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Universal Credit: the wait for a first payment Contents

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1Introduction

1.Universal Credit is the Government’s flagship programme of welfare reform. Introduced from 2013, it replaces six older ‘legacy’ benefits—Employment and Support Allowance, Housing Benefit, Income Support, Jobseeker’s Allowance, Child Tax Credit and Working Tax Credit—with a single monthly payment. As of 9 July 2020, the latest date for which figures are available, the total number of people claiming Universal Credit stands at 5.6 million. This figure has risen sharply as a result of the coronavirus outbreak; from 13 March to 14 May 2020, the two months following the introduction of lockdown, the Department received 2.4 million new Universal Credit claims.1

2.After being rolled out on an area by area basis, Universal Credit is now available across the country. It has undergone many welcome and needed changes during the seven years in which it has been rolled out. DWP intends to move households who are still receiving legacy benefits over to Universal Credit through a process called “managed migration”, which was scheduled to finish in 2024. People on legacy benefits can also transition to Universal Credit through ‘natural migration’, where they experience a change in circumstances—such as losing a job, becoming ill or moving to a different local authority area—which triggers a new benefit claim.

3.Universal Credit is paid monthly and in arrears. This is a deliberate design choice: Universal Credit was intended to mimic the world of work, in line with the programme’s aim of supporting more people into employment. The Department considers the claimant’s earnings over a monthly period, known as the assessment period, and at the end of the month makes a payment based on their assessed income. For new claims, the Department requires an additional week to process the payment.

4.The consequence of this is that most first payments of a Universal Credit award are made after five weeks, though some take longer. In April 2020, the most recent month for which statistics are available, 36,763 households did not receive their first payment in full, on time. This number represents 4.1% of new Universal Credit household claims for the month. Organisations that support claimants have previously expressed concern about the impact that the initial wait, often referred to as the “five-week wait”, can have on people who are already struggling financially. The Trussell Trust, which represents a network of over 1,200 food banks, has spearheaded a campaign—Five Weeks Too Long—which calls on the Government to abolish the wait.2 DWP has introduced mitigations to combat the effects of the wait; for example, offering Advance payments—an advance of a claimant’s expected award, which must then be repaid—and ‘run on’ payments for people moving from legacy benefits. The Department’s view is that, because Advance payments are available straight away, no one needs to wait five weeks for their first payment. We heard evidence, however, that these measures have not fully addressed the issues that people face and that repayments of Advances leave people with an amount below their assessed need for their repayment period.

5.Our predecessor Committee conducted a series of inquiries into Universal Credit, including Universal Credit: the six week wait, in which that Committee recommended that DWP should reduce the initial waiting period, then a period of six weeks, to one month.3 The Department has since reduced the wait to five weeks, but evidence suggests that the problems experienced by claimants persist. We therefore decided to make the wait for a first payment the focus of our first inquiry into Universal Credit.

6.Our predecessor Committee called repeatedly on the Government to eliminate the wait for a first payment of Universal Credit. In a report on the managed migration of existing benefit claimants to Universal Credit, published in November 2018, it called on the Government to eliminate the five week wait for all claimants moving to UC via managed migration, and to “use this as a basis for considering how the wait could be reduced for claimants migrating naturally, and for new claims”.4 In a report on natural migration to UC, published in July 2019, it encouraged the Department to look at “practical options to eliminate the five-week wait”. It suggested that these might include “the Department making advance payments to claimants non-repayable”.5 The Government did not accept these recommendations.

Our inquiry

7.We launched our inquiry on 9 March 2020, shortly before the imposition of lockdown in response to the coronavirus outbreak. Upon launch, we invited written submissions not only on the impact that the wait has on claimants, but on the most effective ways of mitigating that impact. The inquiry’s terms of reference asked for views on a number of potential policy solutions, including: replacing the system of Advance payments with a one-off non-repayable grant; reducing the rate at which Advances and other debts are repaid; restructuring the assessment period so that people are paid more frequently than monthly; and taking a more flexible approach to backdating.

8.Almost 100 organisations and individuals submitted written evidence to our inquiry. We also heard oral evidence from support organisations and charities, academics, think tanks, housing providers, and technical experts with experience of the Government’s IT systems. Towards the end of the inquiry, we heard evidence from the Minister for Welfare Delivery and the Senior Responsible Owner for Universal Credit at DWP, and then from the National Audit Office and the Financial Conduct Authority.

9.We are grateful to everyone who has contributed to our inquiry and helped build a picture of the problems that people are still facing during the wait for the first payment. We also considered a number of policy proposals for removing the wait, or at least mitigating the impact that it has on claimants. As Christians Against Poverty, a charity that supports people in financial difficulty and debt, said in evidence, there is no “silver bullet” for addressing the wait.6 This report, however, sets out the measures that we believe DWP can take to prevent people falling into further hardship.

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