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Universal Credit: the wait for a first payment Contents

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3Moving to Universal Credit without a change in circumstance

“Managed migration” to Universal Credit

37.“Managed migration” is the Department’s term for the process by which people claiming legacy benefits, but whose circumstances have not changed, will move to Universal Credit—at a time determined by DWP. The group of people moving to Universal Credit via managed migration will include people with particularly complex needs. It will include disabled people (including severely disabled people), people with chronic health conditions, and people who are long term unemployed.

38.The Department has not yet finalised its plans for exactly how managed migration will work. It began a pilot of the process in Harrogate in July 2019, under the Universal Credit (Managed Migration Pilot and Miscellaneous Amendments) Regulations 2019. Those Regulations allowed for a pilot of up to 10,000 claimants.

39.This pilot, however, was paused in March 2020 because of the coronavirus pandemic. Will Quince, the Minister for Welfare Delivery, told the House on 27 January that just under 80 households were participating in the pilot, and that 13 had been moved on to Universal Credit since July 2019.41 It is not clear how many households had moved by the time the pilot was suspended in March.

40.Under the process set out in the Regulations, people claiming legacy benefits will be sent a “migration notice”, which will tell them that they need to apply for Universal Credit by a certain date. They are then effectively required to make a new claim for Universal Credit in the same way as brand new claimants and people who are moving to UC because their circumstances have changed. They are expected to make a new claim, verify their details and identity, and then wait for five weeks for their first payment.

41.The key difference is that people who move via managed migration are entitled to transitional protection if their UC award is lower than their legacy benefits. This will be paid as a “transitional element”—a top-up to each month’s Universal Credit award. The Department has made a commitment that “no one on existing benefits whose circumstances remain unchanged and has entitlement to the same support will lose out in cash terms as a direct result of managed migration.”42 People can lose transitional protection if their circumstances later change.

Run-ons

42.The Department plans to mitigate the impact of the five week wait for a first payment of Universal Credit by offering “run ons” of some legacy benefit payments to people who move via managed migration. Claimants who are receiving Housing Benefit, income-related Jobseeker’s Allowance, Employment and Support Allowance and Income Support will receive an additional payment of two weeks’ worth of those benefits when they make a claim for Universal Credit. In response to our predecessor Committee’s report on managed migration, the Department said that claimants would also receive a final payment of their legacy benefit.43

43.Run-ons will be paid to people who move to UC by both managed and natural migration. The Department previously estimated that run-ons will cost £750 million between 2018–19 and 2023–24.44 DWP has previously estimated that around 42% of people moving from legacy benefits will move via managed migration.45 Assuming that this proportion will remain roughly the same, run-ons for people moving via managed migration are likely to cost the Government around £315 million.

44.People claiming tax credits will not, however, receive a run-on payment. Our predecessor Committee recommended in 2018 that the Department should provide run-ons of tax credits to people moving to Universal Credit. In response, the Government explained that it had considered doing this, but decided not to do so because:

By definition, these claimants are in work and will have other income to help support them while moving to Universal Credit. Child Tax Credits claimants who are in-work will similarly have their own income to support themselves through the transition, while those who are not working and do not have private means of supporting themselves will benefit from receiving a run-on of the income-related legacy benefits that they may be claiming. Claimants with children will also have continued access to Child Benefit, as well as access to up to 100% Universal Credit advances.46

45.We heard from witnesses who disagreed with the Government’s assessment. The Trades Union Congress told us that most low paid workers “do not have savings to get them through this wait”.47 The Joseph Rowntree Foundation (JRF) echoed our predecessor Committee’s call for run-ons to be extended to people moving from tax credits. Iain Porter, Policy and Partnerships Manager (social security) at the JRF, said:

It is unjustifiable that there is not a similar run-on for Child Tax Credit. Families with children are more likely to be in poverty anyway. They are one of the groups likely to face bigger problems as they move on to Universal Credit and go through that transition.48

46.Will Quince, the Minister for Welfare Delivery, told us that run-ons have not been extended to tax credits because “traditionally on legacy benefits people are used to a fortnightly payment cycle” and that “tax credits, for a very large number of people, are paid monthly”.49 People on tax credits can choose to receive payments either once a week or once every four weeks.50 HMRC does not publish data on payment frequency across the entire tax credit caseload, but analysis of the April 2020 Personal Tax Credits statistics shows that at least 55% of in work tax credit recipients receive their payment once a week rather than once every four weeks.51

More flexible payments

47.One of the challenges of moving from legacy benefits to Universal Credit is that, for most claimants, the frequency with which they receive their benefits will change. Many legacy benefits are paid weekly or fortnightly, while Universal Credit is paid monthly in arrears.

48.Not all Universal Credit claimants are paid monthly, however. In Scotland, the “Scottish Choices” option allows people to choose to receive their Universal Credit payments twice a month and for their landlord to receive the housing element directly. In Northern Ireland, the default is for people to receive twice-monthly payments and for rent payments to be made directly to landlords. In England and Wales, claimants can apply for “Alternative Payment Arrangements” in limited circumstances which, if successful, allow them to receive More Frequent Payments.

49.In Scotland, take up of twice-monthly payments has been low. We heard evidence, however, that this may be because of the way in which these more frequent payments have had to be implemented: they are offered only after the first payment of a Universal Credit award has been made. Jeremy Hewer, Policy Lead, the Scottish Federation of Housing told us that this approach meant that this option had not yet “achieved its full potential.” He explained:

… the twice-monthly payments are only offered in the claimant’s journal after their first payment, so they have already, if you like, endured the first five-week wait before they get that money. It may not be that attractive. Particularly with the onset of managed migration, if that twice-weekly payment were asked for from the get-go, it would smooth the process for many claimants who would be among the most vulnerable.52

50.For most claimants, the Department argues that it cannot offer twice-monthly payments from day one of a claim because it does not know their entitlement until the end of the first monthly assessment period. For people moving via managed migration, whose circumstances have not changed, we believe that it would be possible for the Department to have assessed their entitlement while they are still claiming legacy benefits. It would therefore be possible for twice-monthly payments to be offered as an option from the beginning of a claim.

Our proposed solution

51.People who are moving to Universal Credit through managed migration are doing so because of a decision by the Government. Nothing in their own circumstances has changed. Under the Government’s plans, however, they would have to wait at least five weeks for their first payment of Universal Credit. We see no reason why their transition to a new benefits system should not be seamless.

52.At present, the Government plans to mitigate the impact of the five week wait on this group of claimants by offering two week run-on payments of some, but not all, of the legacy benefits they are currently receiving. That is a sticking plaster, which costs public money, leaves claimants with a gap between payments, and unnecessarily disrupts their budgeting schedules. The delays to the pilot of managed migration give DWP the opportunity to develop something better.

53.We recommend that DWP should eliminate the five week wait for all claimants moving to Universal Credit through managed migration, including for claimants moving from tax credits. Those claimants should continue to receive their existing benefits during their first monthly assessment period. They should then be offered the option, from day one of their Universal Credit claim, of choosing fortnightly payments of their award. This would ensure a smooth and seamless move from legacy benefits to Universal Credit for people whose circumstances have not changed.

54.To explain how we envisage that this might work in practice, we set out a worked example below. The diagram shows a simplified scenario in which the claimant was in receipt of only one fortnightly legacy benefit payment, applied for Universal Credit on the same day as they received their most recent legacy benefit payment, and opted for twice-monthly payments of their Universal Credit award. In practice, we recognise that claimants’ circumstances may be more complex.

55.Assessing the possible costs of this option is not straightforward. It depends on the complex interactions between schedules of legacy benefit payments and Universal Credit assessment periods, which will vary considerably for individual claimants. The same is true, however, of the Government’s existing plans to pay both run-ons and final payments of legacy benefits to claimants when they move to Universal Credit, which it says could for some claimants mean that they receive as much as four weeks’ worth of legacy benefits during the five week wait.

56.We recommend that DWP set out, in response to our report, a detailed analysis of how our recommended approach could work in practice. It should also assess how the costs of this approach would compare with the costs of its existing plans to pay run-ons and final payments of legacy benefits to claimants who move via managed migration.

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