Communities

Universal Credit in Wales, part 2: the problems and recent developments

This article is the second of two parts. The first covers the design, rollout and impact. This article explores the various issues with Universal Credit and recent developments.

24 October 2017

Darllenwch yr erthygl yma yn Gymraeg | View this post in Welsh

This article is the second of two parts. The first covers the design, rollout and impact. This article explores the various issues with Universal Credit and recent developments.

The UK Government is facing numerous calls from politicians and charities to pause the accelerated rollout of Universal Credit (UC) until issues are resolved with waiting times and rent arrears. The Assembly’s Equality, Local Government and Communities Committee added their voices to these calls in a recent letter to the UK Government. Issues range from the practical implementation to the fundamental design of the benefit.

Waiting time

‘Waiting days’ are not new- they are designed to discourage people applying for benefits to cover short-term periods of unemployment or sickness. For example, the waiting time for Jobseekers’ Allowance (JSA) used to be 3 days, which was then increased to 7 days. Now JSA is being replaced by UC, which is paid monthly in arrears, this waiting period has dramatically increased to 5 weeks (7 waiting days plus one month in arrears).

Up to 8% of claimants are waiting even longer than the 42 day waiting period, according to DWP statistics. In evidence to the House of Commons Work and Pensions’ Committee’s inquiry into Universal Credit, the Trussell Trust stated that in 2016-17 foodbanks “in areas of full Universal Credit rollout saw a 16.85% average increase in referrals for emergency food, more than double the national average of 6.64%.”

Advance payments are available, but these are loans that have to be paid back through deductions to UC payments at a rate of up to 40% of a UC payment for up to six months. Citizens Advice Cymru has suggested that the long waiting time for UC will increase demand for the Welsh Government’s Discretionary Assistance Fund.

Sanctions

Sanctions are reductions or suspensions of benefit payments because a person has not met the conditions of UC. This could involve failing to attend jobcentre appointments or refusing to accept a job.

UC claimants are placed into four groups based on their ability to work. Different levels of sanctions apply to each group. People in the ‘all work-related requirements group’ can receive the highest level sanction, with payments stopped or cut for 91 days for their first sanction and up to 1,095 days for a third.

Between August 2015 and December 2016, 8,667 UC sanctions were applied to people on UC in Wales. The vast majority were the second lowest level of sanction.

Research highlighted in the ELGC Committee’s recent inquiry suggests that a sudden loss of income by removing benefits could result in “severely detrimental financial, material, emotional and health impacts”.

Direct payments

Universal Credit is given directly to claimants to cover their costs, including housing, which was traditionally paid directly to landlords for claimants in social housing.

Direct payment of the housing element of UC to social housing tenants is controversial. Recent reports  found that three London councils whose tenants have already been moved onto UC had built up about £8 million in rent arrears, meaning more than 2,500 tenants were now at risk of eviction.

The UK Government introduced Alternative Payment Arrangements in 2013, which allow UC housing costs to be paid to landlords in some circumstances.

The Scottish Government used its new welfare powers to give claimants more choice over how and when UC is paid. The Universal Credit (Claims and Payments) (Scotland) Regulations 2017 allows tenants to request direct payments for rent and services, and to request twice monthly payments.

Household dynamics

UC is paid on a monthly, household basis, whereas traditionally benefits have been paid to individuals every two weeks. The Women’s Budget Group  and Welsh Women’s Aid have argued that the change reinforces the idea of a male breadwinner, discourages second earners and is likely to increase women’s financial dependence on their partners, making them more vulnerable to financial and other abuse.

Restrictions for families with more than two children

In 2015, the UK Government announced that the family element of UC (which awards extra money for each child) would be restricted to the first two children in a family. The impact assessment acknowledged that this measure was most likely to affect women and ethnic minority families. The Welsh Government’s impact assessment estimated that there were “117,000 families with 2 or more children in receipt of tax credits in Wales in 2013-14 [and] these families will be affected if they have any more children after April 2017.”

Withdrawal of entitlement for housing costs for young people aged 18-21

From April 2017, young people age 18-21 years are no longer entitled to the housing costs element of UC (with some exceptions). The measure aims to “ensure young people in the benefits system face the same choices as young people who work and who may not be able to afford to leave home”. Some organisations have raised concerns, saying that it represents the removal of an “essential safety net” for young people at risk of homelessness.

The UK Government’s equality analysis shows that men are more likely to be affected by the policy. The Welsh Government estimated that this policy would affect around 1,000 people in Wales.

Work allowances

The amount a claimant receives in UC is withdrawn when they start work, at a rate of 63p per pound earned (this was dropped from 65p from April 2017). However, claimants can keep some of their earned income (the ‘work allowance’) before it begins to affect their UC. The work allowance was dropped from £6,420 to £3,850 in the UK Government’s 2015 summer budget.

The Welsh Government estimated that the change to the work allowance would affect 130,000-160,000 families in Wales.

Solutions

Citizens Advice published a report detailing how UC can be ‘fixed’ in July 2017, including: removing the waiting period, making the 55p a minute helpline free of charge (which was accepted by the UK Government on 18 October), and offering everyone options about how their award is paid.

In April 2017 the Joseph Rowntree Foundation published a briefing providing information and evidence on the latest developments as Universal Credit rolls out across the UK. It also provides recommendations on how the system could be improved. The House of Commons Work and Pensions Committee also recently reopened its inquiry into the UC rollout.

The House of Commons Library maintains a regularly updated briefing on the rollout of Universal Credit.


Article by Hannah Johnson, National Assembly for Wales Research Service