BBC News reports: “Universal Credit has proved controversial almost from the beginning, with reports of IT issues, massive overspends, an average 200% increase in rent arrears and administrative problems.” Some may say it’s time to scrap Universal Credit.
What is it?
Universal credit is a new benefit that is gradually replacing working tax credit, child tax credit, job seekers allowance, income support, income-related employment & support allowance, and housing benefit. All to be merged into one payment paid out on a monthly basis.
It’s being rolled out across the UK in stages and has been eased into existence gently to test if the system works. The system has been made significantly less generous since it was announced. Now concerns are being raised that 3.2 million working families will lose £48 a week — about £2,500 a year — compared with the old system.
Why do we need it?
It was designed to make claiming benefits simpler.
A single Universal Credit payment is paid directly into claimants’ bank accounts to cover the benefits for which they are eligible.
Claimants then have to pay costs such as rent out of their Universal Credit payment (though there is a provision for people who are in rent arrears or have difficulty managing their money to have their rent paid directly to their landlord).
Labour has promised it would overhaul the system, with a spokesperson saying: “Universal Credit in its current form simply isn’t working, it is causing greater poverty and anxiety wherever it is rolled out, and we are committed to a root-and-branch review of the social security system.”
Work and Pensions Secretary Esther McVey told the BBC: “I have said we made tough decisions and some people will be worse off.”
But she said: “If those people can work, what they will be losing is benefits, but what they have got now is work. Work will be paying. Their wage will be increasing.”
Better or for worse?
Universal Credit allowances are to increase by £1,000 a year for working families and those with disabilities meaning an extra £630 per year. At the moment if you are employed your Universal Credit reduces as you earn. For every £1 you receive through wages your payment in UC reduces by 0.63p. If on the other hand you or your partner are responsible for a child or living with a disability which affects your ability to work, you are eligible for the new Work Allowance.
Universal Credits are being introduced gradually across the country. If claimants are claiming tax credits and start to claim Universal Credit in the same tax year, the tax credit award will stop, leaving a gap of around 5 weeks, during which they will receive no money at all. For people with no savings, this can cause enormous hardship, as Universal Credits are at the moment paid monthly and this gap of 5 weeks could be catastrophic for some families. It is therefore more crucial than ever for families to budget ahead of time for things such as rent and bills. This can be tough without any help. who may have no other option but to take out more short-term, high interest and potentially dangerous loans to cover the payments gap.
As part of the budget give away, Chancellor of the Exchequer, Philip Hammond has promised an extra 1 billion pounds over the next 5 years to provide additional protection for people transferring over from tax Credits to Universal Credits. This will reduce the time that claimants have to wait for their money when the changeover is made from 4–6 weeks down to 2–3. The system, however, does offer loans to cover the gap in funding that would then be paid back over a year interest-free via the Universal Credit payments, slightly reducing the number of benefits the claimant would receive. This, of course, depends on how many claimants know about the free interest service on offer.
What is causing the delays?
The National Audit Office, which oversees government spending, said that the universal credit programme was “driven by an ambitious timescale” and that it had suffered from “weak management, ineffective control and poor governance”.
Most of the delays caused are due to the claimant:
- Not submitting the claim promptly (Sanctioned for missing appointments)
- Not providing the information required
- Not being able to satisfy the identification checks
Coastline Housing
Housing associations across the UK are warning that the flagship benefit system is “fundamentally flawed” after research revealed 73% of tenants on Universal Credit are in debt, compared with 29% of all other tenants.
Rebecca Jinks from Coastline Housing — “At the moment Coastline Housing has 230 Universal Credit Claimants, the rent arrears at the moment is very low. The claimants who are transferring over to UC are finding that the delays are causing them to increase their personal debt to bridge the gap.”
Johnny Mercer MP for Plymouth in Devon said: “Universal credit has the potential to help people out of poverty by removing the disincentives to move into work from the previous system and allowing them to reach their full potential. A modern compassionate Conservative government simply must get it right”
Coastline Housing is working with their tenants and triaging the support they give, by offering the first contact by phone following up by a home visit to discuss their circumstances in more detail and then tailoring the support they provide to the needs of the claimant.
Rebecca Jinks from Coastline Housing feels that they will see more people struggling once the full 2019/2020 migration over to Universal Credits, takes place. This will be the longer-term claimants, who have been on Employment and Support Allowance for years. Currently, many claimants are working and just receiving Universal Credits instead of Tax Credits, so the impact is far less for them.
Johnny Mercer MP says, “This government can make the system better by smoothing the path from welfare into work with a fresh investment in Universal Credit in this budget.”
He also argued that most people in his Plymouth constituency and around the country want to work. Universal Credits is all about giving people back their autonomy to manage their own budget, have a job without losing credits, and helping them to live a debt free life.
The chancellor Philip Hammond having now delivered his budget has said that Universal Credits are here to stay. His budget has produced some real time improvements that will roll out shortly. He has also tried to put some more money into the system to smooth out the areas that were causing problems, like the length of time it takes to change policies. He is looking into doing the 60-day interest-free loans rollout as soon as possible.
Claiming tax credits
If you are not yet claiming Universal Credit then you may be eligible to claim Tax Credit
If you want to claim tax credits, you’ll need to fill in the TC600 form mentioned above, make a request online or alternatively call the tax credit helpline on 03453003900.
I want to find out more about how to claim for tax credits on the GOV.UK website.
We hope this has been a helpful post for those affected by the recent changes in Tax Credit and generally helped clarify the topic for those unsure. Next, why not read our guide to Claiming Tax Credits in 2018 and beyond.
