Universal Credit: the six week wait Contents

Universal Credit: the six week wait

Universal Credit

1.Universal Credit has great merits as an idea. It aims to:

It rightly has support in principle from across the political spectrum. Implemented properly, Universal Credit has the potential to have a genuinely transformative effect on the labour market and make a valuable contribution to reducing poverty. This makes it all the more important to get it right.

2.Universal Credit is a radical departure from the existing welfare system. Its full success is dependent on cultural change among Jobcentre staff, claimants and employers alike.2 It is also a hugely ambitious IT project. In such circumstances, it is inevitable that things will go wrong. The Department for Work and Pensions (DWP) rightly favours a gradual rollout of the programme, testing and learning from experience as it proceeds.3 This approach to getting the policy right is not, however, just a technical exercise—flaws in the design, operation or implementation of UC, however temporary, can have very serious consequences for individuals and families.

3.In September 2017 the Government updated its analysis of the employment effects of the programme, comparing claims made by single unemployed people without children to the Universal Credit live service, with a control sample of Jobseeker’s Allowance claimants. It found that the Universal Credit claimants were four percentage points more likely to have been in work at some point within the first six months of making their claim.4 Research published by DWP on the same day on families claiming Universal Credit did, however, point to some negative effects. For example, the wait for the first payment was a “key factor” in rent arrears.5 In oral evidence, we pressed the Department on the importance of producing robust statistical analysis of the employment effects of the Universal Credit full service and updating the business case for the programme, demonstrating its full costs and benefits.6

Our work on Universal Credit

4.Our predecessor Committee’s inquiry into the rollout of Universal Credit was cut short by the 2017 general election.7 As soon as we reconvened we launched a new inquiry. Claimants, local councils, housing associations, private landlords, advisory bodies, charities and others sent us around 350 written submissions.8 We have supplemented this body of evidence with a broad oral evidence programme,9 an online forum on which people shared their individual experiences,10 a visit to London Bridge Jobcentre, and extensive correspondence with the Department.11 We have also written to MPs in areas where Universal Credit is being rolled out, asking them to keep us informed of its impact in their constituencies. Throughout our work so far, we have been struck by the unanimity of concerns about the rollout of Universal Credit.

5.Those concerns are wide-ranging.12 In this report, we focus on one important and immediate concern in particular: the standard wait for the first payment for a new claimant. Our work on Universal Credit will be ongoing, and we intend to produce further reports.

The six week wait

6.The rollout of full service Universal Credit, which began in May 2016 and is being accelerated from October 2017,13 has been associated with increases in rent arrears, problem debt and foodbank use.14 Many claimants have found themselves unable to cope with the long wait for their initial UC payment.15 A long wait for support may even make it more difficult for claimants to search for work.16

7.After the first payment, Universal Credit is paid monthly in arrears.17 This is intended to mirror the world of work, as a majority of people are paid that way.18 For their first payment, however, a standard Universal Credit claimant must wait at least six weeks. This period comprises:

i)seven ‘waiting days’, when the claimant is not eligible for Universal Credit;19

ii)one calendar month’s ‘assessment period’, during which the claimant’s income is assessed to determine their first payment; and

iii)seven days for processing the claim.

Figure 1: Components of the standard six week wait for the first payment of Universal Credit

8.This six week wait was at the core of many problems highlighted in evidence. Universal Credit claimants would ideally have savings or a last monthly paycheque to cover essential outgoings during this period. More than half of low and middle income families, however, have no savings, and two thirds have less than a month’s worth.20 Only half of people earning £10,000 or less per year are paid monthly.21 Many households simply do not have the resources to persist for six weeks, or in a minority of cases far longer, without resorting to desperate measures.22

Advance payments

9.The DWP responded to concerns about long waits for first Universal Credit payments by announcing in October 2017 that it would make advance payments of Universal Credit more readily available.23 Take-up of advance payments has increased steadily over the past year to around half of new full service claimants in July 2017.24 Rt Hon David Gauke MP, the Secretary of State for Work and Pensions, told us he hoped the proportion would increase further,25 “correcting” a problem of people not receiving an advance when they should have had one.26 The DWP has issued new guidance to Jobcentres and briefed all Jobcentre managers on the change on 17 October.27 On our visit to London Bridge Jobcentre, we were impressed by the ease and speed with which an advance could be granted.

10.Advance payments have limitations, however, as a solution to the problem of long waits for a first Universal Credit payment. As payments in advance, they are contrary to the principles of Universal Credit, which aspires to mimic work through payment in arrears. We also heard evidence of practical concerns:

Advance payments mitigate some of the unwelcome consequences of the current design of Universal Credit, but they do not address their underlying foundations.

Reducing the six week wait

11.The middle period of the six week wait for the first payment, over which the claimant’s monthly incomings are assessed, is an important component of the design of Universal Credit. The policy merits of the other two weekly components of the wait are less clear. On our Jobcentre visit we were assured that, aided by good communication between the DWP, claimants and landlords, most payments could be processed very quickly. For claimants with no income, or with regular salary payments, the calculation of Universal Credit awards was a simple exercise. Even in more complex cases, an estimated monthly award would already be calculated for the purpose of offering an advance payment. Given the consequences for vulnerable claimants of every additional day’s wait, minimising the processing period should be an urgent priority, even if this means paying an estimated award in some cases.

12.Seven waiting days before a claimant is eligible for Universal Credit were announced in the 2013 Spending Round and introduced by statutory instrument in 2015.29 The purpose of this change was primarily fiscal. The Government estimates that waiting days save the Exchequer £150 million per year, which may rise to around £260 million once Universal Credit is fully rolled out.30 Waiting days (typically three) have been part of the contributory unemployment benefits system for over 100 years, and have applied to means-tested unemployment benefits since 1996.31 The extension to housing costs and child elements in Universal Credit is, however, a new development.32

13.We were widely told that waiting days do nothing to further the stated objectives of Universal Credit but contribute to claimant hardship.33 Lord Freud, the Minister responsible for Universal Credit between 2010 and 2016, told us that the removal of waiting days would be his top priority for any public expenditure on the programme.34 The Centre for Social Justice (CSJ), a think-tank that worked on the initial design of Universal Credit, similarly prioritised the abolition of waiting days, arguing the system is “supposed to mirror the payment cycle of someone in work, however no-one in paid employment works for the first seven days for free”.35 In its report on the draft waiting day regulations, the independent Social Security Advisory Committee (SSAC) said that waiting days were contrary to the Universal Credit objective of simplicity and expressed particular concern about their effect on claimants’ ability to meet housing costs.36 SSAC recommended, based on “persuasive and compelling evidence”, that the increase and extension of waiting days should not proceed.37

14.The baked-in six week wait for the first payment in Universal Credit is a major obstacle to the success of the policy. In areas where the full service has rolled out, evidence compellingly links it to an increase in acute financial difficulty. Most low income families simply do not have the savings to see them through such an extended period. While increased availability of advance payment loans, of up to half the estimated monthly award, are welcome, they are not a solution to a fundamental flaw in the current design. Universal Credit seeks to mirror the world of work, but no one in work waits six weeks for a monthly paycheque. We recommend the Government aims to reduce the standard waiting time for a first Universal Credit payment to one month.

1 Q76 (David Gauke)

3 Q137 (David Gauke)

4 Department for Work and Pensions, Universal Credit Employment Impact Analysis Update, September 2017, p3

5 Department for Work and Pensions, Universal Credit Test and Learn Evaluation: Families - Findings from qualitative and quantitative research with claimants, September 2017, p14. Data based on claims between July 2014 and April 2015.

6 Q159, Q142 (David Gauke, Neil Couling)

8 Our predecessor Committee received 200 written submissions. These have been supplemented by a further 150 submissions to our inquiry.

9 Work and Pensions Committee, Oral evidence on Universal Credit rollout, September 2017

10 Work and Pensions Committee, Web forum: Universal Credit rollout, October 2017

11 See, in particular, our letters to the Secretary of State of 26 April, 12 September, 15 September, 2 October and 9 October; and the responses of 8 August and 17 October.

12 Our predecessor Committee set out its concerns in a letter to then Secretary of State on 26 April 2017.

13 Rollout schedules by Jobcentre area are available on www.gov.uk. Universal Credit full service, which is managed online, is used for all new claims and claims subject to a change of circumstance in selected geographical areas. The Universal Credit live service, which is managed over the phone, is available for single claimants in all other areas across Great Britain, together with families of up to two children in some areas.

14 Citizens Advice (UCR0141), Refugee Action (UCR0140), Mind (UCR0137), Joseph Rowntree Foundation (UCR0136), VIVID (UCR0135), Birmingham City Council (UCR0132) Christians Against Poverty (UCR0130), The Helen Bamber Foundation (UCR0129), Asylum Matters (UCR0125), Community Housing Cymru (UCR0124), Turn2us (UCR0126), Institute of Revenues Rating and Valuation (UCR0122), Public and Commercial Services Union (UCR0118), Inclusion London (UCR0017), Radian Group (UCR0115), NAWRA (UCR0113), Gingerbread (UCR0106 and UCR0112), British Association of Social Workers (UCR0108), Feeding Britain (UCR0111), London Borough of Hounslow, Southwark Council (UCR0105), Plymouth Community Homes (UCR0102 and UCR0023), Lambeth Council (UCR0099), Welfare Conditionality Project (UCR0098), Child Poverty Action Group (UCR0107), UNISON (UCR0095), The Children’s Society (UCR0094), Shelter (UCR0093), Scottish Federation of Housing Associations (UCR0092), Coventry Citizens Advice (UCR0090), Citizens Advice Derbyshire Districts (UCR0088), Housing Justice (UCR0086), Your Homes Newcastle (UCR0084), Trussell Trust (UCR0017 and UCR0083), Scottish Association for Mental Health (UCR0080), Citizens Advice Craven and Harrogate Districts (UCR0079), Peabody (UCR0075), Liverpool City Council (UCR0058), Albyn Housing Society (UCR0056) WDH (UCR0054), COSLA (UCR0053), StepChange (UCR0050), Paul Archer (UCR0049), Royal Greenwich Welfare Rights Service (UCR0048), Citizens Advice Sheffield (UCR0047), Wirral Foodbank (UCR0043), Greensquare (UCR0041), Onward Homes (UCR0034), St Mungos (UCR0032), London Councils (UCR0030), Citizens Advice Scotland (UCR0029), Residential Landlords Association (UCR0028), BHCA Preston (UCR0027), Islington Council (UCR0025), Gloucester City Homes (UCR0024), Wakefield and District Housing (UCR0014), Lancashire County Council (UCR0013), Chesterfield Borough Council (UCR0012), Centrepoint (UCR0011), Torus (UCR0005), Southwark, Hounslow, Croydon and Tower Hamlets Councils (UCR0010)

15 Citizens Advice (UCR0141), Mind (UCR0137), Joseph Rowntree Foundation (UCR0136), Inclusion London (UCR0017), NAWRA (UCR0113), Gingerbread (UCR0106 and UCR0112), Child Poverty Action Group (UCR0107), Coventry Citizens Advice (UCR0090), Citizens Advice Derbyshire Districts (UCR0088), Trussell Trust (UCR0017 and UCR0083), Donna (UCR0060), Royal Greenwich Welfare Rights Service (UCR0048), Citizens Advice Sheffield (UCR0047), Wirral Foodbank (UCR0043), Citizens Advice Scotland (UCR0029)

17 In Scotland and Northern Ireland, claimants can opt to receive twice-monthly payments. This option is available after the first payment is made at six weeks.

18 DWP, Universal Credit policy briefing note 2, September 2011, p.1; Q83 (David Gauke)

19 Waiting days apply to single or joint claims where one or both claimants is subject to full work-search conditionality. Such claimants are expected to look for and apply for work, and be ready and available to work immediately. Exemptions from waiting days apply for some claimants, including those who have transferred from UC live to full service, or migrated from legacy benefits. Over the period May 2016 - June 2017, 64% of claimants served waiting days.

20 Resolution Foundation, Squeezed Britain, February 2013, p11

21 DWP, Universal Credit policy briefing note 2, September 2011, p.3

22 The Department’s estimates that in September 2017, 19% of claimants had only received part of their payment at six weeks, and 11% had received no payment. The Department does not publish statistics on the length of time that claimants wait beyond six weeks, but the Minister told the Committee that, based on indicative data, 4% were still awaiting full payment at 10 weeks - see Q100 (David Gauke). In his letter of 17 October, the Secretary of State said that claimants waiting more than six weeks were likely to be “households with more complex circumstances”.

23 David Gauke, Speech to the Conservative Party conference, 2 October 2017 and Letter to the Committee, 17 October 2017

26 Q74 (David Gauke)

27 DWP, Guidance on Advance Payments, October 2017; Q119 (Neil Couling)

29 HM Treasury, Spending round 2013: Policy costings, p.7; The Universal Credit (Waiting Days) (Amendment) Regulations 2015, S.I. 2015 No. 1362

31 A seven day period of non-entitlement to unemployment benefit applied between 1911 and 1937, when it was reduced to three. Between 1942 and 1971, claimants were reimbursed for their three day wait if their period of unemployment became extended. Waiting days were extended to income-related benefits for the first time with the introduction of Jobseeker’s Allowance (JSA) in 1996. Waiting days for JSA and Employment and Support Allowance (ESA) were extended from three to seven (with some exemptions) in 2014. See Social Security Advisory Committee, The Social Security (Jobseeker’s Allowance and Employment and Support Allowance) (Waiting Days) Amendment Regulations 2014 (S.I.2014 No. 2309), September 2014, p.11

33 Citizens Advice (UCR0141), Refugee Action (UCR0140), Mind (UCR0137), Joseph Rowntree Foundation (UCR0136), NAWRA (UCR0113), Gingerbread (UCR0106 and UCR0112), Plymouth Community Homes (UCR0102 and UCR0023), UNISON (UCR0095), The Children’s Society (UCR0094), Shelter (UCR0093), Coventry Citizens Advice (UCR0090), Your Homes Newcastle (UCR0084), Liverpool City Council (UCR0058), Citizens Advice Scotland (UCR0029), Lancashire County Council (UCR0013), Centrepoint (UCR0011), Torus (UCR0005)

34 Q129 (Lord Freud)

35 Centre for Social Justice (UCR0133)

36 Social Security Advisory Committee, Report on the Universal Credit (Waiting Days) (Amendment) regulations 2015 (S.I. 2015 No. 1362), June 2015, paras 6.6 and 8.2

25 October 2017