184.In the Department’s view, a guiding principle of Universal Credit is that it imitates the world of work. Its system of monthly payments in arrears is intended to mimic the outgoings and income of employees who are paid monthly, which in turns eases the transition for those moving out of the benefit and into work. This monthly structure is also core to the five-week wait: the initial four-week assessment and then fifth week to make a payment in arrears sets up the benefit for the monthly rhythm which follows.
185.Not all Universal Credit claimants are paid monthly, however. In Scotland, the “Scottish Choices” option lets people opt 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, to split their award between partners, or to send the element of their award which covers housing costs directly to their landlord.
186.The Department’s own evidence, however, shows that monthly payments do not mirror the world of work for many claimants. While the Department says that 75% of people are paid monthly in the economy as a whole, DWP expects the proportion of people paid weekly or fortnightly to be closer to 30% among working Universal Credit claimants. In January 2017, the Resolution Foundation think-tank said that 58% of new claimants moving onto Universal Credit as a result of moving from employment were paid either fortnightly or weekly in their previous job. In a 2019 report on Universal Credit, Citizens Advice said that only 45% of the people it helped who were in work before claiming Universal Credit were paid monthly. Moreover, not all monthly payments arrive on time. The latest available statistics indicate that 2.38% of all Universal Credit payments (including new and ongoing benefit claims to households) were paid in full later than the target date in April 2020. This represents over 86,000 Universal Credit payments made late in April 2020.
187.We heard evidence that, for people who are paid more frequently than monthly by their employer, monthly payments of Universal Credit can be difficult to manage. Peter Tutton, Head of Policy at StepChange, a national charity which supports people in debt, told us that 70% of clients it surveyed would prefer to be paid Universal Credit weekly or two-weekly. The Chief Executive of the Trussell Trust, Emma Revie, told us that monthly payments “poorly reflect the working realities of lower-income families and people moving from employment on a potentially zero-hours or fluctuating hours contract”. She said that the five-week wait, which is intrinsic to the design of subsequent monthly payments, “causes immediate hardship” for these families.
188.We also heard that the payment system in England and Wales creates difficulties for people whose outgoing costs are more frequent than monthly. Councils and housing associations told us that monthly payments are challenging for people in social housing, where a weekly rent schedule is commonly used. Community Housing Cymru (CHC) represents housing associations and community mutuals in Wales. It found in a 2019 report, where it monitored the impact of Universal Credit on rent arrears, that tenants moving from legacy benefits struggled to budget when they had to adjust to monthly payments. The Highland Council proposed that landlords could “peg” a person’s tenancy agreement to their Universal Credit claim, which would fix Universal Credit payments to the dates when their rent is due. For tenants with a weekly rent schedule, this might require the Department to offer more frequent Universal Credit payments.
189.We heard evidence throughout our inquiry that claimants in England and Wales would benefit from more flexible payment methods. The Joseph Rowntree Foundation said that people should be able to choose an assessment period, and therefore payment frequency, according to their personal circumstances. Citizens Advice proposed that assessment periods and payment cycles should “match the cycles of pay for in-working claimants”, although acknowledged that these changes “would need reforms to the IT system that would take time to implement”. Baroness Stroud, former Special Adviser to Sir Iain Duncan Smith, the former Secretary of State for Work and Pensions, told us that the architects of Universal Credit had originally wanted to build it to offer more flexible payments:
At the time we wanted to be able to construct a Universal Credit system that if you were paid weekly you would receive it weekly, if you were paid fortnightly, fortnightly, and if you were paid monthly, monthly. At the time that was not possible to do in the digital system, but I suspect now that the whole machinery is so much more stable and people are so much more experienced in knowing how to make changes that would be something that would be worthwhile revisiting, because then it could mimic every form of work: a weekly payment, a fortnightly and a monthly.
190.The Minister for Welfare Delivery told us that, on the question of payments, the Department starts “from the fundamental position that claimants on Universal Credit are encouraged to manage their own finances and budget so it better mirrors the world of work”. The Minister said that, “for the vast majority of people”, monthly payments work “incredibly well”. He said that Alternative Payment Arrangements would work better for a “small minority”.
191.The Department does offer the option of more frequent payments to claimants in England and Wales. A person can apply for an “Alternative Payment Arrangement” (APA), but only where they “cannot manage their single monthly payment and there is a risk of financial harm to the claimant and/or their family”. Depending on their circumstances, a person may be able to have the housing element of their Universal Credit paid directly to their landlord, receive their payments more frequently, or, “in very exceptional circumstances”, split the payment of a household award between partners. Claimants are not told about APAs on their journal when they go to apply for Universal Credit; instead a Work Coach discusses them at the beginning of a person’s claim.
192.According to DWP’s provisional figures from May 2020, 59,456 households on Universal Credit were granted More Frequent Payments in England and Wales. This represents 1.5% of the total number of Universal Credit household claims in England and Wales. In Scotland, 68,880 households on Universal Credit had a Scottish Choices More Frequent Payment: 18.9% of the total in Scotland. In Great Britain, just over 420,000 households with a housing costs entitlement had a Managed Payment to Landlord arrangement or Direct Payment to Landlord through Scottish Choices (17.7% of all households with a housing costs entitlement).
193.Organisations told us that not all claimants find it easy to apply for an APA. Citizens Advice said that awareness of Alternative Payment Arrangements is low and that claimants face a “hierarchy of need” when they apply; for example, having to prioritise a direct payment to landlord before they receive more frequent payments. The Child Poverty Action Group (CPAG) reported in 2019 that it had spoken to people who stopped seeking an APA because they were overwhelmed by the process. It said that people were put off by the number of questions they were asked, and a feeling of “interrogation” from DWP staff about why they wanted to set one up.
194.The Minister for Welfare Delivery told us that it is important that Alternative Payment Arrangements work for a minority of people and that a major change to the payment system would “disadvantage the majority”. Dr Stephen Brien, former Expert Adviser at DWP, told us that the current APA system works well because the Department knows which claimants face challenges. He said that there is “real value in people putting themselves forward as having a challenge [ … ] because that introduces information” and means that there are “the people responsible within the Jobcentres and elsewhere to address the problem”.
195.While monthly payments do mirror the world of work for many, DWP’s own figures show that a significant minority of people who claim Universal Credit received or continue to receive weekly or fortnightly wages. Other sources suggest that a majority of claimants may be paid more frequently than monthly. This can make it hard for households to budget, particularly if they are already managing debt. At the same time, monthly awards create difficulties for some people in social housing with weekly rent payments, and represent another adjustment for people moving from legacy benefits with weekly payments. The evidence we have heard tells us that the option for more frequent payments would benefit the most vulnerable claimants and would have low cost implications for DWP.
196.We recommend that the Department provide new and clearer guidance for Work Coaches to mitigate the impact of the wait and monthly payment system by making the option of more frequent payments under Alternative Payment Arrangements easy for all claimants in England and Wales to access. This option should be offered to all claimants, alongside clear information about how the payment process will work. The Department should review how it uses evidence for Alternative Payment Arrangement applications, following reports that it puts people off applying.
197.We recommend that the Department publishes the guidance given to Work Coaches when they advise people on APAs, to improve transparency in the process. The Department should make clear when and how a claimant is made aware of APAs both during their Universal Credit application and once they start receiving their payments. The Department should publish the rates at which people are unsuccessful in their applications for an Alternative Payment Arrangements, and what reasons the Department might give a claimant if it denies their request for more frequent payments. DWP should also ensure that work coaches are making claimants aware of the option of split payments, where a household’s payment can be divided and paid into two separate accounts.
198.Universal Credit works best when it mirrors people’s daily lives. Payments which align with people’s rent schedules could make it easier for claimants to budget and plan. We recommend that the Department explain in response to our report whether it is feasible for landlords to tag the tenancy agreement to the claimant’s Universal Credit claim so that payments are made in line with their rent schedule. If this is not possible, the Department should set out what aspects of the design of Universal Credit it would need to adapt to build in this flexibility for claimants.
199.Scottish Government data shows that, by the end of March 2020, 24% of claimants in Scotland chose to revert from More Frequent Payments to monthly payments. The Scottish Federation of Housing Associations said Scottish Choices has not achieved its full potential yet because people can only opt into it after they have “endured the first five-week wait”. It told us that the five-week wait was partly the reason why people were put off fortnightly payments. The Minister for Welfare Delivery said that the reversion rate suggests that “people find that it [monthly payments] suits them far better”. He said that this may be because people pay most bills monthly.
200.The high reversion rate from Scottish Choices may be caused by the design of the system. The More Frequent Payments option under Scottish Choices is only offered after the initial wait and after the first Universal Credit payment. A month later, claimants who select this option receive half of the amount from the second assessment period. In subsequent months, claimants receive twice-monthly payments. This means that people choosing this Scottish Choices option are frequently around two weeks behind the amount of money they would have received had they retained monthly payments.
201.While Scottish Government data shows a quarter of people revert from More Frequent Payments under Scottish Choices, DWP’s research does not provide a detailed understanding of how the Department monitors how more frequent payments work for people, and what it might to do improve the policy.
202.We recommend that the DWP improve the quality and detail of its published data on alternative payments, by publishing its figures on how many people revert to monthly payments from the twice monthly payment option in England and Wales. DWP should give detail to these figures by publishing analysis on why people may revert to monthly payments and demonstrate how it monitors people’s experiences of Scottish Choices or more frequent payments under APAs. It should use this analysis to better advise claimants and to identify possible improvements to the policy.
219 DWP, , May 2020
220 Ibid; , June 2018.
221 Resolution Foundation, , p 6.
222 Citizens Advice, (2019), p 5
223 Data from Stat Xplore on DWP,
227 CHC, October 2019, para 2.1
229 Joseph Rowntree Foundation,
230 Citizens Advice
233 DWP, , May 2020
234 from the Minister for Welfare Delivery dated 27 August 2020
235 Data from Stat Xplore on DWP,
237 CPAG, , October 2019, p 32
240 Scottish Government, , 28 May 2020
Published: 19 October 2020