New universal credit claimants ‘will get no money before Christmas’

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Powered by Guardian.co.ukThis article titled “New universal credit claimants ‘will get no money before Christmas'” was written by Patrick Butler Social policy editor, for theguardian.com on Thursday 16th November 2017 13.31 UTC

Claimants signing on to universal credit from this week will not receive any income before Christmas because of the existing 42-day wait for payment, putting the finances of tens of thousands of households at risk, according to a housing association.

The Peabody Trust estimates that nationally more than 60,000 households, containing more than 40,000 children, will make new universal credit claims in the six weeks before Christmas, and so will not receive any income in the run-up to the festive season.

The trust calculated that even if the wait were to be cut to four weeks, 27,000 children across 40,000 households would still be affected. Reducing the wait to two weeks would leave an estimated 20,000 households, containing 14,000 children, at risk of having no cash over Christmas.

MPs and peers will debate universal credit on Thursday afternoon, amid speculation that ministers were planning to cave in to mounting pressure and cut the current minimum six-week waiting time to four weeks.

What is universal credit?

Universal credit is the supposed flagship reform of the benefits system, rolling together six benefits (including unemployment benefit, tax credits and housing benefit) into one, online-only system. The theoretical aim, for which there was general support across the political divide, was to simplify the benefits system and increase the incentives for people to work, rather than stay on benefits.

How long has it been around?

The project was legislated for in 2011 under the auspices of its most vocal champion, Iain Duncan Smith. The plan was to roll it out by 2017. However, a series of management failures, expensive IT blunders and design faults have seen it fall at least five years behind schedule.


What is the biggest problem?

There is a minimum 42-day wait for a first payment endured by new claimants when they move to universal credit (in practice this is often up to 60 days). For many low-income claimants, who lack savings, this in effect leaves them without cash for six weeks. The well-documented consequences for claimants of this are rent arrears (leading in some cases to eviction), hunger (food banks in universal credit areas report striking increases in referrals), use of expensive credit, and mental distress.

Are there other problems?

Plenty. Landlords are worried about the level of rent arrears racked up by tenants on universal credit. Unchecked, this will lead to a spike in evictions. Claimants complain that universal credit is bafflingly complex, unreliable, and difficult to manage, particularly if you are without internet access. Multibillion-pound cuts to work allowances imposed by the former chancellor George Osborne mean universal credit is far less generous than originally envisaged. According to the Resolution Foundation thinktank, about 2.5m low-income working households will be more than £1,000 a year worse off when they move on to universal credit.

 

The lengthy wait for a first payment has been blamed for spiralling rent arrears and rising food bank referrals. More than half of new low-income claimants are used to budgeting on a weekly or fortnightly basis, and few have savings.

Although ministers have signalled that they are prepared to shorten the waiting time to four weeks, campaigners have warned this may still be too long for many households, and that further cuts to the waiting time should be considered.

On Wednesday it emerged that a private landlord in Grimsby had formally warned tenants on universal credit that it would move to evict them if they were unable to meet rent payments. New claimants in north-east Lincolnshire will move to universal credit on 13 December.

Ministers have insisted that the impact of the wait for a first payment is mitigated by the availability of advance payments. However, a recent MPs’ report concluded that the loans offered only limited help because claimants could borrow only the equivalent of up to two weeks’ universal credit income to tide them over the 42-day wait.

The full universal credit service was rolled out on Wednesday in Birkenhead, the Merseyside constituency of the Labour MP Frank Field. He has warned that the local Wirral food bank plans to stockpile an extra 15 tonnes of food to cope with expected demand for emergency parcels over the next few weeks.

The new system was also scheduled to roll out out on Wednesday in Newport, Basildon and Peterborough. Over the next few weeks they will be followed by north Ayrshire, Brighton, Gloucester, Oxfordshire, Birmingham, Manchester, Reading, Wolverhampton and Swansea.


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