A recently published report has exposed the financial insecurity being driven by the Universal Credit system. Falling Behind: The impact of Universal Credit on rent arrears for council tenants in London illustrates serious flaws in the system which lead to rising levels of debt amongst claimants coupled with an inability pay these debts down in the long term. Although the report focuses on London Councils, the highlighted issues are echoed across the country.
The report specifies the biggest issue is the five-week wait for the first payment when a new claim is made. Although some steps have been taken to resolve this issue, for example the availability of advance payments and newly implemented run-on payments, these sticking plasters do not fully address the issues inherent in the system.
DWP statistics demonstrate that only 30% of new claimants actually take an advance payment. This is likely because the advances must be paid back, and many claimants do not want to take on additional debt at a time when their income has already decreased. The new run-on payments only apply to people who have been claiming legacy benefits immediately before claiming Universal Credit and only cover an additional two weeks, still leaving a three-week gap in their income.
The data analysed in the report shows that the majority of new Universal Credit claimants with social tenancies see an immediate and substantial increase in rent arrears which plateau after around 12 weeks. Warrington Housing Association has seen a similar trend, with rent arrears of over £70,000 accumulating amongst almost 150 residents moving onto Universal Credit.
Whilst some residents have managed to keep their rent account clear, often this is following a stark choice between paying bills and putting food on the table. Warrington Housing Association has continued to refer its residents to the local Food Bank and continues to support this vital resource by gathering food donations at key locations in the community and providing cash donations following fund-raising activities. The latest Trussell Trust statistics show that demand for Food Banks continues to rise, with almost 18% of referrals attributable to benefit delays.
The 5-week wait is a major factor in the proliferation of financial insecurity and poverty amongst Universal Credit claimants. This report shines a light on the intrinsic flaws in the design of Universal Credit, highlighting the need for immediate change.