HC 576 - Progress towards the implementation of Universal Credit

Supplementary written evidence submitted by the Women’s Budget Group

1. More frequent payments of universal credit

1.1 In limited situations, the government has acknowledged that some people, in addition to budgeting support and access to financial products, will be likely to need more frequent payments of universal credit than the usual payment monthly in arrears. At the time of writing, it is not yet clear how many people are envisaged to need these, and details about how they might work have not yet been published. But the monthly assessment which will be the norm for universal credit (see 2. below) clearly limits the options. The most likely frequency for exceptions is probably twice monthly, so this is what is assumed below; this is not the same as fortnightly, because universal credit will operate on calendar months rather than 4 weeks. Normally payment is likely to be made 7 days after the end of the month.

1.2 It is assumed that, separately from this, some claimants will be given an advance payment of universal credit in the first month of entitlement, as otherwise they will not be able to meet their commitments; this is not discussed here. Instead, it is envisaged that a claimant may have been on universal credit for some time, but is finding monthly payments difficult, even with the help of budgeting support and access to financial products, and it has been decided that they can at least temporarily have more frequent payments. The two major possibilities, given monthly assessment, are half the payment made in advance, or half withheld and paid later. In the first case, half the payment could be made (eg) a few days after the end of the first fortnight of the assessment month, and the rest as planned 7 days after the end of that month. In the second, half the payment could be made 7 days after the end of the month, and then half another half-month later. Each of these has implications - the first in particular for the administrative authorities, and the second in particular for claimants.

1.3 If people are paid half their monthly payment in advance, ie half way through the relevant month, this would be an interim ‘down payment’, as all the relevant circumstances would not always be known then. This would therefore have to be corrected if necessary in the second half payment; and this would presumably have to be repeated each month. This outcome would seem contrary to the government's wish to avoid the under- and over-payments that dogged tax credits. But on balance, it would seem preferable for most claimants to half the payment being withheld.

1.4 Alternatively, claimants would be paid only half of what they are owed for the month 7 days after the end of that month, and then would wait another half month for the remaining half This would seem to contradict the government's wish to help those who find monthly payment most difficult, and could result in hardship cases and requests for advance payments (and adverse publicity for the scheme).

1.5 It is important for the sake of claimants that the arrangements for exceptional payments are clarified. In addition, if the government pursues the option put forward in the Women’s Budget Group’s evidence to the Select Committee - of amending the draft regulations to allow the choice of more frequent payment for all claimants who would prefer this - these arrangements would clearly apply to larger numbers of claimants and clarification is crucial. The monthly assessment element of universal credit design limits the options. But on balance we believe payment of half the payment in advance is preferable to withholding half, and that claimants should be free to choose twice monthly payments (as set out in our original written submission).

2. Monthly assessment and the ‘whole month’ approach to changes of circumstances

2.1 Monthly assessment for universal credit, and the ‘whole month approach’ to changes of circumstances, were not discussed in detail during parliamentary debates on the Welfare Reform Act 2012. Their implications have only been fully realised on publication of the Explanatory Memorandum for the Social Security Advisory Committee about the draft regulations on decision-making and appeals. This note therefore also discusses these.

2.2 Monthly assessment for universal credit will, firstly, mean that if someone is entitled for less than a month, they will not receive any universal credit for that month. (This seems, for example, as though it would affect someone who gets a job towards the end of a month taking them out of entitlement.) Secondly, the whole month approach to changes of circumstances means that such changes will be applied to the month as a whole, rather than just to the part remaining after the change on a pro rata basis. The situation that obtains on the final day of the month will determine the amount of payment for the previous month as a whole. This will be an advantage for some, if (for example) they have a new baby towards the end of their universal credit month, as it will be assumed that the baby was born at the beginning of the month, so additional needs will be assumed and extra benefit paid for the whole month. But for others, this approach will have the opposite effect. For example, if a dependent teenage daughter turns 18 and leaves home towards the end of the month, she will be treated for universal credit purposes as though she had left at the beginning of it, despite the claimant having had to feed her for most of the month.

2.3 This will mean that the amounts people are paid in universal credit do not bear the same close relationship to their circumstances as means-tested benefits and tax credits do currently, because any change will be deemed to apply for the whole month regardless of when it occurs. In addition, it seems that the decision letter about how any changes of circumstances affect the amount of universal credit paid - either positively or negatively - is not going to be sent until the end of the month to which it applies. Yet we know that claimants are going to be encouraged to budget monthly, arrange direct debits with payments on fixed dates, or set up ‘jam jar’ or other accounts to siphon off parts of their universal credit for different purposes (etc.). This is not a minor element of the system likely to affect few people; it is clear both from the experience of tax credits, and from research by the Centre for Analysis of Social Exclusion, that many claimants living on low incomes have very frequent changes of circumstances.

2.4 By adopting a whole month approach to changes of circumstances for universal credit, the government may avoid administrative comple xity, and (it may hope) the adverse publicity accompanying under- and over-payments of tax credits. Yet in practice these under- and over-payments will still exist. They will just go unrecognised, because they will be borne by the claimants of universal credit, which will be much less responsive to changes in their lives.

3. Conclusion

As was made clear in our previous briefings (see www.wbg.org.uk - Briefings), while we are concerned with effects on the household budget as a whole, we are also concerned about the specific implications of monthly payments of universal credit for women, who in low income families often have the major responsibility for household budgeting and managing debt, and who often bear the costs of trying to make ends meet. The arrangements for more frequent payment, monthly assessment and the whole month approach to changes of circumstances are also therefore more likely to affect women.

1 November 2012

Prepared 6th November 2012