Income Support: reinstatement of single parent component

STATES OF JERSEY

INCOME SUPPORT: REINSTATEMENT OF SINGLE PARENT COMPONENT

Lodged au Greffe on 15th November 2017 by the Health and Social Security Scrutiny Panel

STATES GREFFE

2017  P.113

PROPOSITION

THE STATES are asked to decide whether they are of opinion

to refer to their Act dated 8th October 2015 to phase out the additional single parent component of Income Support, and –

1. to reinstate the additional single parent component of Income Support with effect from 1st March 2018;
2. to request the Minister for Social Security and the Minister for Treasury and Resources to take the necessary steps to identify funds to reinstate the component for the duration of the current Medium Term Financial Plan.

HEALTH AND SOCIAL SECURITY SCRUTINY PANEL

REPORT

As part of Medium Term Financial Plan measures, the Council of Ministers agreed a target of £10 million in savings in annual benefit budgets by 2019. The Minister for Social Security duly brought forward proposals which included phasing-out the single parent component of Income Support and increasing the maintenance income disregard. This proposal was contained within the Draft Income Support (Miscellaneous Provisions No. 2) (Jersey) Regulations 201- (P.103/2015), adopted by the States on 8th October 2015. As a result, 1,300 single parent Income Support households faced a drop in income with effect from 1st November 2015.

In the light of evidence gathered since P.103/2015 was adopted, the Health and Social Security Scrutiny Panel believes that the Assembly's decision to remove the single parent component is unsound; has caused, and will continue to cause, very real suffering to many vulnerable families; and is directly contrary to the stated goal of the Strategic Plan "to help people in Jersey achieve and maintain financial independence and safeguard the most vulnerable in our community".

According to the Jersey Household Income Distribution ("JHID") 2014/15 survey, which was published on 13th November 2015, 56% of one-parent families were in relative low income after housing costs had been deducted[1]. This evidence was released just one month after the Assembly adopted P.103/2015 and shows a stark contrast to the assertions made in the Proposition.

The evidence presented in the JHID 2014/15 survey highlighted that Income Support and benefit payments made up 37% of household income for one-parent families[2], but only 3% of the household income for couples[3]. Likewise, a one-parent family would spend 35% of earned income on housing costs[4] in contrast to a couple, who would spend 17%[5]. The Panel questions whether the States Assembly would have agreed to these changes, had the information contained within the survey been made available prior to the debate on P.103/2015.

This Proposition seeks to reinstate the single parent component of Income Support, and requests the Ministers for Social Security and Treasury and Resources to identify funding to do so until a sustainable funding-stream can be identified in the next Medium Term Financial Plan. Financial Directions prevent the Panel from proposing the use of contingency funds, but the Panel would request the Ministers to have regard to significant underspends in the Social Security Department's annual budgets, some of which have been transferred into the Annual Managed Expenditure ("AME") Contingency. Later paragraphs explain this in more detail.

History of support to single parents

Family allowance (1951 – 2007): A weighting was given to single parent families.

Income Tax: An additional personal allowance of £4,500 is available to single parent taxpayers on the marginal rate of Income Tax. A smaller allowance of £1,500 is available to those on the standard rate for 2017 only, but that will cease in 2018.

Parish  Welfare  (ceased  2007):  Under  guidelines  adopted  by  the  Comité  des Connétable s, single parent families received additional support.

Income Support (commenced 2008): From the outset, the proposers of the new Income Support system recognised that there was an additional cost attributed to being a lone parent. In June 2005 the Assembly considered P.86/2005 "Income Support System" brought by the Employment and Social Security Committee under the presidency of Senator P.F. Routier.  The  report  accompanying  the  Proposition  recommended  that payments made under a new system be based on a series of components, including basic components to cover day-to-day living costs. In discussing the rates of components applicable to individuals and couples, it stated –

"The original CRSP report6 was based on adults in different family situations but the resulting budgets were at similar levels although expenditure within differed. Therefore the Committee believes that one standard rate may be used for all household types. In particular, CRSP examined the needs of those over age 85 and found that again, although people spent their money on different things,  the  total  amount  required  for  a  modest  budget  was  similar.  The Committee proposes that the rate for the second adult in a couple is the equivalent  of  two-thirds  of  the  individual  component.  This  recognises  the additional cost of food, clothing, etc. for the second person, but also that other costs are shared. However, there was an additional cost attributed to being a lone parent, not in terms of food and clothing, but in the cost of running the family home, which is comparable to that of a couple. So, the Committee considers that the lone parent and the first child should be classed financially as a couple". [Emphasis added]

The Assembly agreed all the proposals of the Committee, including a single parent component.

On 29th August 2006 the Minister for Social Security lodged a draft enabling Law for debate7. The report within the Projet set out the purpose of a new system of financial support as follows:

"The purpose of the new system is that it should help and enable people to both avoid poverty and to take appropriate actions and life decisions to get out of poverty. To do this the new income support system should be effective in tackling real needs whilst promoting work and encouraging self-reliance. It should  be  equitable,  consistent,  sustainable,  be  easily  understood  and accessible whilst taking account of the whole needs of the family".

6 Centre for Research in Social Policy, Loughborough University 7 P.102/2006 "Draft Income Support (Jersey) Law 200-"

On 10th October 2007, the States Assembly enacted the  Income Support (Jersey) Regulations 2007 proposed by the Minister for Social Security[6]. The report within the Projet described the basic components of Income Support as follows –

"The basic components are those amounts of benefit paid on behalf of each of the members of the household to meet their individual needs, such as food, clothing, travel, energy and basic medical costs. A specific household component is also paid to each separate household reflecting reasonable fixed costs in a household. There are therefore 4 rates:

• a rate for each adult in the household,
• a rate for each child in the household,
• a rate for the household,
• and an enhanced rate for a single parent in a household.".

The single parent component was agreed at £115.50 per week. This provided an additional £35.49 more than the adult component of £80.01.

When the single parent component was removed in 2015, it provided an additional £40.39 more than the adult component of £92.12.

Changes to Income Support

As part of the Medium Term Financial Plan, the Social Security Department was directed by the Council of Ministers to achieve savings of £10 million in the benefits budget by 2019. The Department subsequently brought forward P.103/2015 – Draft Income Support (Miscellaneous Provisions No. 2) (Jersey) Regulations 2015 – which detailed how these savings would be achieved. One of the savings proposed was the phasing-out of the single parent component of Income Support. The argument put forward in the Proposition states that –

"The single parent receives an additional component of £40.39 per week but, given that a separate component is available for each child, the extra payment made to the single parent is not linked to any specific, additional household cost that a single parent would face."[7]

The following simplified diagram was used in order to highlight the additional payment received by single parents.[8]

The proposition continues to justify removing the component as follows –

"There are about 1,300 single-parent households currently claiming Income Support  who  will  be  affected  by  this  proposed  change.  Not  all  of  these households will experience the full transition – over this period many parents will no longer need Income Support, for example, when a parent returns to full- time work after their child finishes secondary school. In other cases, the household composition will change as the single parent moves into a new long- term relationship.

The single-parent component as it currently exists can be seen to reward single- parent households, and can act as a barrier to another adult joining the household as a partner."11

The Minister for Social Security told the Health and Social Security Scrutiny Panel that her Department had analysed the differences between the support available to a one- parent household and a couple household and concluded that –

"There was absolutely no reason or indication that it would cost a lone parent £40 a week more to live than it would a couple"12

The Panel is concerned that the information put forward by the Minister and her Department to justify the removal of the single parent component was not based on any substantial evidence; and the most obvious source of evidence that would have informed members (the Jersey Household Income Distribution Survey) was due to be released just one month after this Projet was debated.

11 P.103/2015 – Draft Income Support (Miscellaneous Provisions No. 2) (Jersey) Regulations 201- 12 Public Hearing with the Minister for Social Security, Living on Low Income Review dated

5th May 2016, page 11

The issue of the JHID survey has been brought up in the States Assembly earlier in 2015. In answer to a written question by Deputy G.P. Southern of St. Helier , tabled on 20th January 2015, the Chief Minister said –

"The new income distribution survey will provide valuable evidence of the impact of the recession on different household types, and it is not advisable to second-guess the outcome of the survey before the underlying data has been fully gathered, or to make significant policy changes to the income support system in advance of that analysis".[9]

Yet notwithstanding the words of the Chief Minister, the Minister for Social Security brought forward and obtained approval to a significant policy change to the Income Support system in advance of the survey report. The survey report was released on 13th November 2015, and the Social Security Department was the only Department whose savings proposals were debated as part of MTFP1 in October 2015. All other departmental savings were presented in 2016 as part of MTFP2.

Might the debate have been better informed if Ministers had awaited the survey report and debated benefit changes along with all others? Might the Assembly have made a different decision in the light of the survey report? It would certainly have required the Minister to deal with the clear statistics that show single parent families are the most vulnerable group seeking support from her Department.

The Minister presented her proposal as one that ensured the fair treatment of adults under Income Support and improved the targeting of benefits. In her report within P.103/2015, the Minister gave her opinion that the single parent component could be seen to reward single parent households. The report did not make clear, and neither did the Minister inform the Assembly that, as a matter of principle and policy, a previous Minister for Social Security had asked the Assembly to agree that single parents require more benefit than single householders without children –

"Research and experience suggests that single parents require more benefit than single householders without children and are generally the most vulnerable to issues of poverty".[10]

The Minister also stated in her report within P.103/2015 that the single parent component was not linked to any specific, additional household cost that a single parent would face. Unfortunately, she failed to inform Members of the wholly contrary view expressed by her predecessors under the committee system –

"However, there was an additional cost attributed to being a lone parent, not in terms of food and clothing, but in the cost of running the family home, which is comparable to that of a couple".[11]

Surely the Minister was aware of the "research and experience" which her predecessors had seen and recorded. Undoubtedly her Department must have retained that evidence. Unfortunately it was not presented to the Assembly, either in the report within P.103/2015 or in the Minister's address. Instead, the Assembly was told that single

parents were being unduly rewarded, and that removing the additional support available to single parent families would improve the targeting of benefits and result in fairer treatment of adults under the Income Support system.

Single parents – the most vulnerable to issues of poverty?

The  Employment  and  Social  Security  Committee of  2005  recognised  that  it  was important to measure the success of any new system in achieving its aim of reducing poverty. It proposed to use the measure of 60% of median income (before and after housing costs) to measure the incidence of poverty. No doubt this was adopted because it is the same measure used internationally in income distribution statistics to define those living in relative low income.

The situation of single parent families has been examined in 3 reports into household income distribution in Jersey.

2004 – 64% of single parent families were living in relative low income after housing costs, far ahead of the next group which was pensioners (45%).16

2009 – Under half (47%) were in relative low income17. It is generally accepted that an important contributing factor to this large reduction was the decision to introduce a single parent component into the Income Support system which had commenced on 1st January 2008.

2014 –

• Over half (56%) of single parent families were in relative low income after housing costs18.
• One-parent families are over-represented in Relative Low Income – they make up just 1 in 10 of low income households but account for over 1 in 3 low income families with children19.
• One-parent families are heavily dependent on Income Support, deriving 37% of their total household income from Income Support, benefits and grants. In contrast, the greatest proportion (93%) of income for couples with dependent children was from employment, and only 3% from Income Support, benefits and grants20.

As the data contained within the JHID 2014/15 survey relates to the period prior to the removal of the single parent component, the Panel considers that the position of single parent families on Income Support is likely to have deteriorated yet further.

In its report S.R.4/2016 Living on Low Income', the Panel received evidence detailing the increase in single parents accessing support as a result of the removal of the component. Variety submitted the following evidence to the Panel –

16 Report: Income Support System, lodged 6th April 2005 by Employment and Social Security

Committee, section 4.2

17 S.R.4/2016 "Living on Low Income", page 11

18 Jersey Household Income Distribution 2014/15 – page 1

19 Jersey Household Income Distribution 2014/15 – page 1

20 Jersey Household Income Distribution 2014/15 – page 7

"Last year Variety helped 229 families with 476 children with basic needs: Almost on a daily basis we get requests via Health Visitors, CAB, Social Workers, The Bridge, schools and other organisations and individuals who have direct dealings with children and their families. These requests are for food, nappies, baby milk, baby equipment, school uniforms, shoes and other basic day to day needs. Virtually all of the families are single parent families and every family is on an income well below average."[12]

In following up the review's findings in January 2017, the Panel wrote to 6 organisations involved in childcare and received only 2 replies. These were to the effect that no additional need had been detected from amongst single parent families.[13]

However, in recent months, Variety sent its Annual Report for the year ended 30th September 2017 to all States Members. A copy is attached as the Appendix to this proposition and report. The Panel commends Variety for providing financial help to 357 families with 732 children, noting the statement: "All of the requests are mostly for single parent families and without exception are low income families who struggle financially".[14] Should the assistance needed by our most vulnerable families be left to the charitable sector to provide?

In S.R.4/2016 the Panel also addressed the view of the Minister that increasing maintenance disregards would encourage single parents to pursue maintenance costs. In the report, the Panel set out information from various agencies that showed the difficulties faced by single parents in terms of claiming maintenance –

"The views expressed by Variety were reiterated at the session with Brighter Futures attended by the Panel. Members were told that pursuing contact with a former partner can stir up emotions which the women would rather leave behind them. One lady commented: "The pressures on a lone parent are enormous. This can affect your physical well-being and mental health. If you become ill things can fall apart.[15]

The Panel agrees with the evidence provided by Variety, Brighter Futures and the Centre for separated families which points to the difficulties faced by many one-parent families in pursuing maintenance payments. It is unrealistic to expect that an additional incentive in the  form of a maintenance income disregard will have a significant effect on absent partners without providing specialist legal support for the resident parent."[16]

It is the view of the Panel that the additional incentives presented by the Social Security Department in order to offset the financial loss to single parents are not sufficient. Evidence presented to the Panel shows that claiming maintenance is a time-consuming and stressful process for single parents, who by definition undoubtedly have less time to manage general household tasks on top of pursuing absent partners.

The Panel came to the following key findings and presented 2 recommendations as a result of this report.

KEY FINDINGS

47. The Minister for Social Security's decision to remove the £40 per week one- parent component payment is unsound. It is a U-turn on the previous policy of providing additional support for one-parent families which was well-founded.
48. The decision also goes against the clear evidence of the Jersey Household Income Distribution Survey 2014/15 that the position of one-parent families within the Relative Low Income Threshold has worsened.

RECOMMENDATIONS

49. The Minister for Social Security should take the necessary steps to reinstate the one-parent component of Income Support as a matter of urgency.
50. The Social Security Department should consider creating a role for an officer working  on  behalf  of  one-parent  families  to  pursue  absent  parents  for maintenance.

In the Ministerial Response to S.R.4/2016, the Minister rejected both recommendations surrounding the single parent component of Income Support. In the response, the Minister stated –

"The States have already agreed these changes, and the Minister is confident that a strong case was made in order to secure States approval. No amendments to reverse these changes were submitted as part of the debate on the Medium Term Financial Plan Addendum.

The changes have improved the structure of the Income Support system and it would be a retrograde step to reverse them."26

The Minister claimed that a strong case was made to the States; however, she did not address the conflicting information presented by the JHID 2014/15 survey, nor did she address the evidence presented by the Panel that single parent families are now worse off as a result of these changes. The Panel reiterates that as Members were asked to adopt these changes prior to the publication of the JHID survey, they were not in possession of important information that may well have changed their view.

Conclusion

As stated earlier in this report, the Health and Social Security Scrutiny Panel believes that the Assembly's decision to remove the single parent component is unsound and has caused, and will continue to cause, very real suffering to many vulnerable families. The evidence that has been presented subsequent to the decision shows a very different picture to what was presented at the time by the Minister.

The Panel believes that any decision regarding benefit cuts should have been left until after the publication of the Jersey Household Income Distribution 2014/15 Survey, a view that was indeed echoed by the Chief Minister himself. The Panel is convinced that had this information been made available to Members prior to the debate on P.103/2015, the debate would have proceeded differently and the outcome may have been different.

26 S.R.4/2016 Res. Living on Low Income (S.R.4/2016): response of the Minister for Social

Security', page 22

The Panel also believes that the incentives relating to pursuing maintenance claims are not sufficient to offset the loss of the single parent component. Being a single parent is by a nature a time-consuming task, with the parent having to take on additional responsibilities by virtue of there being no partner. This increased income disregard still does not address the issue that single parents often will not have time to pursue maintenance claims. It should also be remembered that many single parents are unable to claim maintenance due to the death or disablement of their former partner, or having lost contact.

The Panel urges members to vote for this proposition. Financial and manpower implications

In order to reinstate the single parent component at the rate of £40.39 per week, calculations made by the Social Security Department have indicated that £2.3 million per year would be required. The cost from 1st March 2018 to 31st December 2019 (the end of the current MTFP) would be £4.22 million. This can be reduced by an amount of £205,000 already budgeted in 2018 as part of the phasing-out of the component agreed in 2015.

The Panel notes that the States of Jersey Financial Report and Accounts 2016' show underspends in the Social Security budget of just over £10 million.[17]

The majority of the underspend in 2016 was due to lower volumes of claimants than anticipated, and some change in the average rate of claim expected.

The Panel wishes to draw Members' attention to the balance within the Annually Managed Expenditure ("AME") contingency. This contingency is set aside to provide a 2% contingency for unforecast variations in Income Support and other tax-funded benefits which are in excess of the 1% contingency provided by the Social Security Department within its annual cash limit.28

The  Medium  Term  Financial  Plan  2016 – 2019  (P.72/2015)  agreed  the  AME contingency in 2016 as £2 million. This was not required, as there was an underspend in the Social Security budget of just over £10 million – as noted above.

The Medium Term Financial Plan Addition for 2017 – 2019 (P.68/2016) agreed an AME contingency of £2 million each year; i.e. £6 million in total.

The MTFP Addition also agreed that the 2017 – 2019 AME allocations should be funded by the use of carry-forward funding from the Social Security Department's underspend in 2016, as the following extract shows –

"Use of 2016 underspend to be earmarked and carried forward

The principle of unspent AME contingency being carried forward is being applied in 2016 where the Social Security department at Q1 are reporting a significant forecast underspend. This means that as well as an underspend on the AME budgets in Social Security of almost £5 million the AME Contingency in 2016 will not be required. The Council of Ministers is proposing to earmark these sums amounting to £6 million to fund the required provisions for AME Contingency in 2017–2019."29

28 MTFP Addition for 2017 – 2019 (as amended), page 62 29 MTFP Addition for 2017 – 2019 (as amended), page 78

The Panel understands that latest forecasts are for Social Security benefits to be unspent in 2017, so it is very unlikely the AME Contingency in 2017 will be required for this purpose.

The Draft Budget Statement 2018 (P.90/2017) refers to the 2017 forecast position and recommends that the unspent 2017 AME Contingency and forecast 2017 Social Security benefit underspend is applied to resolve existing expenditure budget shortfalls –

"Expenditure Forecasts for 2017

The Council of Ministers has received forecasts of department expenditure to June 2017 which showed a forecast underspend by most departments and the most recent figure for August 2017 amounts to £21.8 million, including £6.8 million on Social Security benefits. On the basis of these forecasts, it is recommended that the shortfall in the Health and Social Services budget of £5 million in 2018 and in 2019, following the withdrawal of the planned transfers from the Health Insurance Fund, be funded from the anticipated underspends on Social Security benefits and associated AME contingency. However, sustainable measures of £5 million p.a. will need to be identified ahead of the next MTFP."[18]

From the above, it appears to the Panel that the Social Security Department underspent its budget in 2016 by a little over £10 million, of which £4 million was earmarked for AME Contingency in 2017–2019. It appears that the Department is also likely to underspend its budget in 2017, with the Draft Budget Statement forecasting a £6.8 million benefit underspend to August 2017. Although Financial Directions and the Treasury's revised policy on contingency allocation[19] do not allow the Panel to propose a mechanism for payment of a reinstated single parent component from contingencies, it can nevertheless be seen that there have been significant benefit underspends in recent years. If this proposition is approved by the Assembly, it is hoped that the Minister for Social Security and the Minister for Treasury and Resources will be able to find a means of funding the necessary expenditure until a suitable funding-stream can be identified in the next MTFP.

There are no manpower implications as a result of this Proposition. The administration of this Proposition, if approved, can be undertaken from within existing departmental resources. It would be implemented by an amendment to the Income Support (Jersey) Regulations 2007.

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