Cost of living payments – what now, what next?

Background

As part of a package of measures in response to cost of living pressures, earlier this year the government introduced additional payments for those entitled to certain benefits. Most of the additional payments are provided for in the Social Security (Additional Payments) Act 2022, although the ‘pensioner’ additional payments will be via an additional amount of the (pre-existing) winter fuel allowance. The additional payments (ie, as they are referred to in the Act) are referred to by the DWP as ‘cost of living payments’. There would currently seem to be no plans for further such benefit-related support.

Payments so far and payments to come

The first ‘low-income’ cost of living payment of £326 for those entitled to the qualifying means-tested benefits (universal credit (UC), income support, income-related employment and support allowance (ESA), income-based jobseeker’s allowance (JSA) and pension credit) and tax credits, regarding the qualifying dates 26 April to 25 May 2022, have been made. Payments were due usually to have been made by the end of July regarding qualifying benefits, or 2–7 September regarding tax credits.

The qualifying dates regarding the next (ie, second) scheduled low-income payments of £324 had not been announced at the time of writing. Payments were due to be made during 8–23 November regarding DWP low-income benefits, or ‘shortly after' regarding tax credits.

The ‘disability’ cost of living payment (a single payment of £150) for those entitled to disability benefits on 25 May was due to be made from September 2022 and mostly be complete by the beginning of October.

The ‘pensioner’ cost of living payment (an extra £300 with the winter fuel payment) is due to be made with the winter fuel payment from November 2022.

An official payments schedule is available at gov.uk/guidance/cost-of-living-payment.

Official guidance for decision makers

The DWP has issued official guidance on the additional payments cost of living payments to decision makers.1 That guidance includes confirmation that there is no ‘claims process’, no entitlement decision and no decision-making and appeal challenges. The guidance says:

‘…there is no claims process for persons to follow to claim the additional payments. The payments will be paid into the bank account where claimants normally receive benefits or by the claimant’s preferred alternative arrangements where applicable.

‘Where HMRC make a payment to a claimant thinking they are someone who does not have entitlement to a DWP benefit and it later transpires that the claimant does have an entitlement to a DWP benefit in the qualifying period, the original HMRC payment is treated as if it were the correctly made payment by DWP.

‘Additional cost of living payments are an entirely new benefit which are automatically passported from existing benefit entitlement. Therefore, there 1. is no entitlement decision and 2. are no rights of appeal in respect of these payments.’

No decisions or appeals

That the usual decision-making and appeals rules do not apply to the cost of living payments themselves may be surprising, given the terms of section 6 of the Social Security (Additional Payments) Act 2022. Subparagraph (1) of that says:

‘For all purposes relating to the administration of an additional payment, any provision applying in relation to a social security benefit, child tax credit, working tax credit or disability benefit by reference to which that payment is made is to apply in relation to that payment as if that payment were a payment or award of the social security benefit, child tax credit, working tax credit or disability benefit in question.’

However, the Department has confirmed to CPAG the approach set out in the official guidance. The most obvious concern is regarding situations where the relevant qualifying benefit is only awarded at a later date. The Department plans ‘mop-up’ exercises to deal with this. In response to a query from CPAG, the Department said:

‘If a claimant is not eligible for a payment this will be because there has been a decision the claimant was not eligible for the qualifying benefit during the qualifying period and it is that decision which carries appeal rights in the usual way.

‘So using the UC example, if a claimant was not eligible to a payment of UC in an assessment period ending between 26th April and 25th May, they would not be eligible for the additional payment. Where the claimant does not agree, they can appeal their UC eligibility. If their appeal is successful and they are found to be entitled to a payment of UC with an AP [assessment period] ending between 26th April and 25th May then the [Secretary of State] comes under a duty to make the additional payment to the individual.

‘There is no need for the claimant to independently appeal their entitlement to an additional payment as one will always follow the other.

‘There are a series of mop-up exercises planned to pick up claimants whose entitlement is established at a later date and issue the additional payment to them. This is particularly relevant in relation to the disability additional payments where we are aware claimants’ entitlement to the underlying disability benefit for the qualifying period may still be determined or be the subject of an ongoing appeal. So we are again planning for a series of ‘mop-up’ runs to accommodate this situation.’2

That being the case, it is assumed that section 6 is, officially, mainly about things like payment by direct credit transfer into bank accounts – although (per subparagraph (2)) section 6 certainly does apply regarding ‘overpayments and recovery, and appeals relating to overpayments and recovery’. For obvious reasons, it is hoped that overpayments and (in particular, given the circumstances and the discretion available) recovery of the payments will be rare.

Nil awards and missing payments

Guidance for claimants on gov.uk includes advice on getting the cost of living payments and also regarding missing payments.3

The guidance includes that claims for the payments are not required, and the following:

‘If you’re eligible, you’ll be paid automatically in the same way you usually get your benefit or tax credits. This includes if you’re found to be eligible for a cost of living payment or a disability cost of living payment at a later date.’

Regarding universal credit and ‘nil awards’, it includes that:

‘To get the first cost of living payment of £326, you must have been entitled to a payment (or later found to be entitled to a payment) of universal credit for an assessment period that ended in the period 26 April 2022 to 25 May 2022.

‘You will not be eligible for the cost of living payment if your earnings reduced your universal credit to £0 for the qualifying assessment period. This is sometimes called a ‘nil award’. If money has also been taken off for other reasons (such as payments of rent to your landlord or for money that you owe), you might still be eligible.’

The relevant legislation requires that the claimant ‘is entitled to a payment of at least 1p in respect of an assessment period ending during the period of one month ending with the qualifying day’.4 The guidance says (or at least implies) that direct payment to landlords or third-party deductions for debt will not affect entitlement. But could the ‘nil award’ problem apply to sanctioned claimants – ie, if the sanction reduced the award to nil? The official position is that it can, although the public guidance is silent about that. Press reports in late August cited the DWP as saying that a nil award for the qualifying assessment period resulting from a sanction will mean no UC cost of living payment, although a successful challenge to the sanction would lead to retrospective entitlement.5

A written parliamentary answer of 22 September confirms that some 12,400 UC claimants with a sanction have missed out on the first instalment of the low-income payment due to having a 'nil award', with 6,600 of those due to the sanction alone.

Regarding missing payments, the guidance includes that:

‘If you think you should have had the £326 payment, but you cannot see it in your bank, building society or credit union account, you can report a missing cost of living payment.

‘Most people getting tax credits will be paid the first cost of living payment of £326 between 2 and 7 September 2022.

‘If you have already reported a missing payment, you do not need report it again. We will reply to you as soon as we can.’

There is a link to an online site for reporting missing payments at secure.dwp.gov.uk/report-a-missing-cost-of-living-payment/welcome. That site lists possible correct reasons for why a payment has not received (yet), as follows:

• ‘you’re still waiting for a decision on your benefit application or appeal – if you’re eligible, you’ll get the cost of living payment automatically later;
• ‘the payment is not due yet for your benefit – for example, if you get tax credits, most people getting tax credits will be paid the first cost of living payment of £326 between 2 and 7 September 2022;
• ‘you’re not eligible for it – to get the £326, you must have been either:
  • entitled to a universal credit payment for an assessment period that ended in the period 26 April 2022 to 25 May 2022;
  • entitled to an income-based JSA, income-related ESA, income support or pension credit payment for any day in the period 26 April 2022 to 25 May 2022.’

The guidance is understandably silent about what should happen should this reporting mechanism not result in a payment being made where one should have been made. Complaints and (in an extreme case) judicial review would seem to be the next steps in such situations, which – if they occur at all – will hopefully be very rare.

Disability payments

Information for claimants confirms that the £150 cost of living disability payment should normally have been paid by the start of October, and that decisions made after then but awarding the relevant disability benefit for the qualifying date of 25 May will still lead to ‘automatic payments’:

‘Those who had confirmed payment of their disability benefit for 25 May are expected to be paid shortly after the payment window opens. For those awaiting confirmation of their disability benefits on 25 May, or who are waiting to be assessed for eligibility to receive disability benefits, the process may take longer but payments will still be automatic.’6

Tax credits payments

HM Revenue and Customs (HMRC) said that the first of the cost of living tax credit payments will normally have been made by 7 September; and that although claimants who are now still awaiting payment they think they are due should contact HMRC, it remains that claims are not necessary and that payment is automatic:

‘If customers believe they’re eligible but haven’t received a payment…they should wait until 16 September at the earliest to contact us, to allow time for their payment to be processed. We won’t be able to provide customers with any further information before this date.

‘As a reminder, customers do not need to contact us or apply – payment is automatic into the bank account where they receive their tax credits payments. Any further information they need will be in the letter they received from us earlier this month. The second payment will be made in the winter.’7

Separately, it was also announced that payment from HMRC is identifiable by a specific payment reference number: ‘The payment reference will be: “CL”; followed by the customer’s national insurance number (of two letters, six numbers, one letter); followed by “0001AX”’8

DWP guidance for claimants also includes that:

‘If you get both child tax credit and working tax credit, you will receive a cost of living payment for child tax credit only.

‘If you get tax credits from HMRC and a low income benefit from DWP, you will get a cost of living payment from DWP only.’9

What next?

Energy costs have been a major source of financial pressure and of anxiety about the future, although they are by no means the only such source. The energy price cap for an average household had been due to go up from £1,971 per year to £3,549 per year on 1 October. However, on 8 September the Prime Minister announced that, instead, average prices would be capped from 1 October at £2,500, for two years (for households in Great Britain, with the same level of support to be available in Northern Ireland).

This change does not affect the cost of living additional payments to certain benefit recipients described above. The £400 energy bills discount (the Energy Bills Support Scheme) for households, announced in late July in due to begin from October, will still go ahead.

No announcement was made regarding further cost of living additional payments to benefit recipients, or about uprating or increasing benefits. Indeed, on the same day as the Prime Minister’s announcement of the energy measures, the Work and Pensions Committee published the government’s response to the Committee’s The Cost of Living report, and the response includes a number of rejections of benefit-related proposals from the Committee. In its response, the government said it would not be undertaking a specific review of the adequacy of benefit levels, that there would be no immediate review of the benefit cap and that there would be no pause in deductions from benefits.10

At the time of writing, therefore, the official plan was to concentrate on limiting further average energy prices (ie, beyond an increase to £2,500) and providing specific help with energy costs, rather than provide further help via the benefit system. The result, it would seem, is that benefits are set to remain at 2022/23 levels throughout what will still be a very difficult winter.