Inequitable treatment of Maternity Allowance in calculation of Universal Credit awards

Date Posted: Wednesday 18th November 2020

Dear  Secretary  of  State,

On  4  May,  the  Child  Poverty  Action  Group,  the  Fawcett  Society,  Gingerbread,  the  Women’s  Budget  Group   and  Maternity  Action  wrote  to  you,  urging  you  to  take  urgent  steps,  as  part  of  the  Government’s  response   to  the  COVID19 pandemic,  to  end  the  current  inequitable  treatment  of  Maternity  Allowance  in  the   calculation  of  Universal  Credit  awards by  the  DWP.

In  that  letter,  we  noted  that  this  unjustified  policy  anomaly  leaves  low-­‐income  mothers  in  receipt  of   Maternity  Allowance up  to  £5,000  worse  off  over  nine  months  of  maternity  leave,  relative  to  mothers  in   the  same  circumstances  who  qualify for  Statutory  Maternity  Pay  (SMP)  and  apply  for  Universal  Credit.  We   noted  that,  in  2019,  more  than  half  of  the  some 60,000  new  mothers  granted  Maternity  Allowance  also   applied  for  Universal  Credit.  And  we  warned  that  the  lockdown was  “almost  certain”  to  lead  to  an  increase   in  the  number  of  women  unexpectedly  failing  to  qualify  for  SMP,  and ending up  on  Maternity  Allowance.

On  6  July,  in  its  wide-­‐ranging  and  extensively  evidenced  report  on  the  impact  of  COVID19  on  maternity  and   parental leave,  the  Petitions  Committee  of  MPs  concluded  that:  The  unequal  treatment  of  two  schemes  designed  to  do  the  same thing  –  provide  support  to  new   mothers  during  their  maternity  leave  –  is  causing  real  hardship.  An  Early  Day  Motion signed  by  110   [now  118]  MPs  from  across  the  House  calls  for  this  “anomalous  injustice”  to  be  remedied  by   amending the  Universal  Credit  Regulations  2013.  The  Secretary  of  State  for  Work  and  Pensions  was   also  asked  about  it  in  the House  of  Commons  on  the  4  May,  and  agreed  to  look  into  it,  but  no  action   has  been  forthcoming.  It  should  cost  only £45  million  [per  year]  to  address  this  anomaly,  once   Universal  Credit  has  been  fully  rolled  out.

This  represents  less  than  0.07%  of  the  £65.5  billion  that   the  Department  for  Work  and  Pensions  are  forecast  to  spend on  Universal  Credit  and  legacy   equivalents  in  2020/21.  As  a  matter  of  urgency  the  Government  should  consider whether  Maternity  Allowance  should  be  considered  as  earnings  in  the  same  way  as  Statutory  Maternity   Pay  and  should not  lead  to  deductions  from  Universal  Credit.

The  hardship  identified  by  the  Committee  is  indeed  real,  and  disconcerting,  given  the  Government’s  stated   commitment  to  support  the  least  well-­‐off  during  the  pandemic.  For  example:  Abigail  (not  her  real  name)  is  a  single  parent  who decided  to  re-­‐train  as  a  teacher  after  being  made   redundant  from  her  human  resources  job  in  2018.  On  top  of  her full-­‐time  teacher  training,  which   involved  working  in  a  school  on  a  bursary,  Abigail  took  on  work  in  a  restaurant  in  the evenings  and   weekends.  Then,  having  become  pregnant  in  December  2018,  Abigail  claimed  and  was  granted   Maternity Allowance  of  £148.68  per  week  (£644.28  per  month)  from  August  2019.

As  her  outgoings  had  increased  following  the  birth  of  her  baby,  Abigail  also  applied  for  Universal   Credit.  The  DWP calculated  Abigail’s  Universal  Credit  award  to  be  £826.57  per  month,  but  then   deducted  her  Maternity  Allowance  pound for  pound  from  that  sum,  reducing  the  award  to  just   £182.29  per  month.  At  that  point,  Abigail  sought  advice  from Maternity  Action,  and  her  MP.  Had  Abigail  been  able  to  work  more  hours  and  so  qualify  for  Statutory  Maternity  Pay (SMP)  of   £644.28  per  month  (i.e.  the  same  rate  as  Maternity  Allowance),  all  but  £89.00  of  that  SMP  would   have  been disregarded  by  the  DWP  under  the  Work  Allowance  and  63%  excess  earnings  taper  rate,   and  her  Universal  Credit award  would  have  been  £737.57  per  month.

In  short,  because  she  was  on  Maternity  Allowance,  Abigail  and  her  two  young  children  were   £555.28  per  month  worse off  than  if  she  had  been  on  SMP.  Over  39  weeks  of  maternity  leave,  that   is  a  total  difference  of  £4,997.52.   Accordingly,  and  not  withstanding  the  High  Court’s  recent  ruling  in  Moore  v  Secretary  of  State  for  Work  &   Pensions [2020]  EWHC  2827  (Admin),  we  urge  you  to  reconsider  your  position  on  this  issue,  and  urgently   amend  the  Universal Credit  Regulations  2013  in  line  with  the  Petition  Committee’s  recommendation,  so   that  Maternity  Allowance  is  treated  in the  same  way  as  SMP  in  the  calculation  of  Universal  Credit  awards,   with  claimants  on  Maternity  Allowance  benefiting from  the  Work  Allowance  and  63%  earnings  taper  rate.

We  are  copying  this  letter  to  the  Chancellor,  to  Liz  Truss,  in  her  capacity  as  Minister  for  Equalities,  and  to   the  Chairs of  the  Petitions,  Women  &  Equalities,  and  Work  &  Pensions  Committees  of  MPs.

Yours  faithfully,

Rosalind Bragg – Director,  Maternity  Action

Sam Smethers – Chief  Executive, Fawcett  Society

Victoria  Benson- Chief  Executive, Gingerbread

Angela  McConville – Chief  Executive, NCT

Dr Mary-­Ann Stephenson- Director, Women’s Budget Group

Jane Van  Zyl- Director, Chief  Executive,  Working  Families