Universal Credit Failing Millions Say Lords Committee

A cross party report by the House of Lords’ Economic Affairs Committee has said that Universal Credit is “failing millions of people”. The committee took evidence from charities and benefit claimants during its investigation in which it also found the Tories flagship benefit’s design responsible for “soaring rent arrears and the use of food banks”. This is yet another damning report on the failing benefit that the government are already discounting.

The Lords’ Economic Committee report could not come at a worse time for the government. The COVID-19 pandemic has brought millions of people on Universal Credit and opened their eyes to the reality of the broken system.

The committee’s chair, Tory Peer Lord Forsyth, said the committee broadly agreed with universal credit’s original aim of simplifying the benefits system but added;

“However, in its current form, it fails to provide a dependable safety net. It has led to an unprecedented number of people relying on food banks and not being able to pay their rent.”

The report also placed blame on the past ten years of austerity saying it had caused “widespread poverty and hardship” for the most vulnerable.

Broken By Design

The report apportions much of the blame to the design of Universal Credit. They say the five-week wait for the first payment is pushing people into poverty and should be cut, and that the monthly payment enforced by the DWP is not representative to how people live. They called on the Department for Work and Pensions (DWP) to allow claimants the option of fortnightly payments as soon as possible. It is worth mentioning that this option is already available to claimants in Scotland under devolved powers.

On the five-week wait, the report says it;

“entrenches debt, increases extreme poverty and harms vulnerable groups disproportionately”.

While they admit that urgent payments (advances) are readily available, they do not seen them as helpful. The Government have long tried to argue that advances help claimants in the short term, while ignoring that they push people into debt in the long term. The report highlighted how 30% of a claimants payment can be taken leaving them with little to survive on. Along with deductions for an advance, millions of claimants have seen historical Tax Credit debts deducted too. The report said;

“The Government is using Universal Credit to recover debt, mostly £6 billion of historic tax credit debt.

“Deductions of up to 30 per cent of the standard allowance, and in some cases more, can be taken from claimants.

“This has left many households with less money than they are entitled, often at no fault of their own.”

Another issue the Committee found damaging to claimants, is the way monthly awards are calculated. Currently Universal Credit is paid is arrears, the amount can vary dramatically if a claimant has any unexpected change of circumstances, or happens to be paid twice in one qualifying period. They Lords’ recommended that awards be calculated at three monthly intervals to take into account changes that can occur monthly.

Risk To Victims of Abuse

Universal Credit goes into one account per household but the committee says there should be options for separate payments per person. I have previously highlighted how Universal Credit rules for Domestic Abuse victims are draconian and outright dangerous. They require victims to prove they’ve been abused before they can receive help. On single household payments the report says:

“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.

“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.”

Childcare Problems

The report is scathing when it comes to childcare support and they recommend that it be removed from Universal Credit completely.

“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.

“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.

“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.”

The issue of childcare payments being paid in arrears has long been raised. The Department for Work and Pensions (DWP) state that parents can access the non repayable Flexible Support Fund via their work coach to cover the initial costs however, this in itself adds an extra layer of complexity that is unnecessary.

The two-child limit also came in for criticism for putting 300,000 children at risk of poverty purely because they’re in a bigger family. They recommend the DWP;

“We urge the Government to remove the two-child limit and consider introducing tapered awards for families with more than two children.”

Pensioners Lose Out Due to Changes

In May 2019, the DWP changed the rules for Pension Credit. The new rules meant that if a couple had one person under retirement age, they would have to claim Universal Credit. As I wrote at the time, this would see couples who happen to be different ages, up to £7,300 worse off. The report highlighted how couples are being treated unfairly compared with single pensioners.

“The partner who is eligible for a state-age pension is treated unfairly compared with single pensioners and couples of state-pension age.

Sanctions Don’t Work

Perhaps one of the most important parts of the report is the section on benefit sanctions. They criticized the government for reintroducing sanctions so quickly after lockdown and before the UK is even safely through the pandemic. The Lords’ went on to blast sanctions in general saying;

“The UK has some of the most punitive sanctions in the world but the evidence that sanctions achieve positive behavioural change and lead to better employment and earnings outcomes is mixed.

“Removing people’s main source of support for extended periods risks pushing them further into extreme poverty, indebtedness and reliance on foodbanks. We welcome the reduction in the DWP’s use of sanctions since 2017 and reducing the maximum sanctions length from six months to three.

“The DWP should expedite its work on introducing a written warning system before applying a sanction. This would ensure sanctions are a last resort.

“There is a great deal of evidence to show that sanctions and the threat of sanctions affect people’s mental health. The DWP’s refusal to examine the extent of these effects endangers claimants. The DWP must meet the commitment it made in 2013 to evaluate the impact of conditionality and sanctions on claimants’ mental health and wellbeing.”

While the report does say that they agree with the overall premise behind Universal Credit, you can be left with no illusion that are clear the current system is not fit for purpose. The DWP on its part issued a response to the report as follows, as can be seen, they are more concerned in pointing out what they do, rather than what they don’t. This report, like the numerous others, is unlikely to change anything. With millions more on Universal Credit than was planned due to the COVID-19 pandemic, the real test of the system is only just begining.

Welfare delivery minister Will Quince said the government was “committed to supporting the most vulnerable” and that Universal Credit had; “defied its critics in unprecedented and unforeseeable circumstances” during the coronavirus pandemic, adding: “The case for Universal Credit has never been stronger.”

The minister added:

“We welcome the acknowledgement by the Committee that Universal Credit is here to stay and we will consider their recommendations in detail.”

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