A package to restore benefits for children could lift more than 700,000 children out of poverty | CPAG

A package to restore benefits for children could lift more than 700,000 children out of poverty

Published on: 
05 June 2019

Child Poverty Action Group (CPAG) is calling for re-investment in social security support for the UK’s children in a new report detailing the costs of restoring a catalogue of cuts to social security - including sub-inflationary uprating since 2013/14 - and providing a blueprint for making universal credit fit for families.

The scandal of rising child poverty should be a priority for politicians of all parties and this report sets out the first steps needed to respond to the crisis.

The report outlines a range of options to rewind sub-inflationary uprating and the disproportionate impact of cuts in support for children and families. The report found that as a starting point, a modest package of re-investment in children’s benefits would lift 700,000 children out of poverty by 2023, when universal credit will be fully rolled out, and increase family income by an average of £1,000 per year by:

  • Removing the poverty-producing 2-child limit and benefit cap
  • Restoring the child element in universal credit to its 2015/16 value
  • Re-instating the higher payment for the first child in the family (as in tax credits)
  • Uprating child benefit by £5 per child per week to reverse the impact of the benefit freeze.

This package would come at a cost of £8.3bn, a fraction of the total of social security cuts of almost £40bn per year by 2020.

As well as calling for the restoration of the cuts that have prevented universal credit fulfilling its promise of reducing child poverty, the report also calls on the government to address the many design flaws and system errors that have blighted universal credit . Eventually seven million working and non-working families - including half the country’s children - will be supported by universal credit. The report outlines the major issues that need to be addressed if the government wants to build public confidence in its flagship policy. 

Chief Executive of Child Poverty Action Group Alison Garnham said: 

“Child poverty is rising on every measure and it is time for every compassionate politician from all parties to re-commit to taking action today. We all want to see the best possible start in life for the UK’s children, but instead the face of child poverty is getting younger as 53% of children (two million children) growing up in poverty are now under the age of 5. Work has not proved to be the route out of poverty it should be, with most (70%) of children growing up in poverty in a working family. Children have borne the greatest burden of cuts to government spending with the four-year benefit freeze and punitive policies such as the 2-child limit and benefit cuts - this is just not right. If the government is serious that ‘austerity’ is now over, it needs to demonstrate this in a way that is felt immediately in families’ pockets. Re-investing in benefits for children and families would be a good first step, followed by annual up-rating.

“Bringing more families on to universal credit without restoring the cuts and fixing the numerous flaws highlighted by CPAG’s Early Warning System risks scaling up the errors, hardship and unintended consequences that are blighting the lives of so many families struggling to get by. The UK’s families deserve better.”

The new report calls for design and funding changes to improve claimants’ experience of universal credit and to reduce child poverty. It includes new analysis by the Institute for Public Policy Research (IPPR) which finds: 

  • Restoring both the child element in universal credit and child benefit to their 2013/14 value would mean 200,000 fewer children in poverty.
  • 300,000 fewer children would be in poverty if the two-child limit in universal credit were scrapped. Of all the changes modelled in this report, this would lift the most children from poverty per pound of social security spending.
  • 400,000 out of 500,000 children in families affected by the benefit cap are living so far below the poverty line that even lifting the cap would not be sufficient for them to escape poverty, although it would increase their income. Removing the benefit cap would however move 100,000 children out of deeper poverty (measured as living below 50% of median income). Fewer than 50,000 would escape poverty altogether if the cap were lifted as their incomes are so far below the poverty line.
  • Restoring all working age benefits to their value in 2015-16 - when a four-year freeze began - would move 200,000 children out of poverty. 

Low-cost design changes are also identified

CPAG’s new report, “Universal credit: what needs to change to reduce child poverty and make it fit for families?” also includes recommendations to improve the design and function of universal credit, based on casework from its Early Warning System which to date has collated and analysed more than 1500 benefit cases from welfare rights advisers across the UK (see case studies below). The report’s key recommendations for universal credit include:

Payments

  • Five-week wait
    Remove the five-week wait by making advances non-repayable or moving from monthly to weekly assessment of entitlement: the month-long wait for a first payment is too long for people out of work or those paid weekly or fortnightly. 
  • Increase the value of the disabled child element to the same level as in tax credits.
  • Make support available for 100% of childcare costs to help parents work

Improvements for working claimants

  • Average earnings
    Use claimants’ average earnings over a recognisable pay cycle to work out their entitlement. Imposing the current rigid monthly assessment period can result in wildly fluctuating UC awards for people who are not paid monthly, whose paydays sometimes change with bank holidays/weekends or who are self-employed and have ‘lumpy’ earnings over a year. CPAG has heard of cases where DWP staff have refused claimants’ requests to intervene to avoid ‘pay day clashes’, despite the government having announced new guidance allowing these to be adjusted.

    In a recent test case brought by CPAG the High Court found that the way the DWP has been assessing income from work through the monthly UC assessment periods is unlawful but the Department appears not to have found a solution to the problem of pay day clashes.
  • Scrap the minimum income floor which penalises self-employed low earners

Case study from CPAG’s Early Warning System:

A self-employed worker earning £313 per month had his UC dramatically reduced from nearly £500 a month to just £134, because the minimum income floor was applied and his UC was reduced as if he was earning £878 a month.

  • Pay childcare costs upfront and simplify the rules for reporting childcare costs

Case studies from CPAG’s Early Warning System:

A single mother could not afford to pay childcare costs upfront when she was offered a job. She requested a budgeting advance which was refused as she had not been on UC long enough, and was not told about the possibility of support from the Flexible Support Fund.

A single mother had worked as a cleaner until she had to stop due to ill-health. She is now considering returning to work but cannot afford the upfront costs of childcare and cannot start work.

  • Allow claimants to show payslips or bank statements to prove their earnings, when the automated information from HMRC is incorrect. This is not DWP practice.

Case study from CPAG’s Early Warning System:

A single parent who was working part-time and earning £109 per month did not receive any universal credit because her earnings were incorrectly reported at £2,077. She submitted payslips and bank statements, but her universal credit award remained unchanged. She was unable to pay rent or meet the costs of heating and food for herself and her child. She sent her son to live with his grandmother so that he could be fed and kept warm, but she could not afford his bus fares to and from school (in a rural area). Her mental health suffered and her GP prescribed her anti-anxiety medication as direct result of the universal credit problems. She rents privately, so she and her son were put at substantial risk of homelessness.

Deductions and sanctions:

  • Further limit the maximum level at which deductions can be applied

The forthcoming reduction of the maximum rate of deductions to 30% of the standard allowance is welcome but CPAG’s Early Warning System has seen multiple cases of hardship caused by deductions and we are concerned that this is still a rate which will cause hardship for those with little or no other income.

Case studies from CPAG’s Early Warning System:

A claimant who took out an advance at the start of his claim now has his award reduced by £75 per month for advance repayment and by £52 for rent arrears and water charges, leaving him with just £44 per week to live on.

A claimant with a managed payment to her landlord is left with just £29 per week to live on after deductions for water rates, rent arrears, social fund loan and hardship loan repayment.

  • Reduce the use of sanctions

Reduce the use of sanctions which evidence shows are ineffective in increasing employment and cause hardship.  People waiting for a work capability assessment, those submitting fit notes and those assessed as having limited capability for work should not be required to look for work. Sanctions should not be for a fixed term – they should end when claimants have complied with their requirements.

Case study from CPAG’s Early Warning System:

CPAG worked with a single parent who had physical and mental health problems, with two children aged 5 and 12. Despite providing medical certificates and information about her health conditions, her work search conditions were not adjusted to take account of her health conditions and after 12 months the DWP had failed to arrange a work capability assessment. During this time she was sanctioned three times for failure to undertake work search activity. This left her unable to feed herself and her children, and reliant on a food bank. It also caused her mental health to deteriorate. Only following a complaint was a medical assessment arranged and the sanction decisions reversed.

Support for claimants

  • Improve support for claimants without digital skills or computer/internet access

Case study from CPAG’s Early Warning System:

A claimant with a learning disability and literacy problems was refused help to claim universal credit in his local job centre because he was seen reading a text message and was therefore deemed to be capable of starting his own claim. His local authority refused to assist because its service was not available to people who would never be able to manage their claims on their own without ongoing support. His claim was delayed until his housing provider stepped in after raising concerns about increasing rent arrears.

Managed Migration:

Child Poverty Action Group wants the DWP to trial automatically transferring claimants of existing benefits to UC as part of its ‘managed migration’ pilot, in order find a way of ensuring the most vulnerable claimants are prevented from a total loss of income if they cannot manage to establish a new UC claim within the deadline.

There should be stronger protection against cash losses for some groups transferring to UC as part of the managed migration pilot (for example those currently receiving a severe disability top-up, couples who separate and parents under 25). 

Natural Migration:

Protection against cash losses should also be stronger for people moving to UC because of a change of circumstances (‘Natural Migration’) when:

  • the change of circumstances itself creates extra financial difficulties (for example those moving following a bereavement) and
  • when the move to UC will mean a claimant loses the top-ups they receive in existing benefits in recognition of the extra costs they face (for example around 100,000 moderately disabled children who are nearly £30 per week worse off per week on UC because they lose the lower disabled child premium).

Case study from CPAG’s Early Warning System:

A couple who are both disabled, with a child, moved from ESA to universal credit. They immediately became £122 a month worse off because they now only receive one ‘limited capability for work element’ between them

 

Ends

Notes to Editors:

CPAG’s report includes analysis by IPPR which isolates the child poverty effects of a range of cuts to universal credit and family-related benefits since 2013. It shows how many children will move into poverty (and into severe poverty) as a result of these policies by the time universal credit is fully rolled out in 2023, and conversely how many children would be protected from poverty if they were reversed. It shows the costs to the Exchequer of reversing each cut. The child poverty impacts and costs of other changes to universal credit, such as introducing a second-earner work allowance to allow dual-earner couples to keep more of their earnings, are also calculated. IPPR ‘s findings are based on analysis of the 2016/17 Family Resources Survey using the IPPR tax-benefit model, with projections based on the 2019 Spring Statement.  

Sub-inflationary increases in working age benefits (for people in and out of work) began in 2013-14. From 2015/16 most working age benefits were subject to a four-year freeze.   

The two-child limit restricts the child element in universal credit, worth £2,780 per year, to the first two children. Before 6 April 2017 it was payable for all children in low-income families to protect them against poverty. Third or subsequent children born before the policy was introduced are exempted.

From July 2019 the government will pilot ‘managed migration’ – the movement of existing benefit claimants across to universal credit. Managed Migration will start in full in 2020.

The Minimum Income Floor is an assumed earnings threshold applied to self-employed claimants. It assumes that self-employed claimants earn the equivalent of full-time hours at the ‘National Living Wage’ (or a smaller number of hours for nominated carers of children under the age of 13). If in some months a self-employed claimant earns significantly more than the Floor, their UC award falls in response. But if they earn below the Floor in other months – because their earnings fluctuate month to month – their UC award does not increase to make up the difference. Over a year, a self-employed claimant can therefore receive less UC than an employed claimant with identical annual earnings who is paid the same wage each month.

The benefit cap restricts the total amount of benefits which households can receive if they are not working or only working a small amount. The Cap is set at £23,000 for couples/lone parents in Greater London and £20,000 for couples/lone parents outside the capital. 

The lower rate of the ‘disabled child addition’ in UC (currently £126.11 per month), for children with moderate rather than severe disabilities is worth less than half the disabled child element in child tax credit (£273 per month).

Until April 2017 a higher rate of child allowance worth £277 per month was payable in UC for a first child. The higher rate was scrapped for first children born on or after 6 April 2017 who now receive the lower rate (£232 per month).  

Poverty figures quoted in this release are for relative child poverty, measured as children living in households below 60% of median income, adjusted for family size, after housing costs.

The Government’s Households Below Average Income data published in March 2019 showed relative child poverty, after housing costs are factored in, increased by 500k between 2010/11 and 2017/18. https://www.gov.uk/government/statistics/households-below-average-income-199495-to-201718

 

CPAG media contact:      Jane Ahrends 0207 812 5216 or 07816 909302