Benefit Sanctions inquiry

Benefit sanctions affect a large number of people, sometimes leading to hardship and undermining efforts to find work. Around a quarter of people on Jobseeker’s Allowance between 2010 and 2015 had at least one sanction imposed on them. Suspending people’s benefit payments can lead to rent arrears and homelessness. While these consequences can encourage some people to look for employment, they can undermine others’ efforts to find work. The consequences of sanctions on claimants can be serious so they should be used carefully. However, sanctions can be imposed for honest mistakes. Citizens Advice highlighted the need for flexibility for people who are trying their best. Recommendation: The Department for Work and Pensions should undertake a trial of warnings (rather than sanctions) for first sanctionable offences, as recommended by the independent Oakley Review and the Work and Pensions Select Committee.

Sanctions are imposed inconsistently on claimants by different jobcentres and providers. Sanction use varies substantially, some Work Programme providers refer twice as many people for sanctions as other providers in the same area. The Department for Work and Pensions (the Department) told us there will always be variation. This does not mean that current levels of unexplained variation are acceptable. It is important that the use of sanctions is fair and consistent and the Department has not analysed why some jobcentres use sanctions so much more than others. Jobcentres may be applying different standards. Citizens Advice and Crisis are concerned that inconsistency affects vulnerable claimants the most. Some vulnerable claimants can be excused from having to meet benefit conditions, but the Department does not monitor how often these exemptions are used, so it cannot be sure that vulnerable people receive the protection they are entitled to. Recommendation: The Department should monitor variation in sanction referrals and assess reasons for the differences across jobcentres. It should monitor the use and take-up of protections for vulnerable groups, reporting back to us by the end of 2017.

The Department’s data systems are not yet good enough for it to routinely understand what effect sanctions have on claimants’ employment prospects. There are significant gaps in the Department’s understanding of sanctions and it has not prioritised the improvement of its data. It may be difficult or impossible to determine an ideal level of sanctions, but the lack of data in this area is a barrier to making improvements. The Department now plans, over the next 12 months, to improve its old and poorly-connected systems, to extract better data, and allow it to track the impact sanctions have on claimants’ earnings. Recommendation: The Department should report back to us by the end of 2017 on its progress in improving data systems, including on linking earnings outcomes to sanctions data, and addressing recommendations for better information made by the UK Statistics Authority and National Audit Office. 6 Benefit sanctions

The Department does not understand the wider effects of sanctions. The Department intends that sanctions prompt claimants to comply with conditions and take up support from jobcentres. This should make people more likely to find work. The Department emphasised evidence that sanctions increase employment, but the evidence is also very mixed. Sanctions can lead to short-term and lower- paid work. Other people stop claiming after a sanction without finding a job. This can create knock-on effects that others pay for, such as using food banks or needing advice from local authorities or charities for dealing with debt. Recommendation: The Department should work with the rest of government to estimate the impacts of sanctions on claimants and their wider costs to government and report back to us on progress at the end of 2017.

The impacts of sanctions can be worse for people with housing-related barriers to employment. For some people, their main barrier to moving into employment is the struggle to find, or keep, a permanent roof over their head. The charity Crisis raised concerns about sanctions exacerbating these housing-related barriers to employment, and even causing homelessness in some cases. A third of people surveyed by Crisis who were claiming Housing Benefit had this stopped because of a sanction. The Department confirmed that Housing Benefit should not be stopped due to sanctions and told us that it found no evidence of the problem when it examined the issue in one area. Recommendation: The Department should work to better understand the relationship between sanctions and the housing-related barriers to employment that some people face. It should set out what more it will do to assure itself that Housing Benefit is not being stopped in error due to sanctions. Benefit sanctions 7 1 Implementation

Sanctions reduce support to claimants, sometimes leading to hardship, hunger, rent arrears and depression.6 Crisis has found that sanctions can be a cause of homelessness. It told us that most of the sanctioned people it surveyed in 2015 went without food or heating, and 75% said that sanctions had a detrimental impact on their mental health. Citizens Advice told us that half of the sanctioned people it surveyed stopped paying essential bills like rent, gas, and electricity. It commented that people can take a long time to pay these off, which can damage incentives to find work, if people consider that any 1 C&AG’s Report, Benefit sanctions, Session 2016–17, HC 628, November 2016 2 C&AG’s report, paragraphs 2, 3 and 4 3 C&AG’s report, paragraph 1.6 4 C&AG’s report, Figure 9 and paragraph 3.5 5 C&AG’s report, paragraphs 10, 1.7, Figure 5 6 C&AG’s report, paragraphs 4 and 3.17 8 Benefit sanctions financial gain from working will be used up by paying off debts.7 Claimants can apply for hardship payments, but these will become loans that people on Universal Credit will have to pay back.8

These sometimes serious consequences of sanctions mean that they should be used carefully. The 2014 independent review by Matthew Oakley of Jobseeker’s Allowance sanctions on the Work Programme recommended that the Department should pilot a new approach using warnings and non-financial sanctions following a first failure to comply.9 The Work and Pensions Select Committee made a similar recommendation in 2015 with respect to jobcentre sanctions.10 The Department has tested giving claimants more notice of its intention to sanction them, but has not carried out a trial of using warnings in place of sanctions for first sanctionable offences.11

Citizens Advice explained that sanctions are often imposed for honest mistakes and highlighted the need for a less rigid process when this happens.12 Despite the Department’s review of sanctions communications in 2013, there are still problems preventing understanding of conditions.13 When Citizens Advice surveyed claimants in 2015, only a third knew what they needed to do to fulfil their responsibilities.14 Nearly half (46%) of clients who had sought Citizens Advice’s help about a sanction felt that their sanction could have been avoided, had they received a warning.15 Variations and consistency

Sanction rates vary substantially between different Work Programme providers. Some make more than twice as many sanction referrals as other providers supporting similar people in the same area. Between jobcentres, sanction rates also vary in ways that cannot be solely explained by differences in claimant compliance with rules. The Department does not analyse the reasons for this variation, and told us it does not believe sanction rates can be compared between jobcentres, even where they have similar job markets.16 It looks at sanction rates and asks jobcentres to explain high and low levels of use, and believes the jobcentres it investigates with particularly high and low sanction rates are acting appropriately “based on the labour market and the operation of [each] environment”.17 7 Qq 12, 14 8 Q 159 9 Matthew Oakley, Independent review of the operation of Jobseeker’s Allowance sanctions validated by the Jobseekers Act 2013, July 2014 10 Work and Pensions Committee, Fifth Report of Session 2014–15, Benefit sanctions policy beyond the Oakley Review, HC 814, 11 C&AG’s Report, paragraph 2.23 12 Q 17 13 Qq 9–10; Royal Mencap Society (BNS0037) 14 Q 7 15 Citizens Advice (BNS0035) 16 Q 143; C&AG’s report, paragraphs 14, 2.8 17 Q 78 Benefit sanctions 9

The Department told us there will always be variation in a system where individuals have to make judgments and that it has guidance in place for staff.18 However, the Department’s internal auditors found evidence that suggested work coaches were not complying with sanction processes, weakening the fair and consistent use of sanctions. The Department has identified similar issues in internal summaries of staff surveys.19

Citizens Advice and Crisis were concerned that inconsistency particularly affects the most vulnerable claimants. The Department accepts the importance of protecting vulnerable claimants and has introduced safeguards intended to ensure that they are not sanctioned inappropriately.20 More broadly the Department explained how it aims to improve relationships between claimants and work coaches, and to make conditions more sensitive to individual circumstances.21 However, Crisis told us that these safeguards are only imperfectly working in practice, and that homeless people are sanctioned at twice the rate of the general claimant population. Crisis told us vulnerable people are not necessarily being targeted, but are more likely to be unable to comply with the sanction regime.22 The Department can use formal rules to protect people with particular needs, for example to excuse victims of domestic violence from meeting conditions for a limited period. But it relies on claimants self-reporting their personal circumstances, and work coaches being aware of the protections available. The Department does not track use of the protections and cannot tell whether work coaches use them effectively.23 18 Qq 78, 149 19 C&AG’s report, paragraphs 2.7 20 Qq 160–161; C&AG’s Report, paragraph 1.18 21 Qq 48, 121 22 Qq 7, 21 23 C&AG report, paragraph 1.18 10 Benefit sanctions 2 Understanding outcomes Data on sanctions and their effects on employment

In 2015, the UK Statistics Authority recommended that the Department of Work and Pensions (the Department) improve the transparency of its published sanctions data and address gaps in information on sanctions. The National Audit Office’s report also highlighted the lack of analysis by the Department on the impact of sanctions on the jobs gained by claimants, and recommended improvements.24 The Department accepted that its data on sanctions have limitations that do not allow it to answer questions such as the number of people being sanctioned at a point in time.25

The Department told us that it was not aware of anyone having identified an optimal level of sanctions.26 To examine the impact of sanctions on employment the Department needs good quality data, but it has not treated its sanctions data as a priority in the past. The Department cited the large amount of analytical work it had to do on welfare reform as a reason for not focusing on improving its sanctions data.27 It told us that it will undertake work to improve data over the next 12 months. The Department currently knows in which month it takes decisions to sanction people, but not the start or end dates of sanctions; it told us that it is committed to developing the ability to do so. This will allow better linking between sanctions data and real time information on people’s earnings, the Department told us.28

When it introduced the more severe sanction regime in 2012, the Department lacked evidence on the effects this would have.29 It also acknowledged that this situation had not improved: we heard that it is impossible for the Department to take a view on whether the new system is making a difference, due to the lack of a counterfactual.30 The Department claimed that fluctuations in sanction referrals over time show that it has made conditions more demanding, and improved people’s understanding of their conditions.31 However, the National Audit Office report found that the changes in employment support and claimants’ behaviour do not fully explain changes in jobcentre referral rates.32 Understanding the wider effects of sanctions

The evidence on the impact of sanctions is mixed. On the one hand the Department cited international evidence showing that sanctions increase the likelihood of employment for sanctioned individuals.33 On the other hand the National Audit Office’s review of international evidence shows that sanctioned claimants gain shorter-lived jobs with lower wages than they would otherwise have had.34 24 C&AG’s Report, paragraphs 24, 3.5, 3.9 25 Q 101 26 Q 139 27 Q 106 28 Qq 42, 85 29 C&AG’s report, paragraph 1.13 30 Q 75 31 Q 57 32 C&AG’s Report, paragraph 2.6; ‘Explaining the rise and fall of JSA and ESA sanctions 2010–16’ , Child Poverty Action Group, briefing by Dr David Webster, October 2016. 33 Qq 89, 102–103 34 C&AG’s Report, 3.2 to 3.4 and Figure 21 Benefit sanctions 11

Apart from affecting the employment outcomes of claimants, sanctions may have wider effects. For example they can have negative impacts on mental health, including depression and anxiety; financial and emotional impacts such as falling into arrears with rent and bill payments; and worsening relationships with jobcentre staff. Supporting people the Department sanctions may lead to extra public spending in areas such as local authority funded welfare support. Several organisations have reported, for example, that much use of food banks is because of sanctions.35 Citizens Advice reiterated that sanctions can have ‘a detrimental impact on work incentives’. Both preliminary witnesses told us that sanctions can have a detrimental impact on claimants’ mental health.36

The Department told us that finding out the wider costs to other bodies of sanctions is not simple, and not something it plans to consider as part of its data improvements in the coming year.37 The Department explained how it aims to improve relationships between claimants and work coaches, and to make conditions more sensitive to individual circumstances.38 However, Citizens Advice found that 44% of people it surveyed with a health condition felt their claimant commitment (the document which records the conditions they must meet) did not reflect their health condition.39 Sanctions and homelessness

Crisis told us that some people’s main barrier to moving into employment is getting a roof over their head.40 It surveyed more than 1,000 people who were homeless or who had experienced homelessness and, while 88% believed that conditions should be attached to benefits, more often than not the conditions set for them were unachievable and not relevant to their particular needs.41 These needs can be hidden and difficult to identify, but Crisis told us that some jobcentres are working with local authorities to identify and support housing needs.42

Both Crisis and Citizens Advice raised concerns with us about the links between homelessness and sanctions. Crisis told us that sanctions bring a risk of exacerbating housing-related barriers to employment, and lead to homelessness for some people. Of those surveyed by Crisis, 60% said that being sanctioned hindered their job seeking activity, and 21% experienced homelessness as a result.43 Citizens Advice told us that 15% of the people coming to the charity about benefit sanctions also have housing issues, including problems with landlords due to difficulties paying rent, putting them at risk of homelessness.44 35 C&AG’s Report, paragraph 3.17 36 Qq 14, 28 37 Q 117 38 Q 83 39 Q 6 40 Q 21 41 Q 2; Homeless people’s experiences of welfare conditionality and benefit sanctions, Crisis, December 2015 42 Qq 20, 26 43 Qq 3, 14 44 Q 26 12 Benefit sanctions

Some claimants of sanctionable benefits like Jobseeker’s Allowance also receive Housing Benefit to help with their housing costs. The survey by Crisis showed that a third of respondents who had been claiming Housing Benefit at the time of their sanction had this stopped because of the sanction.45 The Department confirmed that Housing Benefit should not be stopped when a sanction is applied. The Department told us that it had looked at this issue in 300 cases in one area but that it had found no evidence of the problem.46 45 Q 25 46 Qq 156–157 Benefit sanctions 13