The new Work & Pensions Select Committee report on Universal Credit (UC), which I attach to this, highlights both a potential improvement to UC and why such reports are more important in a hung Parliament.
First the report itself. Since UC attempts to mirror the world of work, payments are not fortnightly (as some legacy benefits have been), but monthly. But in practice, not least the application processing time, the agreed DWP first payment is after six weeks – so a longer wait than monthly payments.
The Select Committee recommends that payments be made monthly, and so is different from those sometimes made by critics of UC – make payments fortnightly, to mirror some of the benefits system – and more logical.
The government’s view is that it will continue to make changes where and when they’re needed, but has been quiet so far on this.
As I’ve written before the real issues for those in low paid employment are debt, resilience and cash flow. If someone comes onto the UC system with masses of debt and rent arrears then there is going to be trouble ahead.
So speeding up the first payment, on top of the now better advertised ‘advance’ system could make a real difference to some.
The DWP has promised to continue to monitor carefully the underlying problems of the hardest pressed UC claimants, and look at making changes in response to evidence. That is the benefit of a slow roll out that takes the number of claimants (of the assumed future total) from 8% to 10% by the end of January 2018.
This proposal might make a significant difference and I hope DWP will study its potential impact on vulnerable claimants over the next few weeks and months: and implement the recommendation if it would enhance UC’s success.
When a Parliament is effectively hung, party political impasse is common. The mathematics of a vote inevitably means not all Opposition Votes are voted on. The process of Parliament gets shoutier.
So one way through this is through the work of Select Committees – whose reports are the result of cross party work and at their best road tested in advance.
This was true of the report I co-chaired in the summer on Supported Housing, on which a government announcement will be made next week and where I hope most of our recommendations will be adopted: and it might also be true of this report on UC. This is a trend which will grow in this Parliament.
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In an urgent, unanimous report published on 26 October 2017, the Commons Work and Pensions Committee says Government should aim to cut the baked-in six week wait for the first payment of Universal Credit to a month, as this is a major obstacle blocking the potential success of the policy:
- In areas where the full service has rolled out, evidence compellingly links it to an increase in acute financial difficulty, with widespread reports of overwhelmed food banks, problem debt and steeply rising rent arrears and homelessness.
- Most low-income families simply do not have the savings to see them through this extended period without resorting to desperate measures
Advance Payment loans
While increased availability of Advance Payment (AP) loans of up to half the estimated monthly award are welcome, the Committee says they are no solution to a fundamental flaw in the current design:
- Universal Credit seeks to mirror the world of work, but no one in work waits six weeks for a paycheque.
- The Committee calls on Government to reduce the standard waiting time for a first Universal Credit payment to one month. This would be entirely consistent with the monthly in arrears philosophy of Universal Credit.
Reduce wait to one month
The arguments for a reduction are compelling:
- More than half of low and middle income families have no savings, and two thirds have less than a month’s worth
- Half of people earning £10,000 or less per year are not paid monthly. Many households simply do not have the resources to get by for six weeks, or in a minority of cases far longer, without resorting to desperate measures
- The 7 waiting days at the very beginning are purely a money-saving measure. They do not mirror the world of work – as the Centre for Social Justice has pointed out, no one works the first week of a job for free – and unlike the previous, standard benefit waiting days, they also leave claimants without housing costs or child benefit for the period
Minimising the processing period
- The Advance Payments put forward by Government to mitigate some of the unwelcome consequences of the current design of Universal Credit, but do nothing to address their underlying foundations
- Advance Payments are loans, repayable in addition to other deductions such as rent arrears which can be up to 40% of the standard Universal Credit allowance. This will be difficult or impossible for some claimants to afford