Impact assessment

Equality Analysis: Raising the Administrative Earnings Threshold (Spring Budget 2023 announcement)

Published 17 April 2023

Introduction

This document records the analysis undertaken by the Department to enable Ministers to fulfil the requirements placed on them by the Public Sector Equality Duty (PSED) as set out in section 149 of the Equality Act 2010.

The PSED requires the Minister to pay due regard to the need to:

• eliminate unlawful discrimination, harassment and victimisation and other conduct prohibited by the Act.
• advance equality of opportunity between people who share a protected characteristic and those who do not; and
• foster good relations between people who share a protected characteristic and those who do not.

In undertaking the analysis that underpins this document, where applicable, the Department has also considered the United Nations Convention on the Rights of Persons with Disabilities (CRPD) and the United Nations Convention on the Rights of the Child (UNCRC)/ the United Nations Convention on the Elimination of all forms of Discrimination against Women (CEDAW).

The Protected characteristics are:

• age
• disability
• gender reassignment
• pregnancy and maternity
• race
• religion or belief
• gender
• sexual orientation; and
• marriage and civil partnership

People in the Light Touch regime can be required to attend Work Focussed Interviews and undertake Work Preparation activities. At present, claimants in the Light Touch regime can engage with work coach on a voluntary basis but are not required to engage with the Jobcentre on a mandatory basis.

The original policy intent of UC is to not only support out of work claimants to move into employment, but also to support working claimants to progress and increase their earnings. The intensity of labour market support provided by Jobcentre Plus is primarily dependent on the earnings of the claimant and/or their partner and is defined by two thresholds.

1. The administrative earnings threshold (AET) is the lower threshold. It is set in regulations at an individual or household level. The AET ensures that   claimants with no income or on a very low income receive the most intensive support.

2. The conditionality earnings threshold (CET) is a flexible threshold which is calculated based on the number of hours an individual claimant can reasonably be expected to undertake work or work-related activities based on their circumstances. In most cases, it is set at the rate equivalent to working 35 hours at the National Living Wage (NLW), but this can be adjusted to take account of health conditions or caring responsibilities.

Claimant or household earnings usually place working UC claimants (and their partners) in one of three labour market regimes:

• Intensive Work Search (IWS) regime - earning less than their AET
• Light Touch regime - earning at or above their AET but below their CET.
• Working Enough regime - earning above their CET.

Those in the IWS regime are required to accept a Claimant Commitment agreeing work search requirements and work availability requirements as well as Work Preparation and Work-Focused interview requirements1. They receive regular personalised support from a work coach.

People in the Light Touch regime can be required to attend Work Focussed Interviews and undertake Work Preparation activities. At present, claimants in the Light Touch regime can engage with work coaches on a voluntary basis. However, from September 2023 onwards, claimants in Light Touch will be required to attend regular Work Focussed Interviews and undertake Work Preparation activities.

Claimants in the Working Enough regime have no conditionality requirements applied and do not receive routine work coach support, although they can engage with work coaches on a voluntary basis.

Policy summary

The policy at present

On 26th September 2022, the AET was raised from £355 to £494 (PCM) for an individual claimant and from £567 to £782 (PCM) for couples. This meant the AET was equivalent to an individual claimant earning the NLW working around 12 hours per week and the claimants in a couple working 19 hrs per week.

The Government announced its intention to further increase the AET as part of the Growth Plan in Autumn 2022. On 30th January 2023 Regulation 99 (6) of the Universal Credit Regulations 2013 was amended to raise the AET to £617 for single claimants and £988 for couples from January 2023. This is equivalent to an individual working 15 hours per week at the NLW or the claimants in a couple working a total of 24 hours per week at the NLW.

As explained above, those earning below the AET are in the IWS regime, whereas those earning above the AET and below their CET are in LT.

The proposed change

The proposed change is to amend Regulation 99 (6) of the Universal Credit Regulations 2013 to raise the AET to £812 for individual claimants and £1,309 for couples. This is equivalent to an individual working 18 hours per week at the NLW or the claimants in a couple working a total of 29 hours per week at the NLW. The timing of the change has not yet been decided and depends on a deliverability assessment. However, the Policy Costing Note works on the assumption of an autumn implementation date.

Policy rationale

The purpose of raising the AET is to ensure that more UC claimants on low incomes are provided with regular Work Coach support to help them grow their earnings at a time of cost-of-living pressures, large labour force vacancies and high levels of economic inactivity.

Increasing the AET further complements our new In-Work Progression offer, which is going live this year across the country. It aligns with the plan which was brought forward at the 2022 Autumn Statement where the Chancellor announced that a new conditionality regime for Light Touch claimants will start from September 2023.

The further increase to the AET will bring an estimated 110,000 more claimants into the Intensive Work Search (IWS) regime from the Light Touch regime. Our Work Coaches will review and agree new Claimant Commitments, providing more support and setting appropriate requirements to help them access opportunities to increase their earnings.

Further widening JCP support will also help to increase and upskill the labour market force meaning more claimants are supported to increase their earnings and decrease their reliance on the UC support that they require.

This policy change will not alter existing procedures that are in place to protect those with individual circumstances such as those with health and/or caring responsibilities and who are therefore limited to certain working commitments.

High Level EA

Does the policy have a disproportionate impact (positive or negative) on any group which share a protected characteristic? What forms of mitigation can be applied to lessen the impact? Please confirm where these will be applied. Where a difference of treatment is identified, please provide a high-level justification for it.

The impact of raising the AET on claimants with protected characteristics are addressed below.

Age

Based on ONS 2020 population estimates of the UK working age population, 16.9 percent are aged between 16-24, 52.1 percent are between 25-49, and 31.0 percent are 50-64^{[footnote 1]}.

1. Table 1 shows the age breakdown of pre- and post-measure Light Touch caseload and the composition of AET movers into IWS because of the AET change.

Table 1^{[footnote 2]}

Light Touch Caseload

	Pre-measure (percent)	Post-measure (percent)
16-24	3.1	2.8
25-49	73.3	72.9
50+	23.5	24.1
Unknown/Missing	0.1	0.2
Total	100	100

Composition of AET movers into IWS

	Out of those moved into IWS (percent)	Likelihood of moving into IWS (percent)
16-24	3.8	30.2
25-49	74.3	24.2
50+	21.7	22.2
Unknown/Missing	0.1	17.5
Total	100	24

Column totals may not add up to 100 percent due to rounding.

The overall likelihood of moving from Light Touch into IWS group as a result of the AET change is around 24 percent.

Young people under 23, who are not entitled to the NLW, along with those on a lower NMW, will have to work more hours to reach the AET. Claimants who are aged 16-24 comprises a larger proportion of those moved into IWS (3.8 percent) than in the pre-measure Light Touch caseload (3.1 percent). As such, this group of claimants has the highest likelihood of moving into IWS because of the AET change (30 per cent) in comparison to other age groups and the overall likelihood (24 percent).

To illustrate, an individual aged 18 on the 2023 National Minimum Wage rate working 18 hours per week will be earning £584 per month – not enough to exceed the AET. They would need to work the equivalent of over 25 hours per week in order to surpass the AET.

An individual aged 17 on the 2023 National Minimum Wage rate working 18 hours per week will be earning £412. - again, not enough to exceed the AET. If their CET is the default 35 hours per week, it will be £800. That means the CET for this individual will be lower than the AET at £812. This illustrates the fact that 16/17 year olds will never enter the Light Touch regime as they will either be in IWS (if their earnings are below the AET) or in Working Enough (once their earnings have hit their CET).

UC is designed around earnings rather than hours worked, with the policy intent being to provide more regular support to claimants earning under that threshold (regardless of hours worked). We know that young people face particular challenges with regards to finding employment and progression, and regular, tailored work coach support can help mitigate this. We also know from administrative data that young people are more likely to enter work from the UC IWS group.

The measure will also bring more young people in scope of sanctions. However, Work Coaches will provide tailored job support and advice to meet these claimants’ individual circumstances. There is evidence from the sub-group analysis of the In-Work Progression randomised control trail that the younger age group (18-24) benefitted more from both the Frequent and Moderate interventions than other age groups.

Note on apprentices:

The standard Conditionality Earnings Threshold (CET, above which claimants are considered to be Working Enough) for apprentices is 30 hours (reflecting the Education and Skills Funding Agency guideline level) multiplied by National Minimum Wage Apprenticeships Rate of £5.28 (or higher for older apprentices). This equates to £686 per calendar month. Where an apprentice works fewer than 30 hours, the CET may be reduced. Claimants undertaking an apprenticeship are therefore unlikely to be affected by changes to the AET, nor are affected by the AET at its current level, as they have earnings from their apprenticeship sufficient for them to be placed in the Working Enough regime.

Sex

49.9 percent of the UK working age population are male, and 50.1 percent are female^{[footnote 3]}.

2. Table 2 shows the gender breakdown of pre- and post-measure Light Touch caseload and the composition of those who would move into the IWS group.

Table 2^{[footnote 4]}

Light Touch Caseload

	Pre-measure (percent)	Post-measure (percent)
Male	34.9	34.8
Female	64.7	64.8
Unknown/Missing	0.3	0.4
Total	100	100

Composition of AET movers into IWS

	Out of those moved into IWS (percent)	Likelihood of moving into IWS (percent)
Male	35.3	24.3
Female	64.5	23.9
Unknown/Missing	0.2	16.5
Total	100	24

Column totals may not add up to 100 percent due to rounding.

Women account for 64.7 and 64.8 percent of the pre- and post- measure Light Touch caseload respectively. Women account for 64.5 percent of those moved from Light Touch into IWS. Reflecting the fact that their shares among those moved to IWS are similar to their shares of the pre-measure caseload, women and men have a similar likelihood of being affected by this policy.

Disability

Only UC claimants who have declared a health condition and/or disability that doesn’t affect their ability to work or those awaiting a Work Capability Assessment (WCA) are affected by the change in AET. UC claimants who have been assessed as having limited capability for work (LCW) or having limited capability for work-related activity (LCWRA) are not affected. Our analysis shows that 1.5 percent of claimants who will leave Light Touch group because of the rise in AET are awaiting a Work Capability Assessment (WCA)^{[footnote 2]}.

Raising the AET will therefore result in more claimants who are awaiting for WCA being in the IWS regime, where they will benefit from intensive and tailored support from a work coach to help them progress in work. We know that people with health conditions/disabilities often have varied and complex needs when it comes to finding work, which regular work coach support can help with.

Like any other claimants in IWS, if claimants with a health condition or disability fail to comply with work-related requirements without good reason, they will be liable for a sanction.

In common with the general approach in relation to conditionality, any support will be tailored to an individual’s circumstances. Where a work coach identifies that a claimant’s medical condition is on-going, they will be referred for a work capability assessment at the appropriate point.

Parents

3. Table 3 below provides proportions of parents and lone-parents in pre- and post-measure Light Touch caseload and the composition of those who would move into the IWS group

Light Touch Caseload

	Pre-measure (percent)	Post-measure (percent)
Non-parents	28.9	28.7
Parents	71.1	71.3
Total	100	100
Of this total, percentage who are Lone Parents	32.5	30.1

Composition of AET movers into IWS

	Out of those moved into IWS (percent)	Likelihood of moving into IWS (percent)
Non-parents	29.8	24.7
Parents	70.2	23.8
Total	100	24
Of this total, percentage who are Lone Parents	40.2	29.7

Parents account for 71.1 and 71.3 percent of the pre- and post- measure Light Touch caseload respectively. Parents account for 70.2 percent of those moved from Light Touch into IWS. Non-parents account for 28.9 and 28.7 percent of the pre- and post- measure Light Touch caseload respectively. Since this group accounts for 29.8 percent of those moved from Light Touch into IWS, the likelihood of moving into IWS for non-parents (24.7 percent) is slightly higher than parents (23.8 percent).

In contrast, lone-parents make up 32.5 percent and 30.1 percent of the pre- and post-measure Light Touch caseload respectively. Since lone-parents account for 40.2 percent of those moved from Light Touch into IWS, this group has a higher likelihood (29.7 percent) of moving into IWS group.

Other protected characteristics

The Department has no evidence or reason to suspect that this policy change will disproportionately affect anyone based on the protected characteristics of their gender reassignment, marriage/civil partnership, pregnancy and maternity, race, region/belief or sexual orientation.

Sanctions

This change will mean more people are in a regime where they could be subject to sanctions, but it does not change sanctions policy. Sanctions are there to encourage engagement with Work Coaches and help people move into/progress in work. A Work Coach will only refer a claimant for a sanction if they do not comply with their agreed requirements without good reasons. Where a claimant cannot provide a good reason for not attending an appointment, then they will be referred for a sanction decision. Our decision makers take a holistic view of the claimant’s situation before a sanction is applied. For people with children this would include things such as unexpected unavoidable childcare duties, which would count as good reason (or a temporary easement applied if known about in advance).

Summary

To conclude, we have identified the adverse impact that young people and those not entitled to the adult NLW will have to work significantly more hours to reach the AET. Despite having identified this potential adverse impact, we consider it acceptable to move forward with the policy on the basis that the work coach support is designed to help – not penalise – claimants, and work coaches are trained to tailor all requirements to an individual’s situation. Furthermore, we will do more work to understand the characteristics of the young people likely to be impacted by this change.

Lead Analyst Sign off

[Redacted]

Legal Lead Sign-Off

[Redacted]

SCS Policy Sign-off

[Redacted]

1. Analysis of population estimates tool for UK, Office for National Statistics, 2021. ↩

2. Analysis of internal UC data, November 2022. ↩ ↩²

3. Analysis of population estimates tool for UK, Office for National Statistics, 2021. ↩

4. Analysis of internal UC data, November 2022. ↩