely with the Welsh Government.

We note that the In-Work Commissioner’s report on Supporting People out of Low Pay found that most Jobcentre Plus support is tailored to help people get into work: there is less support and training available for those who are already there. We support its recommendation that Jobcentres should provide a credible in-work offer for all working benefit claimants and with local groups such as employers and skills providers. As skills and lifelong learning are devolved responsibilities, for this to be successful in Wales, the UK Government must work closely with the Welsh Government.

The UK Government should accept the In-Work Commissioner’s recommendation to provide a credible in-work offer for all working benefit claimants. The UK Government should outline how it will take this work forward with the Welsh Government and report back to us in 12 months on the progress made. The UK Government should outline how it will take this work forward with the Welsh Government and report back to us in 12 months on the progress made.

Care-leavers are a vulnerable group and there is a strong case for arguing that they should have enhanced support. While the Welsh Government supports a basic income pilot for this group, we note that the UK government opposes universal basic income.

We have received a range of concerns regarding the limitations of the pilot and there are also considerable issues concerning how the pilot will affect the benefits of the participants. It is crucial that those considering participating are aware of how it will affect the benefits they receive and the tax they pay. Without this, they are unable to make an informed decision about whether to participate. (Paragraph 152) 46 The Benefits System in Wales

In the interests of the young people considering taking part in the Welsh Government’s Basic Income pilot, the DWP and the Welsh Government should work together to conduct an impact assessment on the benefits received and the amount of taxes paid by the average potential participant.

The evidence collected during the inquiry showed that attitudes to the idea of devolving welfare vary significantly. Some were concerned about the financial implications and many felt that they did not have enough information. However, during the course of the inquiry many experts noted the potential merits of being able to deliver benefits in a way that is tailored to the demography of Wales.

It is important to make the distinction between devolving the administration of certain welfare benefits and the wholescale devolution of welfare and we recommend that, as a first step, the UK-Welsh Government Inter-ministerial Advisory Board on Social Security should undertake an assessment of the potential merits of devolving the administration of the same benefits to Wales as have been devolved to Scotland.

In the event of the Welsh Government submitting formal proposals to the UK Government, the DWP should provide us with an update in 12 months regarding the nature and progress of its discussions with the Welsh Government. (Paragraph 162) The Benefits System in Wales 47