The Work and Pensions Committee has published the UK Government’s response to its report on the cost of living and the support measures available for people claiming benefits and the State Pension.
The report, published in July, called on the UK Government to put on hold automatic repayments from benefits to help households currently struggling with huge financial pressures during the cost of living crisis. The Committee also called for the Department for Work and Pensions (DWP) to work to increase the speed with which changes can be made to legacy benefits and State Pension payment rates, with the uprating mechanism for benefits having fallen out of step with soaring inflation.
An uprating of 3.1% was applied to most DWP benefits in April, however, inflation has been steadily rising and was 10.1% for July. The September inflation rate, announced in October, will be used to determine the benefits and State Pension uprating to be applied from April 2023.
The Work and Pensions Committee has shared that the UK Government response states that pausing deductions would not necessarily be in the best interests of claimants and that there are no plans to change the uprating period.
Commenting on the DWP response, Sir Stephen Timms MP, Chair of the Work and Pensions Committee, said: “The Government’s rejection of our recommendations at a time when so many families are continuing to feel real pain from rising prices is disappointing.
“While a package of support on energy bills is promised, the appointment of a new Secretary of State presents a fresh opportunity to consider whether a change of approach at the DWP could also offer extra help for people through the benefits system.”
He added: “We look forward to questioning the new Secretary of State in the coming weeks and hope she can use this autumn’s annual statutory review of benefits and state pensions to make the social security system more agile in adapting to turbulent economic times.”
Chloe Smith MP, was appointed Secretary of State for Work and Pensions in Liz Truss’ new Cabinet while the former DWP boss, Dr Therese Coffey, was named new Health Secretary and Deputy Prime Minister.
Legacy benefits and the £20 weekly Universal Credit uplift
The Work and Pensions Committee also addressed the £20 weekly uplift applied to Universal Credit which resulted in more than two million legacy benefit claimants missing out on additional support worth over £1,500 between April 2020 and October 2021.
The Committee wrote: “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.”
It added: “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.”
In response, DWP said: “The temporary uplift in Universal Credit (UC) was intended to support those most affected financially by the impact of the Covid-19 pandemic when being newly unemployed. The cost-of-living situation now is different and affects everyone.
“One-off payments are the quickest way to deliver support to over 8 million customers in receipt of income related benefits and 6 million customers receiving disability benefits before the next benefit uprating in April 2023. Over 8 million pensioner households will also receive a pensioner cost of living payment alongside their winter fuel payment this coming winter.
“The Secretary of State commences her statutory annual review of benefits and State Pensions in the autumn using the most recent prices and earnings indices available.”
It explained: “DWP IT systems other than UC, have a deadline of the last weekend in November to allow for all the required processes to take place to ensure the new payment rates come into force from the following April.
“Given working-age legacy benefits are closing and those legacy claimants will be moved to UC by 2024, we will not be making any IT changes.
“There are no plans to change the uprating period: using a consistent period for uprating, for example, the 12 months to September to measure inflation means any peaks and troughs even out over time. For example, in 2012 benefits were increased by 5.2%; whereas by the following April CPI was 3% and in 2020 the increase was 1.7%; while CPI fell to 0.8% by April.”
You can read the full response to the recommendations in the rapport online here.
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