Welfare Reform and benefit take-up

6 July 2015

Dan Finn analyses the figures DWP published on benefit take-up – after a gap of three years.

After a break of three years the DWP finally published take-up estimates for most means-tested benefits. They were released on the same day as the child poverty data and received less attention than usual. HMRC’s pre-Xmas release of tax credit take-up also attracted little attention.

The data on benefit take-up matters, as was shown in the strength of criticism that forced the previous government to drop its proposal to cease publication of the annual statistical series. Robust estimates of take-up give an insight into the actual delivery of cash transfers and low take-up can exacerbate hardship and undermine public policy objectives.

The latest statistics show that take-up rates did not improve under the Coalition government. In 2012/13 Pension Credit take-up was between 61% and 64%; for Income Support and Employment Support Allowance between 77% and 81%; for Jobseekers Allowance (Income-Based) between 55% and 61%; and for Housing Benefit between 79% and 82%. The only significant change was an estimated 17% increase in take-up of Housing Benefit amongst claimants in work between 2009/10 and 2012/13, possibly reflecting increased rents and the squeeze on wages of the low paid. The separate HMRC ‘central estimate’ of the caseload take-up rate for child tax credit in 2012/13 was 88% dropping to 66% for working tax credit which was received by only 34% of eligible households without children.

Although take-up rates measured by expenditure are higher the evidence shows that many households are not receiving significant amounts which if claimed could help reduce child and pensioner poverty. The increased income associated with greater take-up would also contribute to improvements in other outcomes, such as health, family well-being and employment participation and retention.

Why people do not claim what they are entitled to is the result of the interaction between social and economic circumstances, administrative structures and complex eligibility rules. Findings from a comprehensive evidence review confirm well-established factors that continue to shape non-take-up. The most significant, from the eligible claimants’ point of view, concern the level and accuracy of knowledge about an entitlement and its eligibility rules, linked with the perceived cash value of the benefit when compared to the effort involved in claiming and maintaining entitlement.

Take-up is undermined by poor benefit design and problems with service delivery and it has also been explicitly discouraged for some groups. In particular, increased conditionality, and related sanctions, are designed to get people into work as quickly as possible and as a result, make their claims to benefits relatively short-lived. However, a side effect has been that eligible unemployed claimants have become ‘disconnected’ from the benefits and employment services system.

A further recent factor is likely to have been the character of the public debate and media coverage of welfare dependency, which has increased the stigma attached to those claiming benefits, especially people of working age. Research findings suggest that this stigma is linked to reductions in take-up and a reluctance to claim among potential beneficiaries.

Means-testing will remain at the centre of the British welfare system and take-up of benefits will be a significant factor shaping the impact that welfare reforms will have on future poverty. The introduction of the Single Tier Pension from 2016 may reduce means-testing for many pensioners, but even when it is fully implemented up to a third of pensioners will rely on Pension Credit and support with Council Tax and rent costs. Universal Credit is expected to increase benefit take-up, especially amongst the poorest households, but it seems unlikely that it will not also have negative effects. There is a risk that digital delivery, for example, may reduce and deter take-up amongst people who do not have the skills, capacity or means to navigate digital channels.

Whatever the welfare cuts announced by the Chancellor in the emergency budget the Government itself clearly has the primary responsibility to ensure that potential claimants are informed of their eligibility, the claims process is facilitated and that services are targeted adequately at the many disadvantaged groups (who the evidence shows are less likely to claim their entitlements). The UK’s devolved administrations, councils, health authorities and voluntary organisations will also continue to have an interest in promoting take-up of benefits. Investment in take-up services and targeted campaigns typically generates far more in additional benefit income for poor households than they cost to deliver with the greater income increasing expenditure and economic activity in low income communities.

While there are contending views about why some take-up rates are low it should be possible for all to agree that households on low incomes should be encouraged to take-up the in-work and out-of-work means-tested benefits they are entitled to. It is important, therefore, that the Government monitors the impact of welfare reforms and commits to annual publication of take-up data, including in future Universal Credit, and for the series to estimate take-up of Council Tax support. If Universal Credit does not improve take-up rates, which the Government has claimed, the DWP should consider setting and committing to an independently assessed indicator giving the level of take-up it wishes to achieve, which would help drive future improvements.

Dan Finn is a Professor at the University of Portsmouth and the evidence review which was commissioned by the Joseph Rowntree Foundation can be found here.