Living on Low Income - Report - 7 September 2016

Health and Social Security Scrutiny Panel

Living on Low Income

Presented to the States on 7th September 2016

SR.4/2016

Contents

1.TERMS OF REFERENCE.................................................................................................. 1

2. PANEL MEMBERSHIP ..................................................................................................... 2
3. CHAIRMAN'S FOREWORD .............................................................................................. 3
4. KEY FINDINGS AND RECOMMENDATIONS ................................................................... 4

5. GLOSSARY OF TERMS ................................................................................................. 10
6. INTRODUCTION ............................................................................................................ 11
7. MEETING PEOPLE LIVING ON A LOW INCOME .......................................................... 15

8. INCREASED NUMBERS OF REQUESTS TO CHARITIES FOR FINANCIAL AND MATERIAL SUPPORT ........................................................................................................ 20

9. INCOME SUPPORT: ORIGINAL AIMS AND CURRENT REACH ................................ 25
10. INCOME SUPPORT: DECLINING VALUE OF THE SAFETY NET .......................... 28
11. INCREASE IN HOUSEHOLDS IN JERSEY LIVING IN RELATIVE LOW INCOME .. 32
12. IMPACT OF HOUSING COSTS ............................................................................... 35
13. INCOME SUPPORT, OTHER SOURCES OF INCOME AND THE BENEFIT TRAP'38
14. THE IMPACT OF LIVING ON A LOW INCOME ....................................................... 41

1. One-parent families ........................................................................................... 41
2. Pensioners ....................................................................................................... 45
3. Visiting the Doctor ............................................................................................. 49
4. Reductions in Income Support payments .......................................................... 55
5. Long Term Incapacity Allowance ....................................................................... 58

6. Home Carers ..................................................................................................... 60

15. INCOME SUPPORT: LACK OF FLEXIBILITY IN THE SYSTEM .............................. 62

16. CONCLUSION: IMPACT OF THE BENEFITS CHANGES IN 2016/17 ..................... 65 APPENDIX 1: ADVISOR'S REPORT .................................................................................. 67 APPENDIX 2: SELECTED CASE STUDIES ..................................................................... 111

1.  TERMS OF REFERENCE

1. To investigate the impact of the incidence in Jersey of relative low income households as referred to in the Household Income Distribution Survey report 2014/15
2. To assess the evidence of relative low income in comparison with previous years
3. To determine whether the incidence of relative low income in Jersey has increased and, if so, the reasons for such increase
4. To assess the effectiveness of States of Jersey policy with regard to tackling relative low income
5. To assess the effectiveness of methods used to monitor the implementation of policies that aim to reduce the incidence of relative low income
6. To assess the delivery of support and help available to those on low income
7. To determine the effects of the changes to the benefits system contained in the Medium Term Financial Plan affecting those on relative low income

To be undertaken by an independent expert advisor:

8. To provide an analysis of low income households in Jersey with reference to the information contained in the Jersey Household Income Distribution Survey 2014/15. The study should identify trends in the incidence of low income and their associated risks in order to inform future short and long-term policy. The study will include:

1. Obtaining statistical information on Income Support from the Social Security Department
2. A comparison between the low income figures contained within the Jersey Household Income Distribution Survey with the number of people claiming Income Support
3. To assess the prevalence of low income households and how this might be addressed in the future

2. PANEL MEMBERSHIP

Deputy Richard Renouf (Chairman)

Deputy Geoff Southern (Vice- Chairman)

Deputy Jackie Hilton

Deputy Terry McDonald

Deputy Montfort Tadier (co-opted for this review)

3. CHAIRMAN'S FOREWORD

Deputy Richard Renouf

Jersey rightly takes pride in the quality of life and standard of living it can offer its citizens. But there is a group of residents who are often forgotten in Island life. They are the ones  left  with  little  or  no  disposable  income  at  the  end  of  a working  week;  whose  finances  are  so  finely  balanced  that  any disruption to income flow can have traumatic effects upon their lives; and where unplanned events such as illness, work lay-offs, job losses and relationship breakdown only add impossible financial strains to

already stressful situations.

In October 2015 the States Assembly approved plans to remove £10 million from the Social Security budget. Income Support benefit was most affected. However just a few weeks later a five-yearly survey on household income starkly revealed that the income gap between the richest and poorest sections of Jersey society had widened significantly since 2009. One is left to wonder whether decisions might have been made on a more informed basis if the survey findings had been known at the time of the debate.

In the light of all this, my Panel decided to carry out a review to investigate the impact of living on a low income in Jersey. We have been alarmed and saddened but not altogether surprised by what we have learned.

We can surely measure ourselves as a society by the way we look after the poorest, most needy and most vulnerable amongst us. The States Strategic Plan for 2015 - 2018 acknowledges that nothing undermines social inclusion more than financial hardship and has as a stated goal "to help people in Jersey  achieve  and  maintain  financial  independence  and  safeguard  the  most  vulnerable  in  our community".

My Panel hopes its report will help to inform and highlight the difficulties faced by the sizeable number of people living on a low income in Jersey so that States Members and the whole Island community can redouble their efforts to achieve the Strategic Plan goal. The task is huge; it will not be easy to meet this challenge; but dare we hope that the next household income survey (due in 2020) will show a narrowing of the gap between the Island's rich and poor?

On behalf of my Panel, I would like to thank all those who have contributed to the Panel's review, either orally or in writing; to the charitable organisations that have welcomed us to their premises and shown us their work; to our adviser for her detailed analysis and guidance; and to our Scrutiny Officers for their hard work and support throughout this review.

4. KEY FINDINGS AND RECOMMENDATIONS

Increased Numbers of requests to Charities for financial and material support: Key Findings

1. The voluntary sector in Jersey is playing an increasingly important role in providing essential assistance to people living on a low income. (paragraph 40)
2. The growing use of Food Banks in Jersey is a consequence of the increasing pressures on people living in Relative Low Income and the widening income inequality gap in Jersey which has been highlighted in the Jersey Household Income Distribution Survey 2014/15. (paragraph 41)
3. The Minister for Social Security's assertion that the growth in use of Food Banks is mostly due to people who have recently arrived in the Island and who are not qualified for Income Support is at odds with the experience of the charitable organisations, as reported above to the Panel. (paragraph 42)
4. The Minister for Social Security presented no evidence to the Panel to substantiate the claim that people were regularly abusing charities by making unnecessary multiple applications for food parcels and again this appears to be contrary to the experience of the charitable organisations. (paragraph 43)

Increased Numbers of requests to Charities for financial and material support: Recommendation

5. The Chief Minister should report to the States on the outcome of his investigation into the increasing use of Food Banks within six months. (paragraph 44)

States Support for Charities: Key Findings

6. A number of the organisations working with people living on a low income rely on States grants to meet a substantial part of their operating costs and they are vulnerable in these times of cost cutting. (paragraph 50)
7. Given the increasing demands on services provided by these organisations, great care should be taken when reviewing grant aid to organisations to determine that a reduction in grants will not affect services and thereby ultimately result in increased costs to the taxpayer. (paragraph 51)

States Support for Charities: Recommendation

8. The Chief Minister, through the Social Policy Group, should ensure that a co-ordinated and consistent approach is taken by the States towards charitable organisations supporting people living on a low income and should review their levels of funding to ensure that the States are properly meeting the Strategic aim of tackling relative low income. (paragraph 52)

Parish Funds: Key Finding

9. The existence of funds held by the Parishes for the purpose of assisting people with a low income is not well known; the use and distribution of these funds varies between the Parishes. (paragraph 54)

Parish Funds: Recommendation

10. The Connétable s and Rectors should look afresh at the resources they have to help parishioners and, to the extent necessary, coordinate their approaches to distribution of these funds. (paragraph 55)
11. The Minister for Social Security should collaborate with the Connétable s and Rectors in efforts to ensure these funds are used for maximum benefit. (paragraph 56)

Income Support: Current Reach: Key Finding

12. The Income Support system does not reach a significant proportion of those who fall below the Relative Low Income threshold. (paragraph 67)

Income Support: Current Reach: Recommendation

13. The Social Security Department should conduct a comprehensive review of the Income Support system to ensure that it is reaching the people who are in need and bring a report to the States by July 2017. (paragraph 68)

Income Support: Declining value of the Safety Net: Key Finding

14. The Income Support system is failing to achieve the aims set out in P.86/2005 (Principles of Income Support) of reducing poverty in the Island. (paragraph 77)

Income Support: Declining value of the Safety Net: Recommendation

15. The Minister for Social Security should suspend the freezing of benefits in 2017 in order to alleviate the pressures on low income households. (paragraph 78)

Impact of Housing Costs: Key Finding

16. High rental costs have had a significant negative impact on the disposable income of people living below the Relative Low Income threshold. The States do not currently have an effective policy to deal with the high costs of rental housing in Jersey. (paragraph 95)

Impact of Housing Costs: Recommendation

17. The  Housing  Minister  should  conduct  an  economic  and  social  impact  assessment on  the current housing rental policy and report to the States by July 2017. (paragraph 96)

The Benefit Trap': Key Findings

18. Few Income Support claimants, who work on minimum wage or close to minimum wage contracts, are ever likely to have sufficient earnings from work to escape from Relative Low Income. (paragraph 108)
19. The level of disregard for earnings and other income in Jersey provides limited incentive to work compared to the UK. (paragraph 109)

The Benefit Trap': Recommendations

20. To improve work incentives and reduce the benefit trap' the Minister for Social Security should

1. examine whether additional payments – such as those for childcare or care related needs – could be removed from the Income Support calculation. An alternative mechanism of provision may be, for example, to pay for childcare for those with incomes below a fixed threshold.
2. examine the benefits of applying a higher level of disregard for earnings income and consider whether a separate disregard for second earners would better incentivise work.
3. Introduce an annual earnings allowance which does not affect Income Support entitlement, as in the UK. (paragraph 110)

One-Parent Families: Key Findings

21. 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. (paragraph 131)
22. 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. (paragraph 132)

One-Parent Families: Recommendations

23. The Minister for Social Security should take the necessary steps to reinstate the one-parent component of Income Support as a matter of urgency. (paragraph 133)
24. 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. (paragraph 134)

Pensioners: Key Findings

25. Pensioners, along with all other Income Support claimants, have suffered an effective loss of income due to the freezing of Income Support components (adult and household) at 2015 levels until 2017. This comes on top of an effective loss of value in benefits of £17.38 between 2010 and 2016 (adult and household component rates). (paragraph 141)
26. The Minister for Social Security's decision to alter the Income Support disregard for pensions does the opposite of targeting benefits on those most in need. It has reduced the disposable income of those new pensioners joining the scheme from January 2016 who have no additional income from a second occupational pension, who are the poorest section of pensioners in Jersey. (paragraph 154)

Pensioners: Recommendation

27. The Minister for Social Security should re-examine the impact of her decision to change the Income Support disregard for new pensioners and devise a scheme which does not discriminate against the poorest section of pensioners in the Island. (paragraph 155)

28. The Minister for Social Security should suspend the changes she has made to pension disregards and investigate the introduction of legislation requiring all employers to enrol their employees in an occupational pension as a better way of achieving her aim of encouraging occupational pensions. (paragraph 156)

Visiting the Doctor: Key Findings

29. The high costs of G.P. visits are deterring many people on low income from seeking appropriate and timely medical treatment. Many are compromising their health for fear of incurring debts with medical practices. This is contrary to the policy of the Health Department to encourage early intervention and treatment by primary care in the community. (paragraph 162)
30. The current provision for medical expenses in Income Support has failed to deliver on the promises made at the introduction of the scheme in 2008 that Income Support claimants should not be concerned about the costs of going to the doctor because Income Support would pay their fee. (paragraph 163)
31. Financial pressures have been increased on the most vulnerable by transferring funds into their Household Medical Accounts from other care components instead of providing additional money. The money transferred from care components was designed to supplement essential living and mobility support. (paragraph 180)
32. The Department has saved money on special payments for medical costs by replacing grants with loans where the claimant contributes to the cost of larger amounts. Repayments are likely to be a minimum of £21 per week. This has added financial worries for claimants over the past five years. (paragraph 181)
33. Undue reliance is placed on General Practitioners to mitigate the burden of medical costs by discounting their fees in favour of low income families. This support, though laudable, is provided in a haphazard and untargeted way. (paragraph 182)

Visiting the Doctor: Recommendations  

34. The Minister for Social Security's review of mechanisms to assist people on low income with health care costs should include consideration of uprating the medical provision in Income Support which has declined in value since 2008. (paragraph 183)
35. The Minister for Social Security should report to the States by July 2017 on proposals to ensure that the original aims of the Income Support system, that no-one should fear going to the doctor due to incurring unaffordable medical expenses, are effectively reinstated. (paragraph 184)

Reductions in Income Support Payments: Key Finding

36. Reductions to Income Support payments through under or overpayments and sanctions can combine to leave individuals in a seriously precarious financial position for several weeks. (paragraph 193)

Reductions in Income Support Payments: Recommendation

37. The Minister for Social Security should examine ways to reduce the number of over and under-payments in Income Support. Consideration should be given to payments in arrears rather than in advance. (paragraph 194)

Long Term Incapacity Allowance: Key Findings

38. There is insufficient evidence for removing the LTIA disregard for people drawing Income Support. This discriminates between people who are able to support themselves financially and those who cannot. (paragraph 204)

Long Term Incapacity Allowance: Recommendation

39. The removal of the LTIA disregard should be suspended pending the outcome of the Minister for Social Security's review of the contributory system. (paragraph 205)

Home Carers: Key Finding

40. Carers who wish to continue in employment find it difficult to find work that will keep them within the income disregard. (paragraph 212)

Home Carers: Recommendation

41. The Panel recommends that the Minister for Social Security's review of contributory benefits should examine extending the range of the current Home Carer's Allowance and include caring for those on PC2 as well as PC3. (paragraph 213)

Lack of Flexibility in the Social Security System: Key Finding

42. Key workers from organisations assisting people on a low income find the process time- consuming due to the lack of an appointment system at Social Security and have difficulty in identifying a single and consistent point of contact. (paragraph 222)

Lack of Flexibility in the Social Security System: Recommendation

43. The Minister for Social Security should establish an appointment system for key workers supporting Income Support claimants. (paragraph 223)

Conclusion: Impact of Benefit Changes in 2016/17: Key Findings  

44. In our view the Minister for Social Security has undertaken a narrow review of benefits with the sole purpose of identifying savings in line with the requirements of the Council of Ministers that all departments must contribute to dealing with deficit reduction. (paragraph 228)
45. In narrowing the focus of her review the Minister for Social Security neglected to research properly the impact of these savings on the most vulnerable members of our society and to take into account the 2014/15 JHID Survey which revealed that the average income of the poorest in our society had worsened over the past five years. (paragraph 229)

46. Without waiting to consult this Survey, the Minister for Social Security chose to proceed with £10 million in savings to tax funded benefits which have increased the pressures on people reliant on these benefits. (paragraph 230)
47. The Panel questions the Minister for Social Security's assertion that the benefits brought into place in 2008 were very generous'. In any event the real value of benefits introduced in 2008 has steadily declined over the past 8 years. This decline has been exacerbated with the freezing of benefit levels until 2017. (paragraph 231)
48. The benefits freeze will create further hardship for people living on a low income in contradiction of the Council of Ministers' stated priorities which include promoting social inclusion and tackling relative low income in the long term'. (paragraph 232)
49. In view of the increasing pressures on a range of people living on a low income in Jersey who depend on the Income Support system to have an adequate standard of living as outlined in our report, there is a strong argument for the Social Security budget to receive the same protection in the next Medium Term Financial Plan as has been accorded to Health and Education in the current MTFP. (paragraph 233)

Conclusion: Impact of Benefit Changes in 2016/17: Recommendation

50. The Council of Ministers should exempt Social Security from any further savings cuts in the next MTFP and identify new funding streams to uprate appropriately current Income Support components. (paragraph 234)

5. GLOSSARY OF TERMS

JHIDS  Jersey Household Income Distribution Survey: prepared approximately every five

years by the Statistics Unit to better understand the differences in the incomes of Jersey residents including the most vulnerable and low income groups

RLI  Relative Low Income – a standard level of income which is defined as 60% of the

median household equivalised income of the population

AHC  After Housing Costs

BHC  Before Housing Costs

HMA  Household  Medical  Account  –  a means of  setting aside  a  proportion  of  Income

Support benefit to provide for the payment of GP bills

LTIA  Long  Term  Incapacity  Allowance  –  a  contributory  Social  Security  benefit  which

compensates working adults who have a loss of faculty whether through illness or injury. LTIA allows people to work if able to do so whilst still receiving a benefit which provides some additional financial support. Claims can vary between 100% and 5% depending on the severity of the incapacity

Disregard  Element(s)  of  earnings  that  are  not  taken  into  account  when  determining  an

application for Income Support

Personal care

component  A benefit provided under Income Support to people with a disability or long term

medical condition. The numbers of claimants are smaller than those on LTIA. The criteria for assessing these components is relatively demanding – requiring a 24 page assessment form – in comparison to LTIA which is accessed automatically after 12 months' incapacity.

6. INTRODUCTION

1. Approximately  every  five  years  the  States  Statistics  Unit  prepares  the  Jersey  Household Income Distribution (JHID) Survey. The first JHID survey in 2002 was used as part of the process to develop a new benefits system. The stated aim of the first JHID survey was:

Aim of Jersey Household Income Distribution Survey

to better understand the differences in the incomes of Jersey residents including the most vulnerable and low-income groups.

2. The JHID survey is based on a large representative selection of Jersey households (1,200 households) and provides detailed information on all sources of income and spending on housing costs as well as demographic information on the make-up of the household.
3. The survey is an internationally recognised statistical tool which is used in many jurisdictions and can be used to enable analysis of trends within Jersey as well as comparison with other jurisdictions,  across  time  periods,  within  geographical  areas  and  across  particular demographic groups. The previous JHID survey was carried out in 2009/10 and so the latest JHID survey published in November 2015 enables a comparison with how average households have fared over the last five years and shows trends for various groups in society.
4. The JHID survey 2014/15 indicates that income inequality over the whole of our community in Jersey has increased since the previous JHIDS survey conducted in 2009/10 and is worse in Jersey than in the UK.

Growing Income inequality in Jersey

Average household income of the poorest section of Jersey's community (the lowest quintile) actually decreased by a sixth (17%) over the last five years  whilst  the  household  income  of  the  third  and  fourth  quintile increased by 7% and 9% respectively.

5. The JHID Survey 2014/15 revealed that, after housing costs are taken into account:

• One in four of all households (26%) – and 23% of individuals in Jersey - were living in relative low income; compared to about one in five (21%) five years ago;
• The proportion of children living in relative low income households has increased from 22% five years ago to 29% (4,900 children);
• The proportion of pensioners in Jersey living in relative low income (28%) has not increased but is twice the proportion in the UK (14%) (4,900 pensioners);
• The proportion of one-parent family households in Relative Low Income increased from under half (47%) in 2009/10, to (56%) in 2014/15.

6. The JHID Survey uses the term Relative Low Income[1] (RLI) to define a level of income which is 60%  of  the  median[2]  household  equivalised  income3  of  the  population.  The  Relative  Low Income standard is defined in terms of the society in which an individual lives and therefore differs between countries and over time. The standard would be expected to rise as the country becomes richer.4 The Relative Low Income threshold (60% of the median) in Jersey in 2014/15 was £410 per week household income before housing costs (approximately £21,400 per annum) and £340 after housing costs (approximately £17,700per annum).

Lower Relative Low Income Thresholds (in constant 2014 prices)

£441 in 2009/10  £408 in 2014/15  (7% fall)  Before Housing Costs (BHC) £380 in 2009/10  £336 in 2014/15  (12% fall)  After Housing Costs (AHC):

7. The Survey (JHIDS) points out that median household incomes have increased by less than inflation since 2009/10 (over this period prices rose by 13%). This means that the threshold at which Relative Low Income (RLI) is defined in 2014/15 in Jersey is actually lower than that in 2009/10.

Relative Low Income Threshold

The Relative Low Income threshold in Jersey was actually lower in 2014/15 than it was in 2009/10. Adjusting for inflation those defined as living in relative low income in 2014/15 had lower average incomes and are on average worse off than those in relative low incomes in 2009/10 and the number of households in Jersey living in relative low income has increased.

8. Adjusting for inflation, those defined as living in Relative Low Income in 2014/15 had lower average incomes and are on average worse off than those in RLI in 2009/10.
9. In the light of these stark facts the Health and Social Services Scrutiny  Panel decided to undertake a review which would look at what help was available to people living on low income and to consider how effective current States policies were in tackling the issue.
10. The Panel was also mindful of the measures agreed in the last Medium Term Financial Plan which set out to achieve a £10 million reduction from the Social Security Department's budget by  2019.  Most  of  the  savings  were  achieved  by  changes  to  benefits  affecting  the  most vulnerable in our society.

Social Security Budget Savings

The £10m Social Security budget measures were introduced before the Jersey Household Income Distribution Survey of 2014/15 had revealed the growing  inequality  in  income  distribution  in  Jersey  and  before  any

The mean average would be a higher figure because the overall distribution is skewed because a small number of households may have a particularly high income – see Jersey Household Income Distribution Report 2014/15 page 10

3 Equivalisation allows for comparison between figures for relative low income thresholds in the JHIDS and Income Support. The same scale used in the JHIDS is the OECD modified scale which is widely used in developed countries. The equivalised scale adjusts income using the following weights per household member: 0.58 first adult, 0.42 additional adult or child 14 or over and 0.2 per child under 14. The base case is a couple with no children, for whom the scale is 1. Other households' income are adjusted with reference to this base.

4 The term poverty, sometimes called Absolute' poverty, on the other hand refers to a set minimum standard below which no one anywhere in the world should ever fall. Source: The Poverty site: www.poverty.org.uk

opportunity to investigate the causes contributing to this situation and the potential impact on those whose household income was already in decline.

11. In December 2015 the Panel agreed terms of reference and co-opted Deputy Montfort Tadier onto the Panel for the review. On launching the review, the Chairman of the Panel, Deputy Richard Renouf , said:

The way we look after the poorest, most needy and most vulnerable is a measure of our society. It is a concern that the gap between the rich and poor is growing – and growing far more than in the UK. States policies acknowledge the importance of tackling low income and the Panel will investigate how effective they are likely to be.

(Statement by Panel Chairman, Deputy Richard Renouf )

12. In February 2016 the Panel appointed Dr Susan Harkness as its advisor (DPhil London; MA Sussex; MA Cantab). Dr Harkness is a senior lecturer in Social Policy at the University of Bath. She is a labour economist and was previously a lecturer in economics at the Universities of Bristol and Sussex and a researcher at the LSE. Her main research interests are in the areas of poverty and inequality, female and household patterns of employment and child poverty. Dr Harkness had worked with a previous Health and Social Scrutiny Panel in its review of Benefit Levels in 2011 (SR3/2011).
13. Dr Harkness was asked to

• Provide  an  analysis  of  low  income  households  in  Jersey  with  reference  to  the information contained in the Jersey Household Income Distribution Survey 2014/15. The study should identify trends in the incidence of low income and their associated risks in order to inform future short and long-term policy.
• Obtain statistical information on Income Support from the Social Security Department
• Provide a comparison between the low income figures contained within the Jersey Household Income Distribution Survey with the number of people claiming Income Support
• Assess the prevalence of low income households and how this might be addressed in the future.

14. References are made throughout this report to her report to the Panel and her full report is appended to this Scrutiny Report.
15. The Panel issued a call for evidence in February 2016, receiving nine written submissions from organisations and 24 personal written submissions. In addition the Panel conducted two drop- in sessions at St Helier Town Hall inviting anyone who wished to speak to them in confidence about their personal experience of living on a low income and visited four organisations, the Grace Trust, Headway, Strathmore and Brighter Futures who arranged for groups of their clients to share their experience of living on a low income. The Panel also held meetings with four other groups who work closely with people living on a low income.
16. On 5th May 2016 the Panel held a public hearing with the Minister for Social Security and her officers.

17. The Panel wishes to thank all those who contributed to their review.

7.  MEETING PEOPLE LIVING ON A LOW INCOME

18. During this review the Panel set out to meet a range of people living on a low income in order to hear their personal experiences at first hand:

• The Panel conducted two drop-in sessions at St Helier Town Hall inviting anyone who wished to speak to us in confidence about their personal experience of living on a low income: 29 interviews were conducted during these two sessions.
• The Panel received 24 written submissions from individuals describing their circumstances and difficulties they faced living on a low income.
• The Panel visited four organisations, the Grace Trust, Headway, Strathmore and Brighter Futures who arranged for groups of their clients to share their experience of living on a low income with the members of the Panel: 25 individuals talked with the Panel within these groups.
• The Panel also met pensioners at Age Concern and the Eastern Good Companions Club.
• The Panel also met four other groups who work closely with people living on a low income, namely Community Savings Ltd, St Helier Methodist Centre and Georgetown Methodist Church, Citizens Advice Jersey and representatives of the Primary Care Body.
• In addition the Panel received nine written submissions from organisations working with people on low incomes.

19. The Panel's resources did not allow for a comprehensive survey of people living on a low income in Jersey. The Panel is conscious that the individuals and groups they met represent only a small sample. We did not succeed in engaging with representatives of Portuguese, Polish and other immigrant communities. Conversations with pensioners at Age Concern and Eastern Good Companions Club allowed for only a generalised discussion rather than a detailed examination of the pressures faced by large numbers of pensioners who do not have secondary sources of income above their States pension.
20. Having said that, the meetings we did have were enlightening and the Panel is extremely grateful to the individuals who were prepared to share their experiences with us, helping us to come to a better understanding of the real life issues faced by those who have to survive on low incomes.
21. It would be difficult to summarise in a few words the range of experiences heard by the Panel throughout these interviews. A few case studies have been selected in order to give a human element to the statistics – see appendix 2 of this report (details have been summarised or amended in order to protect the identity of individuals).
22. In addition, selected comments from the groups the Panel met in round table discussions are included below.
23. The Panel was particularly impressed with a meeting with a group of women, at a session organised by Brighter Futures, a charity supporting parents, carers, children and young people in Jersey. They were articulate and open in describing the difficulties they faced. Their experiences are listed briefly below. The twelve women who shared their experiences with

the Scrutiny Panel spoke highly of the support they receive from this organisation. Brighter Futures must be congratulated on the work they are doing to develop a voice and self- confidence for the 150 families who access their services every week.

1. A woman with a disabled husband described how she struggled with the help of charities to feed her family, having to buy the cheapest forms of food, not necessarily the most healthy. She often had to say no to her children when they requested money for activities.
2. A woman described how her son often lost his clothes or PE kit. She relied on charity shops for clothing but found it difficult to find the right sizes.
3. Another woman said that having to rely on her parents for additional handouts was demeaning and lowered her self-respect but she had to ask them for support for the sake of her child.
4. One woman, who was disabled and unable to work, described her husband as hard working; however, as a builder his work depended on the weather and when the weather was bad he received no money. Consequently the family had to turn to the Grace Trust and Food Banks.
5. One woman wanted to be able to support her parents as her father was seriously ill in a hospital in the UK as his condition could not be treated in Jersey. Social Security however would not provide any funding for her to visit him.
6. Another  woman  described  how  the  water  supply  to  her  flat  stopped  when  the electricity went off.
7. One woman had an ambition to study for a degree which would enable her to get a good job and not have to rely on Income Support.
8. Others wanted to improve themselves through studies at Highlands. However, Social Security insisted that they should give up college and look for work.
9. One woman described going through a difficult breakup. She was unable to find full time work because of childcare needs. Her parents were elderly and disabled and so unable to help. She had recently had to make several visits to the doctor and the dentist. She was grateful for the support she had received but found it humiliating to have to rely on charities for support.

My son believes that there are lots of power cuts in Jersey because the electricity meter frequently runs out and we have no power.

(Woman at Brighter Futures)

Written Submissions

The vast majority of people who come to us for financial support are facing times  of  stress  because  of  unexpected  events  in  their  lives  such  as redundancy,  illness,  relationship  issues  or  mental  health  problems.  It  is comparatively rare that people have come to this situation due to their own fault. (Community Savings Bank)

24. The submissions received by the Panel and our engagement with stakeholder organisations revealed a number of challenges faced by people living on a low income and the organisations seeking to support them.
25. Caritas  Jersey  said  that  the  evidence  of  the  Statistical  Unit,  that  income  inequality  had increased in recent years and that the gap was now worse in Jersey than in the UK, was of no surprise to those at the coal face'. Caritas Jersey anticipated that the freeze on benefits would cumulatively increase the number of claimants and the degree of dependency on their charitable giving.

The benefits freeze will undoubtedly create further hardship and by 2019 we anticipate the problem will become very serious and require an urgent injection of public funds thereby negating the savings achieved. .. We believe that the policy is flawed and will be an expensive error for the States.' (Caritas Jersey)

26. Caritas Jersey summed up the experience of living on a low income: Working longer or on more than one job means less (or no) time for family or for leisure, with all the consequent pressure on married life, quality of life and quality of parenting. Family break up is costly for the States. Poor parenting leads to poor achievement in education and life skills and this is transmitted down through the generations, again with increased costs for the Public Purse. All this stress impacts upon both physical and mental health and this is fast becoming an ever- greater burden on the States' budgets, a situation that is mirrored in the UK. But we would argue that this is a burden of the States' own making. The phrase penny wise, pound foolish' comes to mind.''

Living on a low income means having no savings, no cushion and great stress and worry. Having a low income in Jersey means having to work longer or having more than one job in order to have a decent standard of living. (Caritas Jersey)

27. Citizens Advice Jersey described the stress of living with limited disposable income: Typically clients on a low income have little or no disposable income available at the end of each week or month; accessing services which many people take for granted is out of reach for certain sectors of our community. We often hear that clients cannot afford to visit the doctor, dentist or optician. Clothing and shoes are sourced in charity shops and the Grace Trust or St Helier Methodists are approached for food and tokens. A number of free lunches are provided in St Helier and we are aware that certain clients take full advantage of these events. Clients in such situations have no access to credit and find it impossible to replace or have repaired household items that may have broken down without assistance from a charity or by way of a loan from Social Security.''

People  living  on  a  low  income  present  with  low  self-esteem,  anxiety, depression and feelings of hopelessness, certain clients may present with mental health problems, be suicidal or have problems with addiction to drugs and alcohol. We often encounter such clients when they have hit rock bottom. Once out of employment such clients find it very difficult to re- enter the world  of  work,  they  lack  confidence  and  may  feel worthless. (Citizens Advice Jersey)

28. When asked to comment on the impact of recent benefit changes  Citizens Advice Jersey commented: We consider that it is too early in the year to evaluate how the impact of the recent changes to the benefits system will impact on this particular sector of our service users, but we are aware that when finances are so finely balanced any disruption to income flows can potentially have traumatic effects upon the lives of our clients.''
29. Community Savings Ltd reported an increase in the number of people passing through their door year on year seeking assistance with basic account facilities (to replace accounts they may have had with high street banks which had been closed or frozen), basic budgeting support/mentoring or emergency funding.  
30. Community Savings Ltd described the difficulty for their customers in coping with limited income: Living on a low income affects people in different ways. One of the main aspects is how it impacts their ability to make choices. . Regrettably, some unwise decisions are made from time to time which lead to people getting into debt. This can on occasions spiral by people borrowing from one source to repay another at very high interest rates. Such situations put  even  more  pressure  on  people  with  limited  income,  it  becomes  harder  to  manage repayments with interest on top and the cycle often repeats itself. Some customers do have sufficient  income  to  be  able  to  manage  but  lack  financial  acumen,  which  results  in mismanagement of their finances. This is where our budgeting and mentoring service proves so valuable.''

With limited income, decisions need to be faced about whether elements of  spending  are  necessary  or  just  desirable.  Often  these  are  difficult decisions and can be stressful for the whole family. (Community Savings Bank)

31. The  Special  Needs  Advisory  Panel  (SNAP  Jersey)  expressed  their  concern  that  the  most vulnerable, including carers, families and individuals living alone, would end up with less disposable income, little or no employment opportunities and less ability to socialise leading to  isolation  and  possible  health  issues:  Changes  within  the  system  should  be  handled carefully with understanding and transparency. The people who will be affected should be made aware, in a timely fashion, of what is to happen and when. Co-ordination and good communication  between  staff  within  the  department  and  other  States  departments  is essential. However, this does not always happen, when there are so many changes even staff within  Social  Security  have  trouble  keeping  up  which  leads  to  misunderstandings  and ultimately leads to a negative impact on these families and individuals.''

Unfortunately, families and individuals become reliant whether they like it or  not  on  the  benefit  system.  Changes  within  the  system  can  be  very unnerving,  leaving  families  and  individuals  feeling  very  vulnerable  and isolated. (S.N.A.P.)

32. Reverend T. Morley of the St Helier Methodist Centre told the Panel that he had been surprised that in September 2013 there was no available data relating to poverty in Jersey from the States departments which would then drive cohesive social policy. After numerous enquiries a report by the Statistics Unit was placed on the States website in 2015 which gathered together data from a number of sources. .[3]
33. That report indicated that 3,700 children in Jersey and 4,400 pensioners were living in relative low income. Five of the seven vingtaines in St Helier were the most deprived areas in Jersey. Reverend Morley asked:

• How far has this report been disseminated and developed to coherent direct social policy?  

• Without hard data how is it possible to prioritise limited resources to ensure that it has maximum benefit in addressing poverty alleviation?  

• Was this analysis taken into consideration to measure the impact upon the most vulnerable when the Medium Term Financial Plan was agreed that freezes benefits.  

• Have the States realised the impact of their decisions on the poorest and most vulnerable in society which may store up problems for health and mental health?''

8.  INCREASED NUMBERS OF REQUESTS TO CHARITIES FOR FINANCIAL AND MATERIAL SUPPORT

Many people who come to our Food Bank are hard-working people who have reached a crisis point. They don't have reserves to fall back on when something  unexpected  happens,  such  as  an  illness,  redundancy, relationship breakup or lack of work. (St Helier Methodist Centre)

34. The Grace Trust, Caritas Jersey, the British Red Cross and the St Helier/Georgetown Methodist Centre all reported a marked increase in the numbers of people requesting material support (mainly food and clothing) through Food Banks in the early months of 2016.
35. Citizens Advice Jersey confirmed that there was an increasing trend in the number of clients seeking charitable support (from 67 in 2012 to 96 in 2015). Citizens Advice reported that they regularly referred clients to the charitable organisations for emergency food parcels.

Grace Trust Food parcels 2011   344

2012   418

2013   735

2014  1,347

36. The Grace Trust reported a steadily increasing number of food parcels that had been given out by staff between 2011 and 2014. In January 2015 Mr Jones of the Grace Trust told the Jersey Evening Post that in the past many people thought that only homeless people needed food donations. However, more and more people from a range of backgrounds had been visiting the Grace Trust, including people with jobs: There are some people

• CASE STUDY we  see  only  three  times  a  year, and then there are those who are suddenly  out  of  work  or  waiting
• A woman who visited the Grace Trust for the  for  benefits,  so  they  will  come first time felt that she had no other choice' but  more regularly. Overall a good mix

to ask for food after she was unable to give  of  people  and  working backgrounds,  including  people

her  children  a  hot  meal  for  several  days.  who  are  still  working  but  can't Although she had never used a food bank  make  ends  meet  –  but  it  is

before, the woman said that she would visit  important to mention that almost all of the people we see are local the  Grace Trust  again  because  she  simply  Jersey people.''[4]

didn't have enough money left over to be able

to buy food. And that is despite the fact that

both she and her husband are working.

In an Island this size and with all the money it has it is a disgrace that I cannot afford to feed my children. It is awful to think that it's come to this but there is no middle ground in Jersey. The rich would not understand how poor people really are and I think the States really need to do something about it. (Woman using Grace Trust Food Bank)[5]

37. The St Helier Methodist Centre reported that the needs of people accessing their Food Bank were more complex and greater than ever. Many people told them that they had never had to ask for assistance before but were in desperate need of short-term assistance to overcome a temporary  crisis.  Those  who  came  for  assistance  had  generally  sought  help  from  other members of the family where possible.

They come with a heavy heart, as a last resort and wish to be treated with respect. Most only came to the Food Bank once or twice. In our experience the majority of people coming for assistance are Jersey-born or long term residents – we rarely see people who have been in the Island under the five year residency qualification. The mantra that there are large numbers of newly arrived immigrants seeking support is far from the truth.' (St Helier Methodist Centre)

38. When we questioned the Social Security Minister on her response to the evidence of growing access to Food Banks in the Island, she said that investigations carried out by a team from Social  Security  seemed  to  indicate  that  a  large  proportion  of  the  people  claiming  extra clothing  and  food  parcels  were  people  not  entitled  to  Income  Support,  who  were  not residentially qualified. The Department also believed that there were a number of people doing the rounds' from one charity to another.
39. The Panel was informed that the Chief Minister's Department is currently organising a survey of people using Food Banks to try to collect demographic information about the people using these  Food  Banks.[6]  We  note  that  such  an  investigation  into  reasons  why  people  were approaching charitable organisations in increasing numbers was announced in the States by the Chief Minister eighteen months ago.[7] However, no outcome to these investigations has yet been reported.

KEY FINDINGS

Recommendation

States support for charities

45. The States provides grants to a number of charitable organisations working with people on a low income. Table 1 below shows amounts given as grants or within contracts for services over the past three years:

Table 1 States grants and contracts with charitable organisations

Source: Treasury dept

46. In the course of our review both Headway and Community Savings Ltd expressed concerns regarding potential cuts to grants and their services as a result of MTFP efficiency savings. Headway told us of the concerns for his organisation, including having to cease opening the centre on a Saturday as funds do not permit it with all the other initiatives they have in place, continuing: 'I review all services on an ongoing basis and if funding is short have to redress or reduce accordingly. I am currently reviewing our Art Therapy on Fridays for example. I focus on the services that give most reward to as many members as possible but inevitably this means that some of the niche services that are of great benefit but to fewer members suffer from time to time.

Currently we receive £29,000 p.a. from HSSD under a grant set up many years ago to help support a drop in centre which is how Headway started. Since then, as you know, Headway has moved  to  focus  on  rehabilitation  programmes  and  more  advanced  therapies  which  have shown considerable success. It costs £350,000 p.a. to run the centre and the services. So you can see that less than 10% is supported by HSSD. Several years ago our Commissioner from HSSD agreed that HSSD should be supporting the charity with approx. £120,000 p.a. to cover base costs. Despite continued dialogue with HSSD no increase has been made other than a small cost of living change bringing it to £29,000 p.a. Regretfully we have also been told that even this small sum may be under threat.

The expectations of the charity, increasing referrals and a desire to maintain and improve services which have proved to be very beneficial are what drives us but I do feel that the grant from HSSD is not at all reflective of the work we undertake and the successes we achieve.''

47. Community  Savings  Ltd  reported  a  sense  of  frustration  that  the  financial  savings  to government departments (Social Security, Health and Social Services and Housing) made as a result of the services provided by Community Savings Ltd, were not fully recognised. They said that many of these savings were intangible, for example in terms of long term illness and stress  avoided  through  interventions  by  Community  Savings;  or  dental  work  for  children funded through a Community Savings grant. Other savings could be more easily quantified, such as a pilot scheme being undertaken by Social Security to pay Income Support benefits by means of BACS payments rather than by cheques. Such a scheme would not be possible for many Social Security claimants who were unable to access a regular bank account were it not for Community Savings bank accounts.
48. At the time of our meeting with Community Savings the Executive Chairman told the Panel that the grant of £50,000 received from the Treasury over the past three years was subject to review. Subsequently the Panel was informed that this grant had ceased. To compensate for this loss of income Community Savings applied for consideration to be given for payments to be made from the Criminal Confiscation Fund in recognition of Community Savings having been part of the Prison Rehabilitation programme for the past eight years. By the end of July no acknowledgement from Treasury to this application had been received.
49. Community  Savings  informed  the  Panel:  'As  you  know,  our  operation  relies  largely  on volunteers but as a consequence of the substantial reduction in our income, of our five part- time remunerated  staff  employed  at the  beginning  of  2016, we  have  dispensed  with  the services of one and reduced the hours of another. We have also put our modest expansion programme on hold and are planning to make further savings. These include considering our withdrawal from the Prison Rehabilitation programme and closing accounts of those, of which there are quite a number, who are not complying with our rules, particularly our principal one of saving at least £1 a week. These customers are therefore, effectively using us as an ATM. Deputies Moore and Pinel have been advised accordingly as their clients are the ones that will principally be affected.

KEY FINDINGS

50. A number of the organisations working with people living on a low income rely on States grants to meet a substantial part of their operating costs and they are vulnerable in these times of cost cutting.
51. Given the increasing demands on services provided by these organisations, great care should be taken when reviewing grant aid to organisations to determine that a reduction in grants will not affect services and thereby ultimately result in increased costs to the taxpayer.

RECOMMENDATION

PARISH FUNDS

53.  Before the introduction of the Income Support system, the parishes played a key role in supporting people living on a low income. The Panel sought evidence from the Connétable s and Rectors of the parishes and it is clear that they still have some funds available for these purposes.  Typically  they emanate  from  legacies  which  produce  an  annual  income  or the ownership of agricultural land which produces annual rents. The existence of these funds is not well known and the Panel has gained the impression that the use of the funds and distribution of support varies between the parishes. The funds are probably not sufficient to provide regular support to individuals but would be useful in helping parishioners to fund the type of emergencies which so often derail the plans of those who are struggling to live on a low  income.  Examples might  be  unexpected  GP  costs,  dental  bills,  replacement  of white goods, travel and accommodation costs whilst visiting UK hospitals etc.

KEY FINDING

RECOMMENDATION

55. The   Connétable s  and  Rectors  should  look  afresh  at  the  resources  they  have  to  help parishioners and, to the extent necessary, coordinate their approaches to distribution of these funds.
56. The Minister for Social Security should collaborate with the Connétable s and Rectors in efforts to ensure these funds are used for maximum benefit.

9.  INCOME SUPPORT: ORIGINAL AIMS AND CURRENT REACH

57. In this section of the report we look at the original aims and principles of the Income Support system and the numbers of people within the Income Support scheme today. We note that there is a sizeable number of people whose income leaves them below the relative Low Income threshold who are outside the Income Support benefit system and ask whether it is time for the Social Security Department to conduct a comprehensive review of the Income Support system to ensure that it is reaching the people who are in need.
58. In undertaking an earlier review of the Income Support Scheme (S.R.17/2007) the Health, Social Security and Housing Scrutiny Panel at that time stated that the scheme must be judged on its success in meeting the fundamental aims of the policies developed over the past two decades.

Income Support should seek to guarantee an adequate standard of living for all. (Income Support Steering Group, first report 2001)

59. The  introduction  to  P.86/2005  (Principles  of  the  Income  Support  system)  reinforces  this fundamental statement: "No-one wants to create a culture of benefit dependency, yet there is a need to achieve a level of financial support high enough to provide a basic standard of living without it being so high as to undermine the incentive to work and save. In Jersey this has to be achieved within the Island's existing and future means. The ultimate aim is that of reducing poverty in the Island."

Original principles of Income Support System

The new system will help and enable people to both avoid poverty and to take  appropriate  actions  and  life  decisions  to  get  out  of  poverty. The system will do this by effectively tackling real needs whilst promoting work and encouraging self-reliance. It will be equitable, consistent, sustainable, easily understood and accessible whilst taking account of the whole needs of  the  family.  (The  Report  to  P.90/2007  on  the  Introduction  of  Income Support)

60. The Minister for Social Security, Senator Routier, in the debate on the introduction of the Income Support Law on 10th October 2006 referred to the principles of the Income Support System set out in P.86/2005 and reaffirmed the aims of Income Support (added emphasis):

My Committee at the time explained that the purpose of the system is to avoid poverty and to take appropriate actions and life decisions to get out of poverty. (Senator P. Routier, Minister for Social Security in October 2006)

61. The Committee also declared that the system should provide a firm foundation on which the Island can work towards the eradication of financial and social exclusion in the Island.
62. Successive States Strategic Plans have reiterated a pledge to support Islanders living on a low income. The 2015 – 2018 Plan acknowledges that "a sizeable proportion of Islanders live in relative  low  income  and  have  difficulty  coping  financially"  and  lays  strong  emphasis  on reducing social exclusion. The priorities set out in the Plan are said to be "critical to promoting social inclusion and tackling relative low income in the long term". The four priorities are:

• Health and wellbeing: ensuring that people can access quality health care if they need it. This will help reduce social exclusion;
• Education: our focus on early years and education is intended to ensure that every Islander has the opportunity to develop the skills and confidence to become a successful, independent citizen will play a vital role in the prevention of social exclusion;
• Economic growth: Nothing undermines social inclusion more than financial hardship. Our focus on economic growth is intended to create more good jobs and opportunities for islanders, remove barriers to employment and increase participation. Economic growth will also provide government with more resources to fund services that help lower-income households and safeguard the vulnerable;
• St Helier: Improving our town as a place to live and enjoy will help create a stronger community and increase social inclusion.

Number of Income Support Claims Today

63. At the end of 2014, 6,486 households[8] claimed Income Support out of a total of 43,000 Jersey households (15% of all Jersey households).

• 10% (roughly) of adults in Jersey receive Income Support
• 21% of all children in Jersey live in families supported by Income Support, half of whom are in one-parent families.[9]
• Those resident in Jersey for less than 5 years do not qualify for IS but are likely to be at higher risk of low income.

64. Weekly benefits paid in Income Support amounted to £74million in 2014 with 6,486 household claims. 40% of the total benefits bill is spent on accommodation with 52% on living costs. The breakdown of spending is reported in Table 22 of the Advisor's report.

• Adults without children account for the largest number of claims (2,664) and attract the largest share of spending on Income Support (33%)
• Pensioners are the second largest claimant group (1,767) but have a lower share of the spending (21%)
• Single parents with children account for 1,098 claims and 27% of the spending
• Adults with children account for slightly fewer claims (957) and 19% of the spending.

Comparing numbers on Income Support with those on Relative Low Income

65. Figure 1 below shows that many more households live in Relative Low Income than claim Income Support:

• Before housing costs, only 2,142 pensioners out of 4,900 in Relative Low Income (51%) are supported by Income Support;

• After housing costs only 3,365 out of 4,900 children in Relative Low Income (70%) live in households which claim Income Support

• After housing costs only 6,158 people of working age in Relative Low Income (50%) claim Income Support

Figure 1 Income Support claimants and numbers in Relative Low Income

Numbers in RLI compared to Income Support claimants

14,000 12,000 10,000 8,000 6,000 4,000 2,000 0

Children Working age Pensioners

In RLI - BHC In RLI - AHC IS HH individuals

Source: Table 20 Advisor's report

66. In addition, those resident for less than 5 years fall outside the Income Support system.

KEY FINDING

RECOMMENDATION

10.  INCOME SUPPORT: DECLINING VALUE OF THE SAFETY NET

Falling living standards

Falling levels of Income Support in real terms mean that those living on a low income are likely to see their standard of living continue to fall

69. In this section of the report we look at how the rates of Income Support have changed in the period since the establishment of Income Support in 2008 and the current rates as at May 2016. It also compares the safety net provided through Income Support for those without any other source of income with the Relative Low Income threshold in the JHIDS.
70. Table 2 below shows how the main Income Support rates (excluding housing) have changed since 2008. Between 2008 and 2010 the rates were kept under review and updated for inflation. Since 2010, however, the rates have been frozen (in the case of the adult rate) or increased below inflation

• the adult rate for Income Support has been frozen at £92.12;
• the child rate has increased by £1.89;
• the household component has increased by £4.20.

71. Once these rates have been adjusted for inflation over the period (15.5%), as shown in column C, it is possible to show by how much the Income Support rates have declined in value. Column E shows the loss in value of the three basic Income Support component rates due to inflation

Table 2: Main Income Support Rates between 2008 and 2016

Source: Income Support (Amendment No 4) Jersey) Regulations 2009 and Advisor's report Table 8

72. The Index of average earnings for the period between June 2010 and June 2015 increased by 11%[10]. However, as we have seen from the JHIDS 2014/15, average earnings for those in the bottom quintile, most of whom would be Income Support claimants, have actually seen a drop. Whilst the earnings of those in the third and fourth quintiles has improved both the value of benefits and the average earnings of those in low income have worsened, thus widening the inequality gap in Jersey.
73. Table 3 below looks at the Income Support entitlements for five model' family types, totally reliant on Income Support and compares rates between 2010 and 2016. These examples assume no alternative source of income, individuals run their own household, Income Support fully covers housing costs and no additional care or mobility allowances or other additional payments.

Table 3: Income Support entitlements by family type 2010 – 2016: no alternative source of income

Source: Advisor's Report table 9

74. In current or nominal prices there has been little change in rates between 2010 and 2016, (except for one-parent families for whom the removal of the lone parent component has substantially reduced the value of the safety net – see further discussion in section 7 of this report on one-parent families). Once again when adjusted for inflation over the period we can see that the real value of the benefits has fallen significantly.

Declining value of benefits in real terms

Once  the  entitlements  have  been  adjusted  for  inflation,  it  becomes apparent that the real value of benefits has fallen by 11/12% for single adults and couples with or without children.

One-parent families have suffered a decline of between 23% and 26% in their benefit income in real terms due to the removal of the one-parent component of Income Support.

Income Support and Relative Low Income Threshold

75. Figures 2 and 3 below illustrate how the position of low income households who rely solely on Income Support has worsened in relation to the Relative Low Income Threshold in the five years since 2009/10. Once again it is clear that the value of the safety net has fallen in real terms:

• for single people and couples with or without children their position has worsened since 2009 by dropping a further 3% or 4% below the Relative Low Income threshold.
• The position of single parents has dropped even more sharply due to the removal of the single parent component of Income Support (see section 7.1 of this report).

Figure 2 2009/10 Income Support Entitlements - AHC equivalised income – no alternative source of income

2009/10 Income Support Entitlements - AHC equivalised income

RLI threshold £350 99% 99% = £312

£300

£310  £310  81% £250 77% 74%

£200 £240  £231  £254 £150

£100

Weekly income £50

£0

Single, no Single parent, 1 Single parent, 2 Couple, no Couple, 2

children child <14 children <14 children children <14

Family type

Figure 3 2016 Income Support Entitlements – AHC equivalised income  – no alternative source of income

2016 Income Support Entitlements - AHC equivalised income

RLI threshold £350 = £336

£300 79% 82% 77% ££220500 7£42%47  £266  £277  £7203%6  £260

£150

£100

Weekly income

£50 £0

Single, no Single parent, 1 Single parent, 2 Couple, no Couple, 2

children child <14 children <14 children children <14

Family type

Source: Advisor's report table 10

76. The declining value of benefits in real terms once adjusted for inflation illustrates sharply growing pressures on low income families in Jersey. Ongoing freezing of benefit rates until 2017 will further reduce the real value of benefits. The RPI rate in June 2016 was 1.5%. This means a further effective loss of £3 in value for those on Income Support benefits.

KEY FINDING

RECOMMENDATION

11.  INCREASE IN HOUSEHOLDS IN JERSEY LIVING IN RELATIVE LOW INCOME

79. This section of the report looks at the incidence of low income in Jersey and summarises the analysis undertaken by the Panel's advisor in part two of her report.
80. The JHID Survey 2014/15 reports that the number of households in Jersey living in Relative Low Income after housing costs (AHC) in 2014/15 increased from 21% to 26% compared to 2009/10. Before Housing Costs (BHC) the increase was from 15% to 16%[11].

Growing Numbers in Relative Low Income in Jersey

Given that the Relative Low Income threshold has declined in value since 2009 it would have been expected that the numbers of people falling under the  Relative  Low  Income  threshold  would  have  decreased.  In  fact  the opposite has happened: numbers in Relative Low Income in Jersey have grown  and  the  financial  position  of  those  living  on  a  low  income  has worsened.

81. Figure 4 below illustrates the increasing incidence of Relative Low Income between 2009/10 and 2014/14 with before housing costs and after housing costs measures of RLI.

Figure 4: Percentage changes in incidence of RLI 2009/10 to 2014/15

Source: Table 1 Advisor's report[12]

82. Figure 5 below illustrate the compositions of families in Relative Low Income. Figure 5 shows the percentage of household types in the general population in Jersey. Figure 6 shows the composition of households in Relative Low Income after housing costs. The figures show that both pensioners and one-parent families have increased their share of those in Relative Low Income.

Figure 5 Composition of Jersey households

Composition of Composition of Households Jersey Households in RLI - After Housing Costs

Couple,

Other  Pensioner no  Other

22% 21% children 5%

9%

One  Pensioner parent 32%

11%

Couple,  Single

no  working

children Couple  age  Couple  Single 16% One  with  18% with  working

parent children children age 4% 19% 20% 23%

Source: Advisor's report Table 6

Changes in Income

83. Figure 6 below looks at the changes in income and Relative Low Income over time for a number of groups: pensioners, single parents, couples with children, couples with no children and single working age adults. The following key points can be seen:

• For all groups, income before housing costs has increased by less than inflation (13% over this period), so real incomes have fallen. Falls have been largest for those of working age with or without children.
• Measures of relative low income have increased across the board, once increased housing costs have been taken into account. This is in spite of the 12% fall in the RLI threshold in real terms.
• Rising housing costs have hit single adults with or without children hard, leading to large increases in Relative Low Income AHC.

Figure 6 Income Changes for family types in Relative Low Income over time

% income change 2009/10 - 2014/15

14

12 13% rise in prices over period 10 12

8 10 10 6

4 6

2 4 0 0

0

-2 -3 -2 -3

-4

Pensioner Single Parent Couple with Couple no Single, working

children children age

BHC AHC

Source Table 2 Advisor's report

Figure 7 Percentage changes in Relative Low Income (BHC)

% in Relative Low Income (Before Housing Costs)

40 33

28 29

30

19

20 11 12 17

8

10 5 5

0

Pensioner Single Parent Couple with Couple no Single, working children children age

2009/10 2014/15

Source Table 2 Advisor's report

Figure 8 Percentage changes in Relative Low Income (AHC

% in Relative Low Income (After Housing Costs)

60 56

47

50

40 31 34 28 35 30 22

17

20 9 9

10

0

Pensioner Single Parent Couple with Couple no Single, working children children age

2009/10 2014/15

Source Table 2 Advisor's report

12.  IMPACT OF HOUSING COSTS

84. Our advisor's report highlights the impact of rising housing costs in Jersey, particularly on those in social and private rented accommodation as a critical factor in driving changes in Relative Low Income for working age families.
85. As we have seen, the Jersey Household Income Distribution Survey 2014/15 established that average incomes in Jersey have fallen over the past five years in relation to inflation and in real terms (see paragraph 5 of this report). People living in social rented accommodation have fared far worse than any other group in the past five years. They have seen an 8% reduction in disposable income after housing costs, before inflation[13]. Their income before housing costs has also failed to keep pace with all other groups with the exception of those in non-qualified accommodation.
86. Figure 9 below illustrates average income by tenure. It shows that people living in social rented accommodation have lower average incomes than those who own their own property - £470 per week before housing costs or £280 after housing costs, whilst, as shown in Figure 10 below, they also pay substantially more proportionately for housing – nearly twice as much - than owner occupiers[14]. They are paying £190 per week, over 40% of their gross income, to meet housing costs. This puts them substantially within the measure for housing stress.
87. Housing stress is defined as spending more than 30% of gross income on housing costs. Figures from the Housing affordability report 2013 revel that a third of people in social rental are in housing stress and that over a half in private rental are in housing stress.[15]

Figure 9 Income by Tenure 2014/15.

Income per week by tenure, 2014/15

BHC (Average £680) AHC (Average £560)

 1,200 1,010

 1,000 890

 800 680  670 650

560

 600 440 470  420

 400 280

 200

£ Income per week

 -

Owner occupied Owned, no Qualified rental Social rental Non-qualified with mortgage mortgage accommodation

Household type

Figure 10: Housing costs per week by tenure

Housing Cost per week by tenure

250 200 150 100 50 0

Owner Owned, no Qualified rental Social rental Non-qualified

£ Housing cost per week occupied with mortgage accommodation mortgage

Household type

Source advisor's report Table 4

88. Table 4 below illustrates median income by family types. One parent families, who have the lowest income (£530 per week) and single adults (£640 per week) face substantially higher housing costs than other family types - £220 for one-parent families and £190 for single adults.

Table 4: Median Income by Family Type and Housing Costs

Source Table 2.2 JHIDS

89. Citizens Advice Jersey reported a significant rise in 2015 in the number of clients reporting with rent arrears, particularly in relation to those living in social housing.

There  are  many  and  varied  reasons  for  rent  arrears  accruing,  for instance  a  change  in  the  level  of  benefits  paid,  a  delay  in  receiving benefits, sanctions imposed in relation to breaches of the Back to Work scheme,  prioritising  other  debts  over  rent,  and  mismanagement  of finances in general. (Citizens Advice Jersey)

90. In the public hearing in May 2016, the Panel asked the Minister for Social Security whether Income Support components for housing were sufficient to meet typical private sector and social housing rents. The Director, Policy and Strategy explained the current situation for social rented housing: Income Support supports the full range of social housing provider rents. So you do not need to publish a scale any more but Andium do publish their average rentals. There is quite a comprehensive list on the Andium website of rentals that are being charged. The Income Support system automatically covers the full rent of a social housing tenant as long as the social housing tenant is appropriately housed.''

91. The  problem  remains  for  private  sector  tenants  (comprising  1,898  Income  Support households) whose rents may only be paid in part by Income Support. The Income Support Housing component for private tenants covers rents at 95% of the market value of Andium stock as there is insufficient budget to cover 100%.
92. The Panel was told that £1million in extra money had been put into this area in 2014 so that more private sector tenants were now seeing their rent fully covered within the Income Support  figures.  The  Director,  Policy  and  Strategy  claimed  that  currently  50%  of  private tenants on Income Support had their rent fully met.
93. She  added:  We  will  be taking  a  proposition  to  the  Minister  this  month  to  adjust  those numbers for this October so when the social housing rents go up in October the private sector rental components will also be rising as well in line with the change we have seen in the social housing sector.'' This adjustment was agreed by the States in approving the draft Income Support  (Amendment  No.  14)  (Jersey)  Regulations  2016  which  provided  for  an  average increase of 5.2% in the support provided to Income Support tenants in the private sector.
94. The Panel considers that the following factors contribute to the increase in the numbers of people who live in Relative Low Income Threshold, after housing costs:

• There is no mechanism to control private sector rents;
• The States are still maintaining a system which effectively subsidises private sector rents;
• The policy of raising rents in the social sector by RPI plus 0.75% is simply a marker to prompt the private sector to increase rents and fails to deal with the high costs in the private sector;
• New tenancies in the social rental sector are charged at 90% of the market rate – which, for some people, means a significant rise in rents even for those who are downsizing.

KEY FINDING

RECOMMENDATION

13.  INCOME  SUPPORT,  OTHER  SOURCES  OF  INCOME  AND  THE  BENEFIT TRAP'

97. Only 15% of Income Support claimants rely totally on benefits. Most claimants have other income  sources  from  earnings,  pensions  and  maintenance.  There  are  large  variations  by household type in the share of Income Support claimants who rely on Income Support as their sole source of  income.  For  all  household  types  except  single  parents  income  from other sources exceeds that from Income Support[16].

• Just 1% of pensioners rely solely on Income Support– the vast majority have pension income with an average of £208 per week;
• Only 4% of couples with children rely solely on Income Support - Income Support comprises 41% of their household income;
• 17% of one-parent families rely solely on Income Support. Single parents derive 64% of  their  income  from  Income  Support.  Maintenance  comprises  just  5%  of  their income. It is collected by 48% of single parents with average awards of £55 per week.
• 29% of adults without children rely solely on Income Support. These are likely to be those with health conditions affecting their ability to work

98. For households with income from earnings, pensions and maintenance a common disregard of 23% is now applied to these other sources of income, meaning that they retain a proportion of any additional income before they see their Income Support rates reduced.
99. These levels of disregard have increased over time, having been set at a very low level of 6% on the introduction of Income Support in 2008. Disregards in the Income Support system mean that, for Income Support claimants who have additional earnings, their income may be close to or in excess of the Relative Low Income threshold. The rising level of disregard is meant to provide a greater incentive for those on benefits to find work.

100.  The level of disregard in Jersey, however, is relatively low compared to the UK where the tax

credit taper rate is 41% and applies only to income over £3,850 without affecting a tax credit entitlement. (Please note the UK term taper rate' is equivalent to the Jersey term disregard. Thus, the Advisor in her report refers to Jersey's taper rate as 77%).

Low level of disregard compared to UK

For someone in Jersey on the minimum wage who increased their hours from 30 to 40 would keep just £16 of their additional £70 earnings on the basis of the 23% Jersey disregard – or just £1.60 per hour.

In the UK, if families only receive support with Tax Credits (no housing, council  tax  or  childcare  costs)  income  will  be  withdrawn  at  41%.  If  an individual works at the minimum wage of £7.20 they would therefore retain £42.48.[17]

101.  In section 3.4 of her report the Advisor examines how household incomes for those on Income

Support rises with additional earnings and what level of earnings would allow claimants to cease claiming Income Support and escape low income.

102.  Figure 1 and Table 17 in the Advisor's report shows the earnings and hours of work required

to leave Income Support, assuming individuals work at the minimum wage of £6.97 per hour. For all family types, the income required from earnings to move away from Income Support is high.

103.  For those in rental accommodation unrealistically long working hours are required to leave

Income Support for those on low, or even moderate, wages. For lower skilled families with childcare costs or additional care needs the income required to leave Income Support is even higher.

• For a single parent with one child in rental accommodation weekly earnings of £575 a week are required to leave Income Support or annual earnings of £30,000. At the minimum wage, this would require a working week of 82 hours;
• For a single parent with two children in rental accommodation earnings of £658 are required to leave Income Support, or annual earnings of £34,200. At the minimum wage this would require a working week of 94 hours;
• For couples with two children in rental accommodation earning of £778 a week are required, or an annual income of £40,000, or 111 hours of work at the minimum wage.

104.  Those with child care costs or more than one child, and those with additional care needs, are

likely to find it particularly hard to leave Income Support.

105.  Current Income Support components for those with no alternative source of income are

inadequate for families to escape from Relative Low Income. While for some this may be a transitory  position  (for  example  those  who  are  temporarily  unemployed),  for  others  the implications  may  be  much  more  serious,  in  particular,  for  those  for  whom  there  is  no expectation of work – single parents with young children and those unable to work for health reasons.

WTC system). The IFS suggests a wide range of MTRs, but that once Universal Credit is introduced they estimate that the average MTR will be 54% (with much higher rates for some, and lower rates for others, see http://www.ifs.org.uk/uploads/gb/gb2016/gb2016ch10.pdf pP253/254). Therefore, on average, for an extra 10 hours work individuals would be expected to gain £33.12. The Department commented that if making comparisons with the UK, the universal credit taper rate of 65% would be a more direct comparison. Our advisor informed us that this is only true in so far as the design of the IS system more closely resembles UC. However, UC is only currently claimed by 300,000 single individuals without complex needs (which includes those with children or disabilities). In contrast there are 4 million claiming tax credits. Which comparison is most apt depends on whether you wish to compare the situation of the majority of claimants in the UK with those in Jersey, or to compare the design of the system of IS in Jersey with UC. Note UC is now planned to be rolled out by 2022 and its design has been subject to significant change since first proposed. Note too the complexity of the UK benefit system means there is no single disregard rate (under UC or WTC) – this depends on family circumstances (see footnote below). The IFS Study suggests an average marginal tax rate of 54% (or 46% disregard) under UC once other benefits are accounted for.

Source: Note from Advisor

106.  Children in one-parent families face particular difficulties in escaping from Income Support,

needing to earn £575 a week to leave Income Support (equivalent to 82 hours a week at the minimum wage). This assumes they have just one child and no childcare costs – for those with more children or paying for childcare earnings required are higher again.

107.  The more benefits are subject to means testing the greater the distortion of work incentives.

Including childcare costs in Income Support calculations make the earnings required to escape from Income Support very hard to achieve, particularly for single parents. An alternative model might, for example, pay for the full childcare costs for all those incomes below a certain threshold (e.g. for all those with household incomes under £50,000. It may also be desirable to  provide  some  tapered  support  for  those  with  higher  incomes).   This  would  enhance incentives for those with children to work (or to work more), and reward them more for doing so.

KEY FINDINGS