18.Box 1 sets out a summary of the main features of Universal Credit.
19.Universal Credit’s design aims to simplify the benefits system through integrating six benefits into one and by paying awards monthly in arrears as a single payment. We heard that this design, which relies upon a monthly assessment period, has added a significant level of complexity to the process of making and managing claims for a significant number of people, including the most vulnerable. Furthermore, we were told that this was the result of Universal Credit’s failure to reflect how claimants are used to being paid and therefore how they manage household budgets. We examine these issues below.
20.The DWP said in its 2010 Universal Credit White Paper that the ‘simplification’ of six working age, means tested benefits into a single monthly payment would lead to “increased transparency of the financial benefits of work, reduced administrative burden on entering work, and reduced risk associated with an initially unsuccessful attempt at entering work.” It said that combining benefits would increase the take-up rate of benefits to which people were entitled but did not claim under the legacy system. In evidence to us, Policy in Practice said the legacy system needed simplifying because claimants and advisers were required to “split their administrative efforts across three separate [benefit] agencies, each with different entitlement provisions and claim processes.”
21.Some simplification has been achieved. The Joseph Rowntree Foundation said claimants have access to a range of previously separate streams of support through one claim and that it is now administratively simpler for claimants to move between unemployment and work. However, we received evidence that simplification had benefited administrators most and this came at the expense of complicating claimants’ lives. The Welcome Centre, a food bank, said:
“By consolidating six benefits into one, making the benefit online, reducing payment frequency, and paying the full benefit straight to the claimant, the system is simplified for those administering it. However, it is not simpler for the claimants relying on the system, many of whom do not have online access, cannot manage their budget on a monthly payment cycle, and have challenges managing the housing element of their payment.”
22.The single monthly assessment and monthly approach to paying awards is the cornerstone of Universal Credit’s design, but it has caused significant problems for many claimants. Universal Credit is paid monthly to mimic work and the receipt of a salary. How much a person or household receives is calculated each month by assessing their earnings and other income with reference to a fixed monthly assessment period. We heard that this way of calculating and paying awards does not match the reality of many claimants’ lives, particularly those in work on low incomes who may be paid at irregular intervals. Paul Spicker, Emeritus Professor of Public Policy at Robert Gordon University, said:
“Claimants cannot be certain, even a week before the due date, how much money they will receive in benefit. Incomes fluctuate; they come from multiple sources; they are commonly dependent on the behaviour of third parties, which makes them unpredictable. Liabilities (such as rent) do not necessarily square with the DWP monthly assessment period.”
We explore these issues in more detail in the next section.
23.Witnesses told us that the multiple benefit payments that were available under the legacy system provided greater security to claimants. Dr Rita Griffiths, Research Fellow at the University of Bath, said that several sources of income helped some households to budget more effectively and that the legacy system allowed each partner in a couple to have an income, whereas Universal Credit is paid as a single household payment.
24.Professor Sir John Hills, Professor of Social Policy at the London School of Economics, told us that Universal Credit’s simplified design made administrative errors by the DWP riskier for claimants. He said that under legacy benefits, “Your child tax credit or your housing benefit might keep running, even if there was an interruption in another part of your payments.” He said the integration of benefits into a single payment under Universal Credit has increased the importance of minimising errors, as they can lead to a reduction in income and can potentially lead to rent arrears.
25.Simplification of the benefits system was a driving principle behind the design of Universal Credit. It has made it administratively easier for claimants to move in and out of work. There are also advantages to claimants to having a single point of contact for support. However, simplification has introduced inflexibilities which do not accommodate the reality of claimants’ lives, particularly those on low incomes who are often paid at more frequent intervals. For many, payments have become unpredictable, which undermines the security and stability of their lives. Error or interruptions caused by the DWP can have significant consequences for claimants who may have nothing on which to fall back.
26.In this section we consider two main design features of the monthly assessment. First, we examine the length of the assessment period. Second, we examine how income is taken into account and how changes in circumstances are assessed.
27.According to the DWP, the rationale for the monthly assessment period is as follows:
“In the economy as a whole, around 75% of people are paid monthly, a proportion that has been growing steadily over time as the economy shifts away from typical weekly or fortnightly paid jobs. A weekly assessment period would work for the minority of weekly-paid people, for anyone else such a system could result in significant fluctuations and overpayments. Anyone paid fortnightly, 4-weekly, or monthly could be paid Universal Credit for the weeks in which they did not receive their salary. For this and other reasons, (e.g. the HMRC real-time earnings feed, which is a monthly feed from employers) Universal Credit was designed around a monthly payment cycle. We accepted that the minority of claimants on non-monthly cycles might face a bigger budgeting challenge than the majority, and we would therefore need to support them through our jobcentres and delivery partners, including budgeting support.”
28.Many witnesses thought that the monthly assessment period was a rigid design feature that the Government would be reluctant to change. Paul Gray, former Chair of the Social Security Advisory Committee, told us that it was difficult for the DWP to decide what length the assessment period should be because, “Universal Credit is seeking to bring claimants together from very different circumstances—and, critically, people in work as well as out of work, which was one of the key changes—by reintegrating tax credits into a single system.”
29.Neil Couling, Change Director and Senior Responsible Owner for Universal Credit at the DWP, explained that the monthly assessment period had been set because it is possible to fit weekly payment frequencies into a monthly assessment period but not the other way around. He also said that because Universal Credit is a household benefit there is an additional complication in deciding the parameters of the assessment period, due to different payment frequencies in households. For instance, one person in a household may be paid weekly and the other person in the same household may be paid monthly. Mr Couling said:
“what would your assessment period be for that group? It is just too complicated to [have separate assessment periods within the same household] … You can have an annual assessment period …; you go for a weekly assessment period, which means you cannot cope with the frequency of earnings; or you plump, as we did in 2011, for a monthly assessment period.”
30.The monthly assessment period can create an arbitrary relationship between income and needs. Pay dates for in-work claimants do not always match their Universal Credit monthly assessment period:
For couples with two earners the number of potential scenarios is multiplied. Figure 1 sets out how a person paid monthly can receive one, two or no paydays in an assessment period:
Source: Child Poverty Action Group, Rough Justice: Problems with the monthly assessment of pay and circumstance in universal credit, and what can be done about it (August 2018): [accessed 21 July 2020]
31.The Low Incomes Tax Reform Group set out how people can lose out as a result:
“One might assume that the claimant should not be any worse off overall because although they will receive a lower [Universal Credit] payment in one assessment period, where two pays are taken into account, they will correspondingly receive a higher [Universal Credit] payment in the next, where there is no reported pay information. However, the claimant could lose out due to: losing out on the work allowance in the months where the [real time information system] indicates no earnings; hardship caused by an unexpected missed payment of [Universal Credit]; extra pay might end the [Universal Credit] claim, meaning that the claimant will have to claim again, potentially triggering the benefit cap and surplus earnings rules.”
32.Iain Porter, Policy and Partnerships Manager at the Joseph Rowntree Foundation, told us that the rigid design of the monthly assessment period created complexity for claimants:
“If their earnings go up in one period, it results in a cut in their Universal Credit a month later, so there is a built-in lag, in that sense. Because of the rigid structure, their payments are all over the place. Claimants tell us all the time that they value predictability and certainty in payments, and that seems to be something that has got worse under the Universal Credit design. It is simplified in some ways but complex in others.”
33.Gareth Morgan, Managing Director at Ferret Information Systems, told us that, “far from making irregular earnings smoother, Universal Credit takes regular earnings, and outgoings, and turns them into irregular income.”
34.The timing of earnings and how they fit into the monthly assessment period was subject to a High Court Case in 2019, brought on behalf of four single parents, who challenged the rigidity of the assessment period. The High Court ruled that the DWP had wrongly interpreted the Universal Credit Regulations 2013 on how earned income should be calculated. It held that the amount of earned income in respect of an assessment period is based on, but is not necessarily the same as, income actually received in that period.
35.The Department appealed the decision but lost its appeal on 22 June 2020. The Court of Appeal ruled in favour of the single parents on the grounds that the variations in their Universal Credit awards and the loss of their work allowance as a result of their pay dates not matching the assessment period were irrational:
“they lead to significant variations not only in the benefit award but in the income for the household from benefits and salary in a particular assessment period. They cause considerable hardship and they create perverse incentives affecting a claimant’s employment choices, cutting across the policy of the overall scheme.”
36.The judgment requires the Department to make adjustments to the way that the Universal Credit system assesses earnings when claimants’ regular monthly pay dates fall close to the end of their assessment period, in order to avoid the situation in which two paydays fall in one assessment period. The DWP has confirmed its intention not to appeal the decision and it has said that it will begin the process of considering possible solutions.
Provided by an adviser in Leicestershire:
“The client receives 4 weekly pay, and therefore sometimes receives 2 salaries in an assessment period. This means Universal Credit is greatly reduced or not paid at all. The impact is that the client is unable to afford her rent and other priorities in a month where she receives no Universal Credit. The client has already faced possession proceedings and has a suspended order, which may be breached if she does not have the funds to pay. This could result in her eviction.”
37.Far from simplifying the system for claimants, Universal Credit has created complexity. Claimants’ benefit awards should be predictable. They should know the support they will have from month to month, so that they can plan and budget accordingly. However, under Universal Credit the way that income is assessed does not provide predictability. It creates arbitrary fluctuations in income depending on the assessment date and the claimant’s pay date. This is unfair and impractical.
38.The calculation of Universal Credit in each monthly assessment period is based on the circumstances that apply on one day in each month. When a claimant’s circumstances change, such as changes to their housing costs or to the number of people in their household, these circumstances are treated as though they applied to the previous month as a whole. This design can leave families with arbitrary financial shortfalls, or unexpected bonuses, because of the date on which an event occurs.
39.Swansea Council and GIPSIL, a Cooperative and Community Benefit Society, gave an example of the arbitrary relationship between housing costs and Universal Credit awards if claimants move to a new house in the middle of the month. Claimants will have a higher award if they move to a property with higher rent in the middle of an assessment period because the change is backdated to the beginning of the period, which results in a higher assessment of the housing cost element. The opposite can also occur, which can have serious consequences for those on low incomes.
40.This design does not reflect the reality of life in many low-income households. In 2011 Professor Jane Millar, Professor of Social Policy at the University of Bath, and Professor Tess Ridge, an Honorary Professor at the University of Bath, told the House of Commons Work and Pensions Committee that low-income families tend to experience frequent changes in circumstances. Moreover, they said that many people do not report these changes immediately for a range of reasons, and that many changes are inherently short-term or unstable.
41.The benefits system should not cause claimants significant shortfalls in income. The DWP’s whole-month approach to changes in circumstances does not reflect the lives of many low-income households, some of whom undergo frequent, short-term changes of circumstances. Universal Credit needs to be flexible enough to adapt to these circumstances. The DWP must adapt the design of the whole-month approach to changes in circumstances.
42.We heard that the design of the monthly assessment period was too rigid and requires reform but there was no consensus on how this should be achieved. Dr Stephen Brien, a former adviser to the DWP at the time that Universal Credit was introduced, told us that it is possible to move to a fortnightly assessment period to offset some of the problems with the monthly assessment period. He said that he had provided the DWP with a proposal for such a system and that it would have mitigated the fluctuations of payments and would address the discrepancies between those who are paid monthly and those who are paid weekly.
43.Gareth Morgan provided us with another proposal for changing how Universal Credit awards are assessed, which he said could be based on the current monthly assessment period. Under his proposal, the DWP would base its assessment only on earnings related to that month, rather than taking into account all the money that was received during that period regardless of when it was earned. He said that this could be done using earnings data that the DWP already accesses and that it would overcome the fluctuations that occur when different numbers of pay days are included within a single assessment period.
44.Another approach would be to provide claimants with longer-term fixed awards in order to provide greater predictability of income. Fixing awards for three months could be better than the current system, in which awards can change every month. There is a precedent for a longer-period fixed award; for instance, Family Credit was paid at the same rate for six months.
45.This fixed award period should start after the initial month, so that it is not fixed in relation to any final earnings for people becoming unemployed. Fixed awards need not take into account claimants’ increases in income immediately. Any increase could be taken into account after the fixed period has ended and income is reassessed. However, if a claimant’s income falls during the fixed-award period, that claimant may struggle financially until the award is increased accordingly at the next reassessment. This could be addressed by allowing claimants to report to the DWP falls in income or changes in circumstance in order to have a reassessment sooner than the next scheduled reassessment point.
46.This proposal has two main benefits. First, a fixed award for three months provides security and predictability of income for claimants. This would give claimants a secure platform on which to build their employment prospects. Second, it would mean that claimants were not subject to a poverty trap—whereby benefits are reduced as wages rise—with immediate effect. Instead people would have time to adjust.
47.Claimants would have greater certainty and security of income if awards were fixed at the same level for at least three months. This may encourage claimants to increase the number of hours that they work as they would not face an immediate fall in benefit. We believe that this can be done using the current process of assessment but using it to reassess levels of award once every three months only.
48.One downside of this proposal is that if income falls significantly during the award period, claimants may struggle financially until their payments are increased at the next assessment. This could be managed by allowing claimants to report falls in income or disadvantageous changes in circumstances and have an earlier reassessment.
50.Universal Credit is paid in a single monthly sum, in arrears, to households who are expected to manage their own budget. For claimants who cannot manage their single monthly payment there is a risk of financial hardship. The DWP can provide Alternative Payment Arrangements in these circumstances. There are three types:
51.While the number of low-paid workers who are paid weekly has declined, there are many who still have no experience of monthly pay cycles. In the lowest decile of weekly earnings, the share of employees who are paid weekly is now 17% (compared to 44% in 2000), while over three quarters are now paid monthly (up from just over 50% in 2000). Payment frequency data for people who migrate to, or start a new claim for, Universal Credit is less clear cut. Data from a joint research project between the Resolution Foundation and Lloyds Banking Group, published in 2017, show that 58% of new claimants moving onto Universal Credit as a result of moving from employment were paid fortnightly or weekly in their previous job. Neil Couling said that analysis of tax credit data reveals a different pattern compared with the data reported by the Resolution Foundation and Lloyds Banking Group. He said:
“When you look at the tax credit data, which are basically for the people who will be on Universal Credit, and you look at Universal Credit data, you see a very similar pattern: 28% of people are paid weekly under both tax credits and Universal Credit. The majority, 57%, are paid monthly, with about 12% being paid four-weekly and about 3% fortnightly. That has been mirrored between tax credits.”
52.Many new claimants have no experience of monthly pay. The DWP’s desire to make Universal Credit ‘like work’ does not reflect the work that the majority of low-income workers experience. The monthly payment has caused unnecessary budget and cashflow problems for claimants who are used to receiving more frequent wages and those who are out of work.
53.Policy in Practice called for a “claimant centred approach” to payment arrangements, consisting of twice-monthly payments of Universal Credit, starting with an initial payment at two weeks based on the estimated monthly award amount. Citizens Advice told us that people should be given more choice about when and how they are paid. It said people should be allowed to choose a payment schedule that best matches the way their household budgets or aligns their assessment period with their wages and rental/mortgage payments. Dr Ruth Patrick, Lecturer in Social Policy and Social Work at the University of York, and Dr Mark Simpson, Lecturer in Law at Ulster University, told us that evidence from their participatory study of the experiences of early Universal Credit claimants in Northern Ireland had found that dividing awards into two monthly payments made it easier to stretch a low income across the month. They said, “Twice-monthly payments were a better fit with what some individuals had been accustomed to in previous jobs or when on the legacy benefits, or simply helped with budgeting”. Evidence from NHS Health Scotland also drew attention to twice monthly payments. It said that claimants in England and Wales should be given the choice of twice monthly payments, as is the case in Scotland.
54.Paying Universal Credit awards on a monthly basis is a policy choice; it is not an integral part of the design. However, this approach is not working for many claimants who are forced to fit the rigid requirements of the system. We believe instead that the system should accommodate the circumstances of a wide range of people. At the beginning of their claim all claimants should be allowed to choose whether to have their Universal Credit awards paid monthly or twice monthly. It should be possible for claimants to review this decision on an ongoing basis with their work coach.
55.The monthly approach to Universal Credit depends on receiving accurate and timely data from HMRC’s real time information system. Dr Stephen Brien told us that there is a problem with poor-quality real-time information data, which will become a bigger problem as more people migrate to Universal Credit.
56.If an employer pays an employee who is a Universal Credit claimant and the earnings are not included in that month’s award because the employer is late reporting it to HMRC, the claimant will receive too much Universal Credit award in the current claim period but too little the next. This is because the late reported earnings counted in the next claim period leading to a reduction in that period’s award. This makes it hard for claimants to budget and can undermine the perception that work always pays as Universal Credit awards can appear random.
57.The Low Incomes Tax Reform Group told us that the objective of streamlining the system using real time information “broadly makes sense” but that mismatches in the data supplied cause problems:
“For employees, the key to streamlining UC claims was to build the system around HMRC’s PAYE [real-time information] data. This idea broadly makes sense, and has the potential to alleviate burdens from claimants by capitalising on opportunities created by the digital age. However, mismatches in the definition of earned income for UC and the data supplied by HMRC via [real time information] create problems.”
58.HMRC have issued guidance to employers which explains the data aspects of PAYE and the real time information system. However, the Low Incomes Tax Reform Group said that this guidance is non-statutory and therefore not enforceable by the employee or HMRC. Dr Stephen Brien said,
“At the moment employers are not required to validate their payments, and there are still plenty of records coming through without national insurance numbers or the hashing system that was originally set up for [real time information]. So a bit of work needs to be done with HMRC to make sure that employers are recording on time and the right values.”
59.Neil Couling told us that, despite some issues, he was happy with how the real time information system was performing. He said:
“we did 23 million [Universal Credit] calculations up to January 2020. Of those, there were 20,000 disputes, which indicates 0.09% inaccuracy coming through [Real Time Information]. There are issues there. I fund a team inside HMRC to try to help employers understand how to record their [Real Time Information] correctly so that these things do not happen, but I am very happy with the way [Real Time Information] is performing for us, and where the [Real Time Information] is wrong we correct somebody’s claim on that basis.”
60.Problems with the real time information system can disrupt claimants’ incomes even after a claimant has flagged the issue by raising a dispute. Claimants who have received an incorrect Universal Credit payment must contact the DWP. The claimant must then wait for HMRC and the DWP to resolve the dispute and can be left without the disputed income in the meantime.
61.The accuracy of Universal Credit depends on timely and accurate real time information. Some claimants have been unfairly penalised because of reporting errors and mismatches in the data. This is beyond the control of claimants and often they will be unaware of the issue. Poor-quality real time information creates income insecurity for claimants, making it harder for them to budget and manage their income. While the error rate is low it has nevertheless affected tens of thousands of people. The DWP must work swiftly with HMRC to reduce the real time information error rate.
62.The monthly assessment means that there is a five-week wait for the first payment of Universal Credit. We heard that the five-week wait is entrenching debt among claimants, is increasing reliance on food banks and is causing severe hardship amongst vulnerable claimant groups. Dr Matthew Sowemimo, Head of Public Affairs and Social Policy at the Salvation Army, said:
“the minimum five-week period creates a poverty trap. Why does it do that? We know that 67% of people in the bottom fifth income group in the population have no savings, so, intrinsically, they have vulnerability in the waiting period”.
63.Research by the Riverside Group, a housing association, found that claimants face “destitution and financial hardship” as a result of the waiting period for the first payment. The Poverty Alliance, an anti-poverty network, also told us that the five-week wait is contributing to poverty amongst Universal Credit claimants.
64.The five-week wait has had a disproportionate impact on the most vulnerable groups in society. Research by Disability Rights UK, a charity, found that 30% of disabled claimants could not eat regular meals during the five-week wait, 30% could not heat their homes, and 40% went into significant rent arrears. The five-week wait takes no account of higher costs that disabled people face. Scope, a disability charity, told us that disabled people face higher costs of £583 per month on average, meaning that the five-week wait can leave them in a perilous financial situation.
65.The five-week wait can make it difficult for an individual to leave an abusive relationship and can entrench poverty amongst those who have suffered from financial and domestic abuse. Refuge, a charity, said that the five-week wait typically coincides with the point at which people flee from abuse. The waiting period can push people, including children, into poverty at a traumatic and expensive time.
A refuge worker told us:
“The changeover to Universal Credit has caused a significant delay in accessing benefits when women arrive at the refuge. The five-week waiting time means women have to survive with their children with no income, and only a few food bank vouchers. This means that many struggle with whether they’ve made the right decision to leave if they can’t even feed their children on their own.”
A survivor told us:
“I don’t know if they understand the impact that it has when you have to wait so long. Especially in that period when you’re fleeing. I think if they understood the additional stress that it causes you, for something mundane when you’re trying to cope with all these massive issues, I think if they realised the additional pressure that it puts on women who are fleeing, I think maybe they would try and do something to try and quicken the process, or something to help access funds quicker in that first space of time.”
66.The DWP offers advances to offset some of the effects of the five-week wait. Under the current rules, claimants have 12 months in which deductions will be taken from their monthly awards to repay an advance payment. From October 2021 this will be extended to 24 months. For those who take a 100% advance, this will reduce the loan repayment rate from 8% to 4% of their monthly income. The maximum amount taken to repay an advance, and other forms of debt, will be reduced from 30% to 25% of the standard allowance. We explore the effect of deductions more generally on the adequacy of Universal Credit awards in the next chapter.
67.Housing benefit ‘run-ons’ were introduced in April 2018 for qualifying claimants migrating from legacy benefits to Universal Credit. These claimants receive an additional two weeks’ Housing Benefit to support them as they move to Universal Credit. It is not repayable. The average payment for a Housing Benefit run-on is around £230 and the cost to the DWP is around £550 million per year.
68.We received evidence calling for an end to the five-week wait. The Joseph Rowntree Foundation said that the DWP must end the minimum five-week wait before the first payment in order to help Universal Credit “live up to its original objectives and potential to loosen the grip of poverty”. It recommended that upfront non-repayable grants should be targeted at those most in need, estimating that this would cost between £300 million and £1.3 billion over four years, depending on the level of targeting.
69.Bright Blue, a think tank, recommended that all new Universal Credit claimants be offered a one-off grant of at least 25% of their estimated Universal Credit award. Bright Blue said this would help to alleviate the financial impact of the delay of the initial Universal Credit award.
70.Nicholas Timmins, Senior Fellow at the Institute for Government and the King’s Fund, proposed a two-week, “silver hello” as he described it, for entirely new claims and those transferring to Universal Credit from tax credits. The two-week grant would match the two-week run-ons of some legacy benefits for claimants migrating to Universal Credit. He told us that such a grant would reduce the problem of paying back large advances, meaning that the overall adequacy of awards was increased. We were told that this would cost the DWP around £1 billion to £2 billion per year.
71.Nicholas Timmins told us that an initial grant introduced the possibility of fraud as the monthly assessment means that anyone would be able to apply even if they earned too much to qualify. However, he said that there are ways to mitigate that risk. He said that one solution would be for the initial payment to remain an advance but to use existing deferral powers not to reclaim the advance straightaway. After a set period when the DWP could confirm that the claim was genuine the advance would be turned into a grant. If the claim turned out not to be genuine the person would be pursued for repayment using the existing mechanisms.
72.The five-week wait is the primary cause of insecurity in Universal Credit. It entrenches debt, increases poverty and harms vulnerable groups disproportionately. The DWP has introduced some measures to mitigate its worst effects but these fall short of what is needed.
73.The DWP should introduce a non-repayable, two-week initial grant to all claimants. For claimants moving from certain legacy benefits to Universal Credit, this grant could replace the existing system of run-ons. This would provide some security to claimants and would make repayments of advances more manageable. We were told that this would cost the DWP between £1 billion and £2 billion per year.
74.To reduce the risk of fraud, the DWP should initially administer the grant as an advance payment. The two-week payment should then be written off after two months once the DWP knows that the claim is genuine.
75.Universal Credit is paid as a single household payment. While many couples have different sources of income, Universal Credit is paid into one account. This can be an individual account of either partner or a joint account depending on the choice of the couple. The DWP has recently altered the online claim process to ‘nudge’ couples with children to name the ‘lead carer’ as the recipient of Universal Credit.
76.Baroness Stroud, a former special adviser at the DWP, told us that Universal Credit was intended to be neutral on which member of a household would receive the benefit. She said, “The couple have to work out together… how they want to manage their money. The goal was to be gender-neutral and carer-neutral.”
77.Surviving Economic Abuse, a charity, said Universal Credit is “based on the assumption that couples make financial decisions together and that resources (and debts) are shared, but this does not reflect the complex realities of many families.” We were told that when the woman receives the full Universal Credit award this can also increase the pressure on them to be solely responsible for managing the household budget in financially constrained circumstances.
78.Engender, a feminist policy and advocacy organisation based in Scotland, said that rather than being gender-neutral, Universal Credit is “gender-blind” to pre-existing power inequalities that are reproduced in its design.
79.Marilyn Howard said that the single household payment ignores the potential unequal sharing of resources in the household. As a single payment, Universal Credit does not allow for different streams of income to be shared between the adults in a household. Engender said this entrenches inequality between partners in a relationship and ignores gendered dynamics in the household.
80.We were told that in more severe cases the single household payment can risk the safety of women, particularly those who have suffered domestic abuse, by paying all the money to one individual or to a joint account which one partner manages. The single payment may exacerbate the risk of financial control and coercion, and in cases of abuse can mean that people have no access to income with which to escape. Surviving Economic Abuse told us:
“Even in situations where there was no existing economic abuse, the single payment can exacerbate gender inequalities and create the potential for abuse. Research shows that women are three and a half times more likely to be subject to domestic abuse if they find it impossible to find £100 at short notice.”
81.Partners not in receipt of the Universal Credit award have fewer opportunities to gain financial capability skills. Surviving Economic Abuse set out how the single payment encourages financial dependence:
“Denying an independent income to both parties through the single payment is regressive in that it encourages financial dependence, reinforcing the traditional ‘male breadwinner’ model and overlooking women’s right to an independent income.”
82.Split payments can be arranged if abuse is disclosed directly to a work coach through an online Universal Credit account or over the telephone. However, evidence from Women’s Aid in a report written for the TUC found that such disclosure can exacerbate abuse. Surviving Economic Abuse said:
“This is not a realistic or safe solution for victims, as challenging the abuser’s control by making such a request could make the abuse worse. Research shows that, when women experience economic abuse within a context of coercive control, they are at increased risk of domestic homicide.”
83.The Women’s Budget Group told us that split payments must be administered manually as Universal Credit’s IT system is not able to split an award automatically. As of February 2020 there were only 115 split payments out of 2,571,795 households on Universal Credit. The DWP does not provide data on why such split payments are made.
84.Neil Couling, Change Director General and Senior Responsible Owner for Universal Credit at the DWP said he had doubts over the usefulness of split payments to help reduce abuse:
“They live in the same household, and if it is a “he”—and it normally is—he will know that she gets money on the same day as he does. How is splitting the payment going to help the situation? It is a gross simplification to suggest that somehow it is a magic bullet for domestic violence, which is a criminal act and needs to be dealt with by the criminal justice system. A benefit system cannot fix that problem”.
85.We note the difference between joint payments of Universal Credit and individual tax assessments. The Scottish Government is exploring the option of ‘separate payments’, which differ from ‘split payments’ in that they would not depend on the exceptional circumstances under which split payments are arranged currently. The objective of a separate payment is to provide Universal Credit claimants with access to an individual income. Options under consideration include splitting the standard allowance between the individuals in a couple and paying specific elements of an award to the qualifying person, for example paying the child element to the main carer. These separate payments would have to be delivered using the IT system that supports Universal Credit and as such they could be administered UK-wide if successful.
86.The benefits system cannot be expected to provide solutions to domestic abuse. These acts are criminal and only the abuser is responsible for their actions. That said, the design of the single household payment can, in certain circumstances, exacerbate the risk that financial coercion may take place and make it more difficult for people who have suffered from any form of abuse to escape.
87.The current practice of paying Universal Credit into one account does not reflect reality for many families today, who are used to both partners having their own income. This is important both for reducing the risks of financial coercion and domestic abuse more widely and for encouraging more balanced and equal relationships. The Department should review the option of separate payments by default, drawing on the current review in Scotland.
88.We were told that the treatment of the self-employed in the social security system has always been a “huge challenge”. Under Universal Credit, self-employed claimants have the same work allowance and taper rate as employed people. However, the self-employed are subject to a ‘minimum income floor’. Box 4 explains the minimum income floor.
The minimum income floor means that self-employed claimants are treated as earning a certain amount. That amount is set at the equivalent of someone working 35 hours per week (unless they have other responsibilities) at the National Minimum Wage. If an individual earns below this level in any given month they are treated as if they had earned the minimum income floor regardless. If they earn more than the minimum income floor their actual earnings are taken into account. There is no conditionality applied to self-employed people, as long as they are gainfully self-employed (which is tested before the minimum income is applied).
The minimum income floor applies to those making a claim for Universal Credit who have been gainfully self-employed for more than 12 months. After becoming self-employed, an initial assessment is carried out at the claimant’s ‘Gateway Interview’ by Jobcentre Plus work coaches, which seeks to establish that the work is regular, organised, developed and is making a profit as the claimant’s main job.
89.Self-employed claimants must provide monthly ‘cash-in cash-out’ figures. The DWP has made clear that if an individual’s earnings exceed their set minimum income floor, they receive less Universal Credit, with a taper rate of 63%. If they earn less than their minimum income floor, payments are not increased accordingly but remain on the level commensurate to the minimum income floor.
90.There is a tension between providing security to the self-employed and ensuring that the taxpayer does not support businesses that are not viable. Policy in Practice said that the “rationale behind the Minimum Income Floor is that the objective of a benefits system is not to support businesses, and to reinforce the minimum wage”. The minimum income floor seeks to overcome this by encouraging self-employed claimants to grow their business or spend more hours on other forms of employment if their business is financially non-viable. However, Bright Blue said that the 12-month exemption period was too short to establish a profitable business.
91.Citizens Advice Sheffield said that while the design of the minimum income floor can deter “bogus” self-employment, the current arrangements are too harsh and do not account for people who choose self-employment for health or caring reasons.
92.The minimum income floor does not recognise the full range of disparate forms of self-employment. This creates inequalities. Cornwall Housing Ltd drew attention to the disparity between seasonal workers—for whom Universal Credit payments account for fluctuations in income—and self-employed seasonal workers who struggle to meet the minimum income floor during their ‘off-season’. Caridon Landlord Solutions, an advice service, said that the minimum income floor is not realistic for certain types of self-employed people who have fluctuating incomes such as cleaners and taxi drivers.
93.The minimum income floor can create inequalities between men and women. Gingerbread said that single parents, who are overwhelmingly women, are more likely to be self-employed and 11% of single parents in employment are self-employed. The minimum income floor makes it difficult to balance childcare responsibilities alongside starting a business. In some cases it can discourage people from becoming self-employed, which the TUC said can sometimes be the only option for single parents, carers and others who find traditional employment difficult to access.
94.The social security system should not support unproductive and unprofitable businesses in the long-term. However, treating disparate forms of self-employment similarly creates inequalities in the support that they receive. Self-employed claimants who have fluctuating earnings, seasonal patterns, and varying costs and expenses suffer disproportionately from the minimum income floor. The DWP must address this problem to ensure adequate and fair support for those in disparate forms of self-employment. When the temporary suspension of the minimum income floor is lifted these problems will be magnified by the arrival of many more self-employed claimants as a result of the COVID-19 pandemic.
95.Given that the minimum income floor is currently suspended in response to the COVID-19 pandemic, the DWP should measure the impact of its suspension on self-employed claimants and publish the results.
96.The housing element of Universal Credit is normally paid in arrears as part of the overall monthly award. It is paid directly to the claimant who is expected to budget accordingly and make rent payments to the landlord. This contrasts with Housing Benefit, which for council tenants and housing association tenants is paid directly to a claimant’s rent account. There is evidence of an increase in rent arrears among people claiming Universal Credit compared with those still receiving Housing Benefit. A recent quantitative study by Iain Hardie, a doctoral researcher at the University of Glasgow, found a statistically significant relationship between the rollout of Universal Credit in local authority areas across England and the increase in repossession orders from landlords.
97.In evidence, the five-week wait was cited as a significant cause of rent arrears. Peabody, a housing association, found that rent arrears increased by 28% on average after tenants claim Universal Credit. Research by the National Residential Landlords Association for October–December 2019 found 79% of landlords with tenants claiming Universal Credit had experienced tenants going into rent arrears in the previous 12 months. The average amount owed by Universal Credit claimants was £3,149, compared with average debt of £1,973 for all tenants in arrears.
“Jackie lived in a private rental property and had never been in rent arrears. Jackie had always had a good relationship with her landlord. Jackie had to open a Universal Credit claim and did not have any savings to cover her rent during the five week wait period for her first Universal Credit payment, meaning that even if her claim had been straight forward she would have had to go into rent arrears. Unfortunately, there was an issue with her Universal Credit claim, which meant that she did not receive her housing element. Because she was already five weeks behind with her rent, her landlord notified her that he could not wait any longer for her rent payment, and threatened to start the eviction process. Jackie was very worried about being evicted, and felt her only option was to take out a payday loan of more than £600 so she could pay her rent. This saved Jackie from eviction, but means that she now has high interest debt, which will take her years to pay off. During this period, Jackie had to rely on the food bank to help her with food and other essential items.”
98.Alternative Payment Arrangements enable the housing element of Universal Credit to be paid directly to landlords. These are intended to be used only in particular circumstances and are supposed to be temporary. For an Alternative Payment Arrangement to be made, the claimant must be two months or more behind on rent, after which the landlord can apply to have the housing element paid to them directly.
99.The National Residential Landlords Association said that the average waiting time for a direct payment to a landlord under an Alternative Payments Arrangement was eight and a half weeks. As a result, the National Residential Landlords Association said that “it is not difficult to understand why landlords are so concerned about the financial impact of [Universal Credit].” It said that between October and December 2018, 18% of landlords who had tenants in receipt of Universal Credit had applied for an Alternative Payment Arrangement. Of those, 61% had experienced delays in receiving payment.
100.In December 2019, the DWP opened a ‘Landlord Portal’ and ‘Trusted Partner Scheme’ for social landlords. Both schemes have made it easier for social landlords to share data with the DWP and identify tenants who are at risk of rent arrears. The average waiting time for an Alternative Payment Arrangement may reduce with the launch in May 2020 of a new online form, which is to be extended to private landlords as well as social landlords. According to reports, in some cases the revised system could cut the processing time down from in excess of three weeks to two hours.
101.The design of the housing element has led to increased rent arrears and left many claimants feeling vulnerable and at risk of eviction from their home. All claimants should be given the choice, at the beginning of their claim and not when significant arrears have accrued, of having an Alternative Payment Arrangement. If implemented alongside our recommendation to introduce a two-week non-repayable grant at the beginning of a claim, this would help prevent unmanageable rent arrears and provide greater security of housing for all claimants.
102.Universal Credit can include a payment of up to 85% of childcare costs to claimants who work. Claimants can receive a maximum of £646.35 per month for one child or of £1,108.04 per month for two or more children. This was intended to provide more generous childcare support than working tax credit, which has capped support at 70% since 2011. In addition, childcare support under Universal Credit is also available for those working less than 16 hours per week, which was not the case previously. However, the maximum amounts that is reimbursed under Universal Credit for childcare costs were set in 2005 and have not been increased since.
103.The Child Poverty Action Group said that the monthly cap on support means that it is not always worth parents working full time, especially in parts of the country that have high childcare costs such as London. Childcare support is paid in arrears but the costs must usually be paid by the claimant in advance. Leeds City Council told us this is a barrier to parents moving into or remaining in work. It said, “Universal Credit … assumes that the claimant is in a position to find often substantial childcare fees upfront.” Gingerbread, a charity for single-parent families, said the payment of childcare costs in arrears was particularly difficult for single parents during the summer holidays as it made it harder for them to maintain employment.
104.Neil Couling told us that there is an issue with fraud and error when childcare support is paid upfront, as is the case under HMRC-administered tax credits. He said HMRC had advised the DWP to pay childcare costs after receipts are provided. He said the ‘Flexible Support Fund’, which was introduced in 2011, can help parents going into employment when they are unable to afford the first month of childcare costs in advance.
105.The Flexible Support Fund is a grant offered at the discretion of local jobcentres. In certain circumstances, it can be used to claim expenses, such as the first month of childcare costs. The fund is not available to parents already in work who face upfront childcare costs. Save the Children, a charity, said that parents are not able to claim support for childcare through Universal Credit in the same month as receiving support from the Flexible Support Fund. As a result, the problem of affording childcare in advance is moved forward by a month, “as parents will have to pay the next month’s costs upfront without having received support through the childcare element of [Universal Credit].”
106.While the childcare element of Universal Credit is designed to be more generous than the previous system its inclusion in a single benefit was a mistake. Including childcare support in Universal Credit speaks to our central concern with the drive for simplification: it has benefited administrators at the expense of making claimants’ lives more complicated.
107.Including childcare support in Universal Credit has also created further complexity for claimants. Paying costs in arrears has been a barrier to in-work progression. In some cases, it has been a disincentive to work.
108.We recommend that the Department remove childcare support from Universal Credit entirely. This would require exploring options for a separate benefit and for a range of measures to support the supply side–more free hours of care, subsidies for providers, and reduced fees for parents with low incomes. This new benefit could still be delivered via a digital platform.
10 Council Tax Support, Free School Meals given on the grounds of low income (for those in Year 3 and above), and free prescriptions fall outside of Universal Credit. Under legacy benefits, the last two of these were previously accessed through a ‘passporting system’. Universal Credit was initially a passport to Free School Meals, but this was withdrawn in April 2018, and entitlement was then only for those below a set earnings threshold. In some cases, this has reproduced a ‘cliff-edge’ (which cuts out all entitlement to free school meals at a threshold).
11 Capital or joint capital over £6,000 is treated as providing income, known as ‘tariff income’, of £4.35 per month for each additional £250 (or part thereof). For example, capital of £6,250 gives monthly tariff income of £4.35. Capital of £6,250.01 gives a monthly tariff income of £8.70. The lower limit is £6000, so any capital below £6000 is disregarded. The upper limit is £16,000, so anyone with savings over £16,000 cannot receive Universal Credit. See, Revenue benefits, ‘Universal credit: Capital rules’: [accessed 16 July 2020].
13 Written evidence from Policy in Practice ()
14 Written evidence from Joseph Rowntree Foundation ()
15 Written evidence from The Welcome Centre ()
16 Written evidence from Paul Spicker ()
17 Written evidence from Dr Rita Griffiths ()
18 (Prof Sir John Hills)
19 Written evidence from the DWP ()
20 (Paul Gray)
21 (Neil Couling)
22 Written evidence from the Low Incomes Tax Reform Group ()
23 (Iain Porter)
24 Written evidence from Gareth Morgan, Ferret Information Systems ()
25 Summary of the judgment of the Divisional Court, R v Secretary of State for Work and Pensions (11 January 2019): [accessed 20 July 2020]
26 R (oao Johnson) v Secretary of State for Work and Pensions (2020) EWCA Civ 778
27 Child Poverty Action Group, ‘Court of Appeal finds DWP’s treatment of earnings under universal credit irrational in further victory for four single mothers’ (22 June 2020): [accessed 16 July 2020]
28 HC Deb, 25 June 2020,
29 Written evidence from Housing Service, Swansea Council () and GIPSIL ()
30 Professor Jane Millar is a Specialist Adviser to this inquiry.
31 Written evidence from Jane Millar and Tess Ridge to the Work and Pensions Committee (), para 8
32 (Dr Stephen Brien)
33 (Gareth Morgan) and supplementary written evidence from Gareth Morgan ()
34 DWP, ‘Alternative Payment Arrangements’ (13 May 2020): [accessed 17 July 2020]
35 The latest data from the ONS—from April 2019—show 12.6% of all employee jobs are paid weekly, compared with 76.4% which are paid monthly; 28.9% of temporary and casual jobs in the UK are paid weekly, compared with 63% which are paid monthly. See, ONS, ‘Annual Survey of Hours and Earnings (ASHE)-Estimates of the proportion of employee jobs for pay period length by job contract type, UK, April 2019’: [accessed 23 June 2020]. These data are for the whole workforce and will include many workers who are not on Universal Credit.
36 Resolution Foundation, A new settlement for the low paid: Beyond the minimum wage to dignity and respect (June 2020) p 19: [accessed 17 July 2020]
37 Resolution Foundation, Universal Remedy: Ensuring Universal Credit is fit for purpose (October 2017) p 6: [accessed 17 July 2020]. The data are not a representative sample of the Universal Credit case load and are drawn from a sample of Universal Credit claimants who had Lloyds bank accounts.
38 (Neil Couling)
39 Written evidence from Policy in Practice (); also see Policy in Practice, ‘Financial resilience and the transition to Universal Credit’ (September 2019): [accessed 17 July 2020].
40 Written evidence from Citizens Advice ()
41 In Northern Ireland Universal Credit is paid in two monthly payments by default; the assessment period remains the same.
42 Written evidence from Ruth Patrick, Mark Simpson and UC:Us ()
43 Written evidence from NHS Health Scotland ()
44 There is a risk that arrears could increase in some cases when claimants opt for twice monthly payments. For instance, claimants who have twice monthly payments face the possibility that they will not be able to pay their bills and rent out of the half award, depending on when they fall. For those who accept twice monthly payments, but do not have payments of housing costs direct to the landlord, they must make sure they are able to pay rent at the end of each month out of the payments they receive.
45 (Dr Stephen Brien)
46 Written evidence from the Low Incomes Tax Reform Group ()
48 (Dr Stephen Brien)
49 (Neil Couling)
50 DWP, ‘Universal Credit and employers: frequently asked questions’ (12 August 2016): [accessed 17 July 2020]
51 CPAG, ‘Universal credit claimants blocked from challenging DWP decisions’ (19 July 2019): [accessed 17 July 2020]
52 Data from March 2020 show that 12.8 million households in the UK have no savings or less than £1,500 of savings. See The Money Charity, The Money Statistics (March 2020) p. 3: [accessed 17 July 2020].
53 (Dr Matthew Sowemimo)
54 Written evidence from the Riverside Group Ltd. ()
55 Written evidence from the Poverty Alliance ()
56 Written evidence from Disability Rights UK ()
57 Written evidence from Scope ()
58 Written evidence from Refuge ()
59 DWP, ‘New to Universal Credit: Housing’: [accessed 16 April 2020]
60 IFG, Universal Credit: Getting it to work better (March 2020) p 11: [accessed 17 July 2020]. From July 2020 similar non-repayable, two-week run-ons for those already on JSA, income support and ESA will take effect. This is expected to cost around £250 million a year. See HM Treasury, Budget 2018, HC 1629, October 2018, Table 2.1, Item 14): [accessed 17 July 2020].
61 Written evidence from the Joseph Rowntree Foundation ()
63 Written evidence from Bright Blue ()
64 IFG, Universal Credit: Getting it to work better (March 2020) p 11: [accessed 17 July 2020]
65 (Nicholas Timmins)
66 (Nicholas Timmins); also see Letter from the Institute for Fiscal Studies to the Economic Affairs Committee (8 June 2020): [accessed 20 July 2020].
67 (Nicholas Timmins)
68 See DWP, ‘Universal Credit: personal welfare’ (11 January 2019): [accessed 17 July 2020] and oral evidence taken before the Work and Pensions Committee, 16 October 2019 (Session 2019), (Dr Thérèse Coffey MP).
69 (Lady Stroud)
70 Written evidence from Surviving Economic Abuse ()
71 (Dr Rita Griffiths)
72 Written evidence from Engender ()
73 Written evidence from Marilyn Howard ()
74 Written evidence from Engender ()
75 Written evidence from Surviving Economic Abuse ()
77 DWP, ‘Alternative Payment Arrangements’ (13 May 2020): [accessed 17 July 2020]
78 TUC, Unequal, trapped & controlled: Women’s experience of financial abuse and implications for Universal Credit (March 2015): [accessed 17 July 2020]
79 Written evidence from Surviving Economic Abuse ()
80 Written evidence from Women’s Budget Group ()
81 DWP, ‘Stat-explore: Split payment’, available at: [accessed 22 June 2020]
82 (Neil Couling)
83 Women’s Budget Group, Benefits or barriers? Making social security work for survivors of violence and abuse across the UK’s four nations (June 2019) p 17: [accessed 17 July 2020]
84 (Paul Gray)
85 The minimum income floor is currently suspended in the wake of the COVID-19 pandemic. This change applies to all Universal Credit claimants and will last for the duration of the pandemic.
86 DWP, Universal Credit: Impact Assessment (December 2012), p 35: [accessed 17 July 2020]
87 Written evidence from Policy in Practice ()
88 Written evidence from Bright Blue ()
89 Written evidence from Citizens Advice Sheffield ()
90 Written evidence from Cornwall Housing Ltd ()
91 Written evidence from Caridon Landlord Solutions ()
92 Written evidence from Gingerbread ()
93 Written evidence from the Trades Union Congress ()
94 Universal Credit also supports claimants with mortgages and may provide help towards the cost of a mortgage. Help with mortgage payments is provided as a loan. In other words, the claimant will be required to pay back the loan if the property it was claimed for is sold or transferred to someone else. Claimants can get help with mortgage payments only if they have been claiming Universal Credit for 39 weeks or more, with no breaks or earned income in that time. At the point the claimant begins to earn income, help with mortgage support ceases. Any break in the Universal Credit claim, or newly earned income, means that the claimant must claim Universal Credit for a further 39 weeks with no breaks or earned income before they can receive help with mortgage payments again. See DWP, ‘New to Universal Credit: Housing’: [accessed 23 June 2020].
95 See The Trussell Trust, #5WeeksTooLong: Why we need to end the wait for Universal Credit (September 2019) pp 22–23: [accessed 17 July 2020]; Peabody, The Impact of Universal Credit: Examining the risk of debt and hardship among social housing residents (2019): [accessed 17 July 2020] and House of Commons Library, Housing costs in Universal Credit, Briefing paper, , 8 May 2019, p 4.
96 Iain Hardie, ‘The Impact of Universal Credit Rollout on Housing Security: An Analysis of Landlord Repossession Rates in English Local Authorities’, Journal of Social Policy, 2020, pp 1–22 available at: [accessed 20 July 2020]
97 Written evidence from Peabody ()
98 Written evidence from the Residential Landlords Association and National Landlords Association ()
99 DWP, ‘New to Universal Credit: Housing’: [accessed 16 April 2020]
100 Written evidence from the Residential Landlords Association and National Landlords Association ()
101 The Landlord Portal allows social landlords who are registered users to verify rent and submit managed payment requests for an APA through the Landlord Portal, rather than through the established email processes. A Trusted Partner is a social landlord appointed to identify tenants who are unlikely to pay their rent. They assess the need for a Managed Payment to landlord where appropriate, and arrange for support so that the tenant, in time, takes responsibility for paying their rent. The Landlord Portal and the Trusted Partner Scheme are aligned: once a landlord takes on Trusted Partner status, they will be given access to the Landlord Portal. The Universal Credit Landlord Portal is available to registered social landlords only and not to private landlords. It is currently available only to tenants making a new claim for Universal Credit, or to established claimants who declare a change of circumstances and require a rent verification. See DWP, ‘Guidance: Landlord Portal and Trusted Partner Scheme for social landlords’ (30 December 2019): [accessed 17 July 2020].
102 Marc Da Silva, ‘Universal Credit: New online form allows landlords to apply for direct rent payment’, Landlord Today (27 May 2020): [accessed 17 July 2020]
103 DWP, ‘New to Universal Credit: Childcare and Children’: [accessed 15 April 2020]
104 Before 2011, childcare support was capped at 80% under working tax credits.
105 Written evidence from Child Poverty Action Group ()
106 Written evidence from Leeds City Council ()
107 Written evidence from Gingerbread ()
108 (Neil Couling)
109 Written evidence from Save the Children ()