Second Report - The Cost of Living

The Committee welcomes the Government’s swift action and range of measures introduced in response to the cost of living crisis. It is clear that these will offset some of the increased costs for households living in poverty. However, we have heard very concerning evidence about the impact of the crisis on disabled people, older people, carers and larger families in particular.

We recommend that the Department for Work and Pensions engage with the organisations mentioned throughout this report to assess what further or more direct support needs to be provided to any of these groups as the cost of living continues to rise. We also urge the Government to simplify the support mechanisms to ensure households understand what support they are entitled to and enable them to chase up receipt. (Paragraph 12) The adequacy and uprating of social security

We welcome the inclusion of those on legacy benefits in the Government’s support measures. We recognise that there are logistical difficulties in getting the necessary support in place quickly, but the Government does not seem to have taken on board our previous recommendations to improve systems. While we understand that in this case one-off payments may have been quicker to put in place, and able to reach more people, we agree with the Secretary of State’s opinion from 2021 that they are not the preferred approach. We recommend that other options, such as more responsive benefit uprating, are prioritised in future.

The systems that legacy benefits run on are not fit for purpose. It is disappointing that the Department has not adapted its IT systems to allow for flexibility in uprating these benefits to respond to national events. The Department has scheduled and then delayed the migration of claimants from legacy benefits onto Universal Credit several times and the current date to complete this process for many is the end of 2024, leaving legacy benefits still in use for a considerable period. The Department must be able to uprate legacy benefits swiftly in times of high inflation. The Department should also publish (or at least provide to the Committee) for each benefit the details of the process, complexities and time required for the uprating exercise. We repeat our recommendation that the DWP work to increase the speed with which changes can be made to legacy benefit and state pension rates.

While an annual uprating is workable and effective at times of stable inflation, it is not appropriate in more volatile economic circumstances and is causing people real hardship. In the medium-term the Department should reduce the length of time between the inflation reference period and the uprating implementation date to allow more flexibility in the system, preferably to the previous quarter end or more recent if possible.

Whilst £1.5 billion for the Household Support Fund is welcome, we are concerned that there is no information available to indicate where this funding is going, The cost of living 37 and whether or not it is supporting the most vulnerable households effectively. Discretionary funding should not replace core funding. Where the Government continues to use discretionary funds, it should ensure councils are well supported to deliver the funding to the households who need it the most. We ask the Department to publish information on what local authorities have spent this funding on to date by the end of September 2022.

The Housing Support Fund was designed to be a short-term measure but is now in its third funding cycle. While we all hope to see far more stability in the economy in coming years, the need for such funds highlights that benefits are already set at subsistence levels for most, leaving no capacity for individuals to cope with short term shocks. A more responsive uprating system would help to address this. We recommend that, by the end of this Parliament, the Government review the adequacy of benefit levels and publish its findings. This should include a specific review of the adequacy of disability benefits and should consider whether it is appropriate to continue to rely on discretionary funds and one-off payments.

The reset of Local Housing Allowance to cover the 30th percentile of rents was a welcome intervention at the start of the COVID-19 pandemic, but the increase has since been eroded by rising housing costs. Some parts of the country are experiencing acute shortages of affordable housing, and we have heard this is leaving some unable to move on from temporary accommodation. DWP should work with other Departments to make housing more affordable for those on low incomes, as it did in 2020. This must include an increase to Local Housing Allowance to ensure that it supports people on low incomes to access secure, affordable housing in their local area. (Paragraph 31) Benefit cap

We welcome the decision by the Government to exempt the cost of living payments from the benefit cap so that those most in need of support can receive it. This decision suggests, however, that the Department knows that the cap is set too low to effectively cover households’ now spiralling costs of living. Regardless of the changes made when the Fixed Term Parliaments Act was repealed, it was clearly not the intention of the original legislation that the benefit cap go more than six years without even being reviewed, let alone adjusted for inflation. The benefit cap should be reviewed urgently—and certainly no later than the end of 2022—to ensure it is in line with average household incomes and increasing rent/energy/food costs—the results of this review should be published. Furthermore, the cap must be uprated this year. (Paragraph 39) Deductions

Deductions from the Department are contributing to hardship for struggling households, who are already trying to tackle rising costs. We have heard that for some, deductions are pushing them into destitution and leading them to depend on food banks. The Government has urged creditors to accept reduced monthly payments or write off debts, but isn’t following its own advice. We recommend that deductions are paused, and then only restored gradually as the rate of inflation 38 The cost of living reduces, or when benefits have been uprated to reflect the current rate of inflation. If the Government is not willing to pause deductions then it must increase awareness of existing options such as short-term pauses, and ensure that those who are struggling can get accessible and practical debt advice. The Government should also consider the Committee’s recommendations on deductions and debt in our 2020 ‘Universal Credit–the wait for a first payment’ report. We would welcome a response by the end of 2022. (Paragraph 55) Pension Credit

Pension Credit provides vital support for pensioners, yet some 850,000 eligible households do not claim it. The rising cost of living means this must now be urgently addressed. The Government’s efforts are focused on a communications campaign. The Committee heard, however, that this was unlikely to be enough. We recommend that the Government work with key stakeholders, including local authorities, to develop a written strategy to increase take-up by the end of 2022. This should include a plan for the most effective ways to identify households likely to be eligible and support them to claim. The Government should also explore ways to simplify or automate parts of the claiming process. The strategy should have clear aims, including a target for take- up, as well as a timeline of actions to be taken to achieve this and confirmation of how the strategy will be funded. The Government should provide an annual update to the select committee on achievements to date and any amendments to the strategy. (Paragraph 66) The cost of living 39