Summary
People claiming Universal Credit for the first time wait at least five weeks for their first regular payment. This is manageable for some claimants, but causes difficulty for many others. We see no reason why claimants moving to Universal Credit when their circumstances have not changed should have to endure the five week wait: the Department should ensure that they can move seamlessly to Universal Credit. For brand new claimants, it should offer their household a starter payment equivalent to three weeks of the standard allowance. For people who move to Universal Credit because their circumstances have changed, the Department should—where possible—make the move seamless. Where that is not possible, they should receive the starter payment for new claimants. Our intention is that these payments should mean that people have the money they need for basic living essentials, like food and heating, during the wait.
Evidence of the impact of the wait
Some of the evidence we heard suggested that people on Universal Credit are more likely to need a food bank or have rent arrears than people on the legacy benefits that it replaces, and that moving to Universal Credit may lead to a rise in psychological distress. This evidence does not prove that Universal Credit, and in particular the wait for a first payment, is the cause of the problems people may face. Further work is needed to understand these findings and what is causing them. But the evidence shows that people on UC disproportionately experience problems. DWP must take these findings seriously and conduct or commission in depth research to understand better the impact of the wait on rent arrears, rising food bank use, and mental health and wellbeing, which all contribute to higher taxpayer and public sector costs through NHS and other public sector demands
Advance repayments and debt
People claiming Universal Credit for the first time can ask for an Advance to tide them over during the wait for a first payment. These Advance payments can be a lifeline for people who would otherwise have no income for at least five weeks. But Advances are effectively a loan, and claimants’ future benefits—already set at a subsistence level—are reduced to repay them.
If the Government implemented our recommendations of seamless moves for legacy benefit claimants and starter payments for new claimants, we expect that fewer people would need to ask for an Advance, and some might need a much smaller Advance. A request for a substantial Advance in these circumstances would be a clear indication that someone is struggling with the transition to Universal Credit. The Department should use this as an opportunity to support these claimants at the earliest possible stage.
Advances should be renamed “new claim loans”, so that it is clear to claimants that they will need to be repaid. Before a new claim loan is granted in full, the Department should provide personalised budgeting support—when possible, with a face-to-face option—with a full assessment of the claimant’s financial situation and the impact that future repayments of the loan will have on their household finances.
The Department should also take steps to reduce the burden of repaying these loans. It already plans to extend the repayment period for Advances from 12 to 24 months and to reduce the maximum rate of deductions from 30% of the standard allowance to 25%. These changes, however, will not take effect until October 2021. DWP must prioritise implementing them as early as possible, and no later than April 2021. It should also reduce the cap to 10%, in recognition of the fact that deductions are taken from benefits already set at subsistence levels. It is also recommended that the Government introduce measures that ensure the collection of public sector debt reflects best practice standards.
Many people who take out an Advance are also repaying another government debt, most often overpayments of tax credits. Repayments of tax credit debts are also deducted from the claimant’s Universal Credit award, which can compound hardship. We recommend that tax credit debts should only be recovered once a person has finished paying off their Advance, if they have taken one out. The Government should also write off tax credit debt that is over six years old, and any remaining deductions should be capped at 10% of the Universal Credit standard allowance per month.
Coronavirus measures
In our first report, DWP’s response to the coronavirus outbreak, we welcomed the Government’s decision to increase the standard allowance in Universal Credit and the basic element in Working Tax Credit by £20 per week for a year, and to raise rates of Local Housing Allowance to the 30th percentile of market rents. Before the coronavirus outbreak, benefit rates had become detached from the real cost of living. The increases to the standard allowance of UC and to the basic element in WTC are scheduled to last until April 2021. The Government should now commit to making them permanent.
Support for claimants
The Department’s Help to Claim service, delivered through Citizens Advice, is a valuable source of support for people who are applying for Universal Credit. Help to Claim, however, does not provide support beyond the initial claim—for example, for people who are struggling to repay their Advance. DWP’s offer of support in this respect is lacking. It must invest in Help to Claim and expand it so that it can offer support throughout a person’s claim, in line with what the architects of Universal Credit envisaged for its predecessor, Universal Support.
Some groups of people are more likely to face challenges when moving to Universal Credit. DWP currently lacks an effective means of identifying and tracking people who are vulnerable or more likely to need additional support. It must prioritise improving the Universal Credit system to allow Jobcentre Plus staff to record claimant needs in a more formalised manner. DWP should also review its approach to how it works with organisations that support claimants, such as support workers, housing providers and local authorities.
Payment timeliness
No one should have to wait more than five weeks for their first payment. DWP has made strides in improving the proportion of Universal Credit claims paid on time, but more than 200,000 people have received their first payment after five weeks so far in 2020. We welcome the announcement that the Department intends to double the number of work coaches over the next financial year, with 4,500 expected to be in place by October. This is an ambitious programme of recruitment, and the Committee would welcome a written update from the Department by the end of the calendar year on how it is progressing and provide further updates each month thereafter.
Many disabled people and people with health conditions must wait much longer than five weeks to receive their first payment in full because of the time taken to complete the Work Capability Assessment—an average of four months. That is too long for someone to wait for their full award. DWP should work to speed up the WCA process as soon as possible.
There is a penalty for claimants who do not provide the necessary documents in time: their Universal Credit is paid late. But there is no equivalent penalty for the Department when it fails to keep its side of the bargain. Where a claimant provides all the information DWP has asked for on time, but DWP has not completed its own processes to verify the claim details, the claimant should receive the full amount of benefit entitlement for which they are claiming. For people whose WCA is delayed, they should be paid at the highest rate until their entitlement has been decided.
Backdating
Not everyone makes a claim for Universal Credit as soon as they become entitled or when it is best for them to. DWP recognises that this is a problem: it must now take steps to understand why some people delay making a claim, and publish its findings. People can apply to have their Universal Credit claim backdated in limited circumstances, but this process can be intrusive and bureaucratic. The Department should identify ways to make this process less burdensome for claimants, and allow people to have their claim backdated, in specified circumstances, not only to a month before, but to the point when the event that triggered a Universal Credit claim occurred.
Improving payments
The monthly payment structure in Universal Credit is intended to mimic the world of work. However, this simply does not work for everyone, especially people who were paid more frequently in their previous job. Alternative Payment Arrangements (APAs) offer a good option for claimants who need to change how they receive their Universal Credit award, but some people are not aware that they exist, or are put off applying by a bureaucratic application process. The Department must ensure that it is easy for all claimants to opt into twice-monthly payments so that strict criteria do not prevent more flexible payment options. In Scotland, a quarter of people have reverted from More Frequent Payments to monthly payments; we heard suggestions that this was because the option was offered only after the first payment of Universal Credit. The Department should analyse why people may choose to revert from More Frequent Payments and use this to better advise claimants and improve the policy. DWP should also work with HM Treasury to see if it can expand its use of Faster Payments.
Improving the assessment system
The Department says that the monthly assessment structure and payment in arrears works for most claimants as it says the majority come from monthly paid work, as has been seen with new claimants in the pandemic. However, a rigid assessment system disadvantages people whose wages and outgoing costs do not match the Universal Credit assessment dates. Experts in benefits systems have proposed different models for assessment which may work better for claimants. The Department should assess the possibility of estimating a daily calculation of people’s earnings with which it could assess people more flexibly. The Department must integrate its policy, operational and technical staff when building improvements to Universal Credit systems.
Published: 19 October 2020