Universal credit claimants are facing Christmas hardship over delays.

Housing association The Peabody Trust believes a big chunk of the 110,000 UK households that move on to the system over the next few weeks will be forced to borrow money.  Claimants have little choice to see them though until the new year. This includes 67,000 families collectively looking after an estimated 116,000 children.

Who are the Peabody Trust?

The Peabody Trust was founded in 1862 as the Peabody Donation Fund. It now brands itself simply as Peabody. Peabody is one of London’s oldest and largest housing associations. With around 55,000 properties across London and the South East

The Peabody Trust said.

Claimants who signed up after 20 November will not receive any benefit until after the festive period. Because of the built-in wait of at least 35 days for a first monthly payment.

They estimate that More than 100,000 children live in families at risk of debt and hardship over Christmas. Because they are waiting for a universal credit payment,

Peabody called on ministers to reduce the five-week wait to two weeks.

This, say Peabody would bring it in line with the waiting time for a first housing benefit payment under the old system. This would cut the numbers of households without income over Christmas by 44,000.

The struggle to manage over the 5-week period without any income or money coming in would increase hardship. At one of the most expensive times of the year, many families would find themselves trying to cope.

Peabody carried out research over the summer.  They found 70% of low-income tenants in London had no savings. They were forced to use food banks or payday loans to help them through a cash crisis. This in turn was pushing them further into debt.

For struggling families, already in debt, it can be a viscious cycle.  Many are working but have low take home pay and rely on some form of benefit.

Loans are available and are repayable over a year.

Because of the outcry from many charitable bodies, the government introduced loans to cover the waiting period. Claimants need to show they would be unable to pay rent or buy food without an advance.  Smoothing any financial shock to vulnerable claimants during the time it takes for universal credit to be paid.  100% loans are available if needed.

Around 65% of all new claimants take out an advance. This say critics locks claimants into an ongoing financial struggle. Many of these vulnerable households may already have debts from overpayments of tax credits or rent arrears.  Overpayments are automatically deducted from monthly payments. For those already fighting to stay afloat, they are unable to see a way out.

Claimants can see up to 40% deducted in repayments.

As many as a third of all universal credit claimants see up to 40% deducted from the monthly income they receive to repay debts and advances.

Frank Field, MP, the Commons work and pensions committee chair, has called this arrangement a “nationalised form of debt.” That was “fast becoming a main supply route to food banks”.

The government announced it would  cut the maximum monthly repayment to 30% at the recent budget. Although this will not come into effect until October 2019.

Anya Martin, policy officer at Peabody, said: –

Although the government had made welcome changes to universal credit: Restoring some of the money previously cut and improving the terms of advance loans. The five-week wait for universal credit payments was “still causing significant hardship”.

“People having to use their benefits to repay the government means that this hardship continues even when regular payments have kicked in. Reducing the waiting period to two weeks from the start of a claim would make a huge difference to thousands of vulnerable families across the country.”

Recent report by UN’s Human Rights (ohchr) criticises UK austerity measures.

A recent report by the UN rapporteur Philip Alston, into poverty in the UK, criticised the delay in payment of universal credit.

The 5-week delay is designed to mimic monthly salary patterns in which wages are paid a month in arrears.

Philip Alston criticised the long wait, which in practice often stretched to 12 weeks. Caused by administrative glitches, it pushed many claimants into survival mode.

“The rationales for the delay are entirely illusory. [And] the motivation (for designing a five-week wait) strikes me as a combination of cost-saving, enhanced cash flows, and wanting to make clear that benefits should involve hardship. Instead, recipients are plunged into further debt and inevitably struggle mightily to survive,” Alston wrote.

In a statement released on 16th November, he said for almost half of the nation’s children to be poor today is “not just a disgrace, but a social calamity and an economic disaster, all rolled into one.”

The government responded that the language of the report was political.

Encouragement into work.

The idea behind universal credit is to encourage more people into work.  They should not be better off on benefits than they would be working.  It becomes one payment covering the previous 6 different claimable benefits. The aim – to make the social security system more efficient.

Many experts say, that in principle, the idea is a good one.  However, critics point out it is running six years behind schedule and its widespread problems are linked to claimant poverty and ill health.

New benefit claimants in most of the UK now move automatically on to the new system. Areas transferring onto universal credit in the next few weeks include postcodes in north-west London, Derby, Stoke-on-Trent, Wolverhampton, Edinburgh, Glasgow, Wakefield, Portsmouth and Milton Keynes.

A Department for Work and Pensions spokesperson said:

“There’s no reason for people to be without money over Christmas because advance payments are widely available. Anyone applying for Universal Credit can get an advance of up to 100% upfront, payable on the same day if someone is in urgent need.”

Universal Credit may be making UK housing shortage worse.

Cash-strapped councils can’t build more affordable housing because of a backlog with unpaid rent, according to the head of the Local Government Association (LGA). An investigation by BBC’s Panorama shows tenants on universal credit have rent arrears of more than double those on housing benefit. In Flintshire, north Wales, rent arrears have leapt by £1million with one claimant telling the BBC he was left with £29 to live on.

Richard Watts of the Local Government Association, told the programme:

“We need to build a lot more new genuinely affordable housing, particularly council housing . And that’s harder if councils are getting less money into their housing account because rent arrears are higher.”

“This will hit the number of new council homes being built across the country.  At a time when we desperately need more genuinely affordable housing.”

According to the BBC, FOI results showed 129 UK councils that responded were owed on average £662.56 by tenants claiming universal credit.

The government say: –

Chancellor Philip Hammond’s budget showed 200,000 more families will benefit from a £2billion Universal Credit cash injection.

Minister Alok Sharma told the BBC: –

“After a period of time people will on average see those arrears coming down.”

“But the key point here is to make sure that people get support in terms of funding. [And] that is why early this year we introduced a package worth one-and-a-half billion pounds. Which means that anyone who’s coming onto UC who’s currently receiving housing benefit will get an extra two weeks of run-on, two weeks of extra money.”

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