Universal Credit welfare scheme “punishes the poorest” and its controversial five-week waiting period should be ditched, according to a House of Lords committee.
Peers on the Economic Affairs Committee – chaired by a former Conservative Cabinet minister Lord Michael Forsyth – said that while they back the “original aim” of Universal Credit, its design must share blame for “soaring rent arrears and the use of food banks”.
The committee says the five-week wait period between making a claim and receiving the first payment should be ditched and replaced with a non-repayable grant covering the two weeks before claiming and receiving money.
Universal Credit was first rolled out in 2013, and is set to replace six “legacy” benefits in full by 2024 after a series of delays in its implementation.
Record numbers of people have claimed the benefit amid the coronavirus pandemic, with the government increasing its standard allowance during the crisis and the Department for Work and Pensions moved around 10,000 people to the frontline to process the claims.
But the committee said the scheme needs “urgent investment” to provide claimants with an “adequate income”, and says the boost during the Covid-19 pandemic “shows that the previous level of awards was too low” and should be made permanent.
DWP is also criticised for using the scheme to recover debts accrued from its tax credit scheme, with deductions of up to 30% eating into the standard allowance given to claimants.
“This has left many households with less money than they are entitled, often at no fault of their own,” the committee says.
“Tax credit debt should be written off as it is unlikely to be repaid."
But the peers train much of their fire on the five-week wait period, arguing that this feature of the system is “the main cause of insecurity” for people who rely on Universal Credit.
“This wait entrenches debt, increases extreme poverty and harms vulnerable groups disproportionately,” they warn.
“The government should introduce a non-repayable two-week grant to all claimants.”
The committee also warns that “large fluctuations” in monthly Universal Credit payments make it “extremely difficult for claimants to budget”, and call for awards to be fixed at the same level for three months to help people better manage their finances.
Launching the report, committee chair Lord Forsyth said: “Most people, including our committee, broadly agree with the original aims and objectives of Universal Credit.
“However, in its current form it fails to provide a dependable safety net. It has led to an unprecedented number of people relying on foodbanks and not being able to pay their rent.”
The Conservative former cabinet minister added: “The mechanics of Universal Credit do not reflect the reality of people’s lives.
“It is designed around an idealised claimant and rigid, inflexible features of the system are harming a range of claimant groups, including women, disabled people and the vulnerable.
“Universal Credit needs more money to catch up after 10 years of cuts to the social security budget. It requires substantial reform to its design and implementation, the adequacy of its awards, and how it supports claimants to navigate the system and find work.
“The five-week wait for a first payment must be replaced by a non-repayable two-week grant to all claimants. The monthly payment calculations which can result in big fluctuations to claimants’ incomes should be fixed for three months. Historical tax credit debt needs to be written off.
“The punitive nature of Universal Credit has not worked. It punishes the poorest by taking away their sole source of income for minor infractions.
“It needs rebalancing, with more carrot and less stick, particularly as large numbers of claimants will have ended up on it because of events completely out of their control.”
Responding to the report, Labour’s shadow work and pensions secretary Jonathan Reynolds said: “Sadly, this report confirms what many have known for a long time – Universal Credit is simply not working.
“There is clear consensus that the system is not delivering on its objectives and is instead pushing people further into poverty and debt.
"Ministers should listen to their Conservative colleagues’ calls for a reformed social security system. Labour has long been calling for the changes recommended in this report, such as an end to the five week wait and scrapping the two child limit.”
Iain Porter, policy manager at the Joseph Rowntree Foundation, said the report showed the “scale and urgency of reforms needed to Universal Credit”.
He added: “As we seek to navigate the current economic storm, now more than ever we need a social security system that provides a reliable lifeline to families and treats them with dignity and respect.
“Delays in payments, the inadequacy and unpredictability of financial support is too often pulling people into deeper poverty and hardship.
“The government must act on the recommendations of this report to ensure that every claimant of Universal Credit receives adequate and timely support that helps them keep their heads above water in these extremely difficult times.”
Case for UC 'never stonger'
Welfare minister Will Quince said the case for Universal Credit had “never been stronger”.
“The system defied its critics in unprecedented and unforeseeable circumstances, processing more than 3.2m new claims at pace since mid-March and paying more than a million advances worth hundreds of millions of pounds to those in urgent need within days,” he said.
The minister added: "We remain committed to supporting the most vulnerable in society, which is why we currently spend over £95bn a year on the benefits system.
"We've also increased the Universal Credit standard allowance by up to £1,040 a year, as part of a package of welfare measures worth over £9.3bn.
"We welcome the acknowledgement by the Committee that Universal Credit is here to stay and we will consider their recommendations in detail."
Matt Honeycombe-Foster is acting editor of CSW's sister title PoliticsHome, where this story first appeared.