The six-week wait for benefit payments under universal credit is a major obstacle to its success, an influential parliamentary committee has said, putting further pressure on the government to make changes to the flagship welfare reform.
Theresa May has faced weeks of criticism over the roll-out of universal credit from Labour as well as Conservative backbenchers and calls for a review from the former prime minister John Major.
Key to the criticism is the mandatory six-week wait for payment which is imposed on claimants, which the government says is aimed at mirroring the wait for a paycheque if the claimant were in work.
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.
About 8% of current benefits claimants are on UC, which will increase to 10% by the end of January. The rollout is due to be completed by 2022.
On Thursday, the cross-party work and pensions select committee said there was evidence the six-week wait was causing “acute financial difficulty”.
In its conclusion, the report said: “The baked-in six-week wait for the first payment in universal credit is a major obstacle to the success of the policy.
“In areas where the full service has rolled out, evidence compellingly links it to an increase in acute financial difficulty. Most low-income families simply do not have the savings to see them through such an extended period.”
The work and pensions secretary, David Gauke, has said jobcentres would flag to applicants the availability of emergency advance payment loans, which the committee said were “not a solution to a fundamental flaw in the current design”.
The report said the six-week wait for payment could not be said to be similar to working. “Universal credit seeks to mirror the world of work, but no one in work waits six weeks for a monthly paycheque,” it said.
The Conservative MP Heidi Allen, a member of the committee who has been one of the most vocally critical of the scheme, said there was support for universal credit as a concept, because it simplified the benefits system, but said the six-week wait did not honour the reform’s true intention.
“To truly represent the world of work, the payment cycle must mirror how the majority of people are paid, ie monthly,” she said. “Universal credit will only be the success it deserves to be if it works with claimants to find work, and not against them.”
The committee’s chair, the Labour MP Frank Field, said the waiting period was cruel and no minister had been able to give adequate justification.
“Such a long wait bears no relation to anyone’s working life and the terrible hardship it has been proven to cause actually makes it more difficult for people to find work,” he said. “It is not too late for the government to avert a Christmas disaster. They must act now.”
At prime minister’s questions on Wednesday, May defended the gradual rollout of the policy which she said allowed ministers to test and learn from how the system was working. However, the committee said while universal credit had “great merits as an idea” the gradual roll-out should not be seen as a just a “technical exercise”.
“Flaws in the design, operation or implementation of UC, however temporary, can have very serious consequences for individuals and families,” the report said.
A DWP spokesperson said: “Universal credit lies at the heart of our commitment to help people improve their lives and raise their incomes. It provides additional, tailored support to help people move into work and stop claiming benefits altogether.
“The vast majority of claimants are paid in full and on time but no one who needs support has to wait six weeks. When people apply for universal credit they are advised about the maximum advance they can receive, and that they can repay over six months. Once we know someone needs an advance, they can get it within five days or on the same day if they are in urgent need.”
