Shetland’s Commission on
Tackling Inequalities
Session 2: Household Finances
24th August, 2015
Introductory Session
• Welcome and Apologies
• Note of Last Meeting
– Approval
– Matters Arising
• Terms of Reference: for approval
• Report of Session 1
• Media Q & A
Purpose of Session 2
• To hear evidence about the challenges faced
by households in Shetland on a low income
• To discuss and understand this evidence, and
develop solutions to issues faced
• Ongoing business of Commission
Household Finances
An Introduction
Household Finances
• Income
– Benefits
– Earnings (Salary / Self-Employment)
• Expenditure / Outgoings
–
–
–
–
–
–
–
–
–
–
–
Housing
Food and Drink
Clothing
Household Goods
Health and Personal Care
Communications and Technology
Social and Cultural Participation
Transport
Household Fuel
Childcare
Debt Repayments
Individual Income in
Shetland: 2015
Weekly
Monthly
Annual
JSA, income-based (18-24) (2013/14)
57.90
251.86
3,022.38
JSA, income-based (25+) (2013/14)
73.10
317.98
3,815.82
JSA, contribution-based (similar to ESA,
support group) (2013/14)
109.00
474.15
5,689.80
ESA, work-related (2013/14)
102.15
444.35
5,332.23
Minimum Wage, 37 hours (2013)
233.47
1,015.60
12,187.13
Living Wage, 37 hours
283.05
1,231.27
14,775.21
Full time, Mean (2013)
506.95
2,205.25
26,463.01
Household Income in
Shetland: 2010 & 2014
Bottom 10%
Bottom 10-20%
Top 80-90%
Top 90%
2010
2014
£0-£9,261.71
£0-£9,175.49
£9,261.71-£14,487.32
£9,175.49-£13,564.13
£52,058.26-£68,609.54
£50,864.80-£66,225.45
£68,609.54 or more
£66,225.45 or more
Ratio between top earner of bottom 10% and bottom earner of top 10%: 7.2
Ration between top earner of bottom 20% and bottom earner of top 20%: 3.7
Household Income in
Shetland: comparison with
elsewhere
Mean Income
Median Income
Lowest Quartile
Aberdeen City
£38,612
£30,321
£16,117
Aberdeenshire
£42,422
£34,362
£18,421
Eilean Siar
£30,117
£24,159
£13,734
Glasgow City
£30,667
£23,167
£12,781
Highland
£32,721
£26,333
£14,644
Orkney
£29,808
£24,236
£13,791
Shetland
£33,934
£28,068
£15,697
Scotland
£34,619
£26,992
£14,659
UK
£36,400
£28,621
£15,423
Poverty Levels in
Shetland
Relative poverty equates to a household income
which is less than 60% of the UK average
Severe poverty equates to a household income
which is less than 50% of the UK average
Extreme poverty equates to a household
income which is less than 40% of the UK average
In Scotland, living in relative poverty if you are a
single person means a household income of £9,200 per
year; for a couple with two children, you have a
household income of £21,000.
Poverty Levels in
Shetland
Shetland’s Mean Household Income is £33,934.23
Relative
Poverty
Severe
Poverty
Extreme
Poverty
Calculation
Annual
Income
Number of
Households
60% of
£33,934.23
50% of
£33,934.23
40% of
£33,934.23
£20,360.54
3700
£16,967.11
2906
£13,573.69
2087
Numbers on a
Low Income
Locality
Lived in
Properties
Considered
Low
Income
%
Considered
Low
Income
Social
Rented
Lived in
Properties
West
735
80
11%
110
43
39%
South
1693
135
8%
231
72
31%
North
Mainland
1411
167
12%
360
109
30%
North
Isles
1217
166
14%
224
84
38%
Lerwick &
Bressay
3426
623
18%
1295
559
43%
Central
Mainland
1694
85
5%
300
45
15%
11010
1256
12%
2520
912
36%
TOTAL
Considered
%
Low Considered
Income Low Income
Household Outgoings
Weekly Food Basket, by Area Type
(MIS)
£57.44
£43.48
£40.67
£40.98
£40.75
B) Accessible
settlement
C) Inaccessible
mainland
settlement
£36.91
English rural
town
A) Remote
Scottish town
D) Less accessible
island
settlement,
E) Remote island
settlement
MIS – additional costs
Household Outgoings
Weekly Food Basket, by Area Type (MIS)
Household Outgoings
% of MIS
140
Income Relative
to MIS (Single
Person)
MIS
120
100
English urban
80
Highland town
60
Remote island settlement
40
20
0
Income Support
Minimum Wage
Average earnings
Use of MIS .....
• To calculate Shetland’s Living Wage:
– £8.63 to £10.99
England urban,
£198 (£7.85)
England rural
town, £214
English hamlet,
£245
Highland town,
£265 (£10.52)
Highland
settlement,
£271 (£10.75)
Island
settlement,
£277 (£10.99)
Challenges Faced in Shetland
Focusing on Those with the Lowest
Income
The UK Benefit System
• Many different benefits
– Majority are currently responsibility of UK
Government
– Complex / Serve different purposes
• Employment Status / Income
– Out of Work: e.g. Job Seekers Allowance / Employment Support
Allowance
– In Work: Tax Credits
– Housing Costs: Rent / Council Tax
– Universal Credit
• Disability: Disability Living Allowance / Personal
Independence Payment
• Age: Pensions / Pension Credit / Cold Weather Payments
17
The UK Benefit System
• Weekly Income for Key Benefits, 2015/16
– JSA:
• Single / Lone Parent, Under £25: £57.90
• Single / Lone Parent, 25 or over: £73.10
– ESA / Income Support
• similar to above
– Severe Disablement Allowance:
• Basic Rate: £74.65
– State Pension: £115.95
– Pension Credit:
• Single: £151.20
• Couple: £230.85
18
19
DWP Annual Report and Accounts 2014 - 2015
Welfare Spend
Ref:
Universal Credit
Universal Credit helps to ensure people are better off in work than on benefits by:
•
Removing the limit to the number of hours someone can work each week
•
Reducing a claimant’s Universal Credit payment gradually as their earnings
increase, so they won’t lose all their benefits at once if they’re on a low
income
Universal Credit
•
•
•
•
•
Income-based Jobseeker’s Allowance
Income-related Employment and Support Allowance
Income Support
Working Tax Credit
Child Tax Credit
•
Housing Benefit
21
Universal Credit:
key differences
•
•
•
•
•
Available to people who are in work and on a low income, as
well as to those who are out-of-work
Most will apply online and manage their claim through an online
account (still being developed)
Will be responsive: as people on low incomes move in and out of
work, they will get on-going support
Most claimants on low incomes will still be paid UC when they
first start a new job or increase their part-time hours
Claimants will receive a single monthly household payment, paid
into a bank account in the same way as a monthly salary;
support with housing costs will usually go direct to the claimant
as part of their monthly payment
22
Universal Credit:
the claim process
People will usually make a claim for Universal Credit
on-line at https://www.gov.uk/apply-universal-credit
during which initial claim verification will take place.
After making a claim, claimants will attend an
interview with their Work Coach at the jobcentre,
eligibility for Universal Credit will be confirmed, and
the claimant will accept a Claimant Commitment.
23
Universal Credit:
the claim process
To receive Universal Credit, claimants will need to accept a Claimant
Commitment.
In most cases a Claimant Commitment will be drawn up during a
conversation with a JCP Work Coach.
The Claimant Commitment will set out what a claimant agrees to do to
prepare for and look for work, or to increase their earnings if they are
already working. It will be based on personal circumstances and will be
reviewed and updated on an on-going basis.
Jobcentre Plus Work Coaches will give claimants all the support they need
to prepare for work, move into work, or to earn more.
24
Universal Credit:
in Shetland
Preparations and Ongoing Work:
Delivery Partnership Agreement between DWP & SIC
In place to mitigate the effects of the introduction of Universal Credit and
includes :
• Personal Budgeting Support (including debt management)
• Digital On-line support
• Administration of Housing Element
Universal Credit Operations Forum: DWP, SIC, Hjaltland Housing Association
In place to address local DPA issues, the Forum:
• Meet regularly
• Monitor claim numbers
• Progress local administration issues
• Agree Citizen communications
25
Universal Credit:
in Shetland, since
11th May 2015
• Initially for single “jobseekers” only – this will increase during
national roll-out to couples and families
• Claims made = 35
• Of 35 claims made, claimants not receiving top-up payment of
Universal Credit = 7 (started or increased work)
• Referrals to Personal Budgeting Support = 1
• Housing Element of UC in payment = 7
26
Number of Claimants in
Shetland
Oct 14
Jan 15
Apr 15
Jul 15*
JSA
107
83
118
109
ESA (Total)
590
618
N/A
601
ESA (WRAG)
120
118
N/A
107
Lone Parents
N/A
62
56
45
27
Challenges to Accessing the
Benefit System
Budgeting Difficulties
• Monthly payment
• Includes housing costs
• Delay in initial payment (normally 5 weeks)
• More difficult to budget
• Increase in housing arrears
• Cycle of indebtedness
Digital by Default
•
•
•
•
•
Presumption that claimants will apply online
Presumption that claimants will carry out job-seeking online
Requires regular computer access and internet connection
Requires IT skills
Evidence that sanctions are being applied because of
problems accessing /using IT
• Adequacy of Universal Jobmatch?
• Digital exclusion is about more than access to hardware
Claimant Conditionality
• Claimants have to comply with a range of “conditions” to
keep their benefit
• “Looking for a job should be a job in itself” – claimant
can be required to evidence 35 hours weekly job-search
• Evidence of unrealistic conditions placed on people
• Not taking account of personal circumstances
• Are job search requirements genuinely supporting
people to find work?
• Sanctions = reduction in benefit paid, often to nil
• Sanctions are cumulative (can last for up to 3 yrs)
Room for Error
• System is new for all: DWP, claimants, local
authorities, housing associations, support
agencies
• Errors in processing of claims by DWP
• Misleading information from DWP, local
authorities, HMRC etc
• Good quality advice is crucial
Disabled People
•
•
•
•
Disabled people are hit hardest
Work Capability Assessment: nature of questions
People with mental health problems
PIP – aimed at reducing number of claimants across UK by half
a million
• Delays in assessment process: stress and financial hardship;
debt
• Knock on impacts for carers (who are already poorly
recognised and compensated); if disabled person does not get
PIP, unpaid carer will not get Carers Allowance
Children and Families
• Families with dependent children are one of the
biggest losers due to cumulative impact
• In particular, larger families e.g. no tax credit for 3rd
child
• Increasingly benefits provide bare minimum – can
miss out on educational/social opportunities
• Paid to one person in household - will the person
getting the money spend it to the benefit of the
whole family?
Not Enough to Live On
• National benefit levels – do not take account of cost of
living
• Benefit levels have been steadily reducing in real terms:
uprating reduced from RPI to CPI from 2011;
then 1% cap from 2013;
now 4 year freeze from 2016
• Scottish Government calculated in 2014 that impact of
cuts would mean £4 million loss to Shetland economy
per annum
Budget Tax and
Benefit Reforms
Measure
What is the Impact?
Freezing all working age
benefits and tax credits for four
years from 2016/17 to 2019/20
This will reduce the real terms value of the benefits received by most
working age recipients. This will affect the claimants of a wide range of
benefits in Scotland, including around 577,000 families who currently
receive child benefit.
From April 2016, reduction in
income thresholds in tax credits
and work allowances in
Universal Credit (UC)
This will reduce the amount of income an individual can earn before their
tax credits start to be withdrawn from £6,420 to £3,850. This reduces
incentives to work. Between 200,000 and 250,000 households in Scotland
will be affected.
Increase the tax credits taper
rate from 41% to 48% from April
2016
This increases the speed at which tax credits start to be withdrawn once an
individual earns over £3,850. A higher taper means that the rewards for an
individual from working more hours, or moving into work, are reduced.
Same number of households affected as for reduction in income thresholds.
Restrict eligibility for child tax
credit to the first two children,
from April 2017.
This will reduce the value of tax credits for future claimants with 3 or more
children. There are currently 50,000 households in Scotland with 3+ children
receiving tax credits.
From April 2017, those out of
work aged 18 to 21 making new
claims to Universal Credit will
no longer be entitled to the
housing element.
In Scotland there are currently 2,149 claimants aged between 18-21 on
Housing Benefit and JSA with no children. If they were all subject to these
new rules, the reduction in housing benefit in Scotland would be around
£4.5 million.
What Works
• Accessible, high quality advice (on benefits, debt,
employment etc)
• Tackle high levels of unclaimed benefit - stigma issue
• Income maximisation – £832,531 client financial gain in
Shetland in 2014/15
• Many people need support to apply and challenge
• Holistic approach and referrals for other support
• Small, easy to access grants for families
• Highlighting social policy issues, eg ESA delays
In-Work Poverty
Get a Job
• Work is not a guaranteed route out of poverty
• The majority of working-age adults in poverty in
Scotland are living in working households (52%)
Particular problems for:
• Those with additional barriers to getting (full time)
work - disabled people, lone parents, carers
• Young people - not eligible for minimum wage
increase
• Self employed people on low incomes – UC assumes
they are earning 35 x minimum wage
In-Work poverty
Why?
• Low wages
• High cost of living, even higher in Shetland
• Also high cost of working
• Cost of childcare or lack of childcare
• Zero Hours contracts
• Part time working
• Gaps in in-work benefits
• Cuts to tax credits
Shetland’s Wages?
• We know median wage
• We know some folk are earning very high wages
• We know 700 households receive benefits due to low
income
But we don’t know:
• Number on Minimum Wage
• Number below Living Wage
• Number below Minimum Income Standard
• Number on Zero Hours contracts
Not Working Hard Enough?
• Claimant conditionality will also apply to those in work –
if earning less than 35 hours x minimum wage, will be
expected to seek more hours/higher pay
• Likely to affect women more than men (more likely to be
working part time, on lower wage)
• What about folk who can just manage limited hours health issues; caring responsibilities; transport problems
• May lead to under-claiming
• Barriers to employment – childcare, transport, skills and
experience; mental and physical health problems
Reaching Out
• Partnership working to reach most vulnerable (whether in
work or out of work)
With NHS
With support organisations
• Benefits of approach recognised by all
• Strategic support is not enough; need ongoing buy-in from
busy practitioners
• Outreach provision: takes time to establish
• Being there is not enough
• Direct referral works
• Scope to develop ...
Q&A
Hubert Hunter, DWP
Karen Eunson, CAB
Catherine Harper, CAB
Debt and Money Management
Who is in Debt?
• There is no stereotypical debt client.
Carer (inc. family)
Employment
8%
1%
6%
Full-time employed
6%
Ill health/disability
3%
33%
Part time employed
13%
Retired
School/Higher/Further Education
Self employed
30%
Unemployed-seeking work
Who is in Debt?
£6,000 or less
Income
7% 2%
£6,001 - £10,000
7%
24%
£10,001 - £15,000
4%
£15,001 - £20,000
5%
24%
£20,001 - £25,000
£25,001 - £30,000
27%
£30,001 - £40,000
Over £40,000
Who is in Debt?
Health
4%
6% 3%
17%
17%
53%
Learning disabilty
Long term illness
Mental ill health
None
Other (inc. addiction)
Physical disability
Who is in Debt?
1%
9%
3%
Housing
Homeless
12%
Not householder
31%
Owner-Occupier
Rent - Local
Authority
Rent - Social
Landlord
Rent - Private Rent
44%
Why do People get
into Debt?
•
•
•
•
•
•
•
•
•
•
Relationship Breakdown
Employment Issues
Illness / Disability
Having Children
Retirement
Becoming a Student
Leaving Home / First Tenancy
Addiction – alcohol / drugs / gambling
Money Mismanagement / Inability to Budget
High Cost of Living
What Debts do They Have?
£350,000.00
£300,000.00
£250,000.00
£200,000.00
2014/15
£150,000.00
2013/14
£100,000.00
£50,000.00
£-
Bank loan Credit card
Rent
Council
Tax
Store
credit
Utilities
Income
Tax
Other
What is the Impact of Debt?
•
•
•
•
•
•
•
Financial hardship / Fuel poverty
Housing arrears; homelessness
Physical and mental health problems
Absence from work; unemployment
Social isolation
Impact on relationships and wider family
Difficulties getting credit in future
67% of our
clients were
having
difficulty
sleeping
61% said debt problems
were impacting on their
physical health
44% were having
mental health
problems as a
result
50% were unable to manage their money
How We Help
• Identify all of the debts they currently owe and the
creditors to whom they are indebted
• Check if they have received Court papers
• Identify Priority and Non-Priority debts
• Produce income and expenditure calculations
• Maximise their income
• Identify any affordable disposable income
How We Help
•
•
•
•
•
Discuss options available
Negotiate repayment plans with creditors
Negotiate to stop interest and charges being added
Carry out regular reviews
Access legal remedies available - Debt Arrangement Scheme
(DAS) & Bankruptcy
• Impartial and confidential advice; independent of creditors –
especially important in small community
Not Just About Crisis
• Support with managing money: income and
expenditure
• Taking control and planning
• For individuals e.g. at times of change
• For groups – we are working to develop financial
education programmes for young people
• Working closely with Credit Union; encourages saving
and provides access to affordable credit when it is
needed
What Works
• Early referrals through CAB advisers; through links
with SIC Housing and Hjaltland; developing links with
NHS
• Face-to-face support: taking time; removing stigma;
applying appropriate remedies; negotiating on
client’s behalf
• Holistic approach: income maximisation
• Referrals to CAB’s Money Adviser
• Referrals to Credit Union – access to affordable credit
What is the Cost for Shetland
of not Providing Debt Advice
• Negative impact on individuals
• Loss of revenue from payments of council tax and
increase in rent arrears
• Lower rate support grant due to lower levels of welfare
benefits being claimed
• Increased costs in dealing with evictions, re-housing,
homelessness
• Negative impacts on health and well-being for families;
additional costs to health and social care
• Negative effects on local economy due to debts not being
paid to local businesses and disposable income being
reduced
Food Poverty
Food Poverty in Shetland
• There are two main types of food poverty in
Shetland:
– people who cannot afford to eat, usually as result
of a short term crisis;
– people who cannot afford to eat enough and/or
healthily.
59
Food Poverty in Shetland:
Statistics
Year
Total
No. / Month
2011*
38
8
2012
163
13.5
2013
268
22.3
2014
283
23.6
2015**
178
29.7
* August to end of December
** January to end of June
60
Food Poverty in Shetland:
Why?
Some examples:
• Sanctions
• Fuel Bills
• Mental Ill-health
• Travel to Appointments
• Illness
• Recently out of hospital or prison
61
Food Poverty in Shetland:
Why?
• Cost of Living for Essential Items
• Cost of Travel if Living in Remote Areas
• Cost of Pre-Payment Meters
62
Food Poverty in Shetland:
How?
• Referrals (96% last year)
• Parcel
– 1 Week
– Approx £50
– Quickly Heated
• Cost of Fresh Fruit and Vegetables
63
Q&A
Hubert Hunter, DWP
Karen Eunson, CAB
Vivienne Tulloch, CAB
Angela Nunn, Salvation Army
Solutions & Challenges
Solutions
• Recognising the Needs of the Most Vulnerable
– Debt Advice / Money Advice
– Education / Early Intervention
– Communication
– Access
Solutions
• Enabling older people to access cheaper
goods, through access to internet (links with
intergenerational activity)
• Provision of Broadband, readily accessible
(including not too technological + skills)
• Collaborative purchase of food / co-ops
67
Challenges
• Reducing Public Sector Resources
• Increase Household Incomes by Payment of
Higher Wages, e.g. Living Wage
• Enable Parents to More Readily Work:
Provision of Affordable Childcare Tailored to
Needs of Parents
• Reduce Transport Costs and Time Travelling:
Employment Closer to Home / at Home /
Flexible Working
68
Questions for Session
• What are the inequalities? (including age, gender, opportunities etc.)
• What is the impact on individuals, households and communities of these
inequalities? Think about inequality of opportunity, too.
• What is the impact on Shetland, thinking about the economy, society
(including health, housing and crime), and environment?
• What are the big issues, and key challenges in terms of Shetland’s
inequalities?
• What is the root cause / or causes of these inequalities?
• What needs to be achieved to overcome these issues and challenges?
What needs to be achieved to mitigate?
• What are the solutions?
• What would you like to know more about?
Developing
Recommendations
• Feedback
• Discussion
• Proposed Recommendations
Next Steps
• Outputs: Note / Report
• Media Q & A
• 21st September, 1pm, Islesburgh
• 28th October, North Isles?