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Leicestershire Centre for Integrated Living

What is universal credit - and what's the problem?

Date: 4/10/2017
Summary: Universal credit has proved controversial almost from the beginning, with reports of IT issues, massive overspends and administrative problems.

From Tuesday, universal credit will be introduced to a further 45 job centres across the country, and each month about another 50 will be added.

Up until now, the benefit has been introduced to about five job centres a month.

But what is it?

Universal credit is a new benefit for working-age people, replacing six benefits and merging them into one payment:

It was designed to make claiming benefits simpler.

A single universal credit payment is paid directly into claimants' bank accounts to cover whichever benefits they are eligible for.

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).

How does it work?

The idea of universal credit is that it can be claimed by people whether they are in or out of work.

There's no limit to the number of hours you can work per week if you get universal credit, but your payment reduces gradually as you earn more.

It is designed to mean that no-one faces a situation where they would be better off claiming benefits than working.

Under the old system many faced a "cliff edge", where people on a low income would lose all their benefits at once as soon as they started working more than 16 hours.

In the new system, benefit payments are reduced at a consistent rate as income and earnings increase - for every extra £1 you earn after tax, you will lose 63p in benefits.

Why are people waiting so long for payment?

A six-week wait is built into the system - government always intended people to have to wait for this amount of time.

Because universal credit is based on how much money you have each month, it is paid in arrears: people claiming the benefit receive money for the last month worked, not for the month ahead.

That means everyone has to wait at least four weeks, and the rest of the time is because of the way the scheme is administered.

Delays in system

However, a quarter of all claimants have had to wait more than six weeks to receive their first payment of universal credit because of errors and problems evidencing claims.

The housing element of universal credit has a particular problem in this respect, in that claimants must show a recent tenancy agreement.

Many people - especially if they've lived in the same place for years or their landlord lives abroad or is otherwise less approachable - have had problems providing this evidence.

If claimants can demonstrate they will be in financial need, for example not able to afford food or heating, while waiting for their first payment, then they can apply for an advance payment.

This is a loan that must be paid back and is worth a maximum of two weeks' worth of the benefit (bearing in mind people may be waiting more than six weeks).

After reports that some people weren't aware they could access these payments, the government has promised it will make it easier for people to receive a loan to tide them over while they wait for the benefit to kick in.

What's gone wrong?

Universal credit has been in the headlines again and again since it was first announced in 2010.

The project cost many times more than originally predicted and has taken far longer than expected.

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".

What's next?

As of August 2017, 590,000 people were on universal credit. Of these people, 230,000 (39%) were in employment.

The number receiving it will rise sharply as the Department for Work and Pensions speeds up the rollout of universal credit to more than 50 job centres a month.

It's expected that the Scottish government will use its new powers over welfare to introduce faster fortnightly payments, and begin to make payments directly to landlords.

By 2022, more than seven million households are scheduled to receive universal credit.

Source: BBC

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