Written evidence from Citizens Advice Leicestershire [UCW0038]

Citizens Advice LeicesterShire offers free, confidential and independent advice to all. Staff and volunteers are trained to give advice and practical support on a wide range of issues. Help to Claim is a service that is funded by the Department of Work and Pensions (DWP)  to support those applying for Universal Credit (UC) up until their first full payment. Citizens Advice LeicesterShire have supported 1,720 new claimants April 2019 - December 2019. This accounts for 6% of all new UC claims in Leicestershire over the same time period and 56% of all UC claimants supported by Citizens Advice Leicestershire over the same time period [n=3,079].

The following information responds to the March 2020 call for evidence launched into UC and the 5 week wait. This is based on real case studies that were available at the time of the request.

Questions can be directed to Jo Thomas via jo.thomas@citizensadviceleicestershire.org.

1)     To what extent have the mitigations the Government has introduced so far (e.g. Advance payments) helped to reduce the negative impact of the 5 week wait for UC claimants?

Despite positive changes such as reduction of the initial wait for the first payment and an increase in the amount that claimants are able to receive in advance[1], we suggest that current support does not fully mitigate against the financial hardship associated with the 5 week wait.

Advance payments are theoretically available to all claimants. However, issues around verifying ID can delay claimants most in need, from accessing advance payments. Claimants that have limited ID and/ or no bank account often struggle to access prompt support. This includes many prison leavers and homeless claimants:

The Payment Exception Scheme is intended to be a way for people who do not have a bank account to collect benefits or pension payments. Anecdotally, we know that this is not well known about by frontline Jobcentre staff and is often a lengthy process. 

Advance payments have to be paid back over 12 months; deductions of up to 30% are taken automatically from the UC standard allowance. Further down the line, deductions can cause serious financial hardship, particularly for those whose income on UC is already especially stretched. This includes families subject to the benefit cap and/or Local Housing Allowance rates. Furthermore, if a claim is closed, a claimant can claim multiple advance payments. This means that these claimants will struggle to manage with the unpredictability of their finances over a longer period of time:

We also see a number of clients that repeatedly experience financial hardship as a result of the DWP automatically reinstating the higher rate of debt retrieval after this has previously been renegotiated: 

Some clients decide not to take advance payments because of the fear of deductions. Without an advance payment, most clients are left with no support for five weeks. While only 15% of all employees are paid weekly or fortnightly, the DWP estimates that this proportion is around 30% among working UC claimants[2]. This means that some clients that are used to budgeting for weekly or fortnightly payments find the five week wait especially difficult to manage.

Locally, we have seen that the run-on of Housing Benefit for two weeks provides additional security for some. However, this excludes many families that were not in receipt of Housing Benefit; Many of the claimants naturally migrating have experienced a change of circumstances, such as job loss. These claimants will experience a sudden drop in income and may not be entitled to non-recoverable support during the wait for their first UC payment.

●        What problems do claimants still experience during the five week wait?

From all UC claimants in Leicestershire April 2019 - December 2019, 10% were also being supported with debt and 6% were also being supported with housing related issues. Many of these issues are likely to be caused/ exacerbated by inherent struggles associated with the five week wait.

The annual food bank user survey, conducted by Trussell Trust Oct - Nov 2018, indicated that around 2/3 of people accessing food banks have had problems with the benefit system in the 12 months prior to the survey.[3] From these, the most common problem was a ‘long wait for a benefit payment’ which affected 4/10 respondents, followed by ‘sanctions’ which affected ⅕ respondents.[4] Crucially, this survey was completed after the increases to the amount of advance claimants are entitled to. Locally, we have also seen claimants continue to struggle to pay for essential goods during the five week wait, with advisers having to frequently supply clients with food bank vouchers.

●        What is the best way of offsetting the impact of the five week wait?

The latest budget announcement indicated that the maximum rate at which deductions can be made from a UC award will be reduced to 25% from 30%, and claimants will have up to 24 months to repay the advance payment, as opposed to 12. In real terms this means maximum deductions will be reduced from £95.00 per month to £80.80 per month. While this is a welcome change, we are still concerned that too many people will struggle to manage with reduced finances over a longer period of time. Particular at risk groups are families with more than two children that are impacted by the benefit cap and those subject to LHA.

We also welcome the run-on of income based Jobseekers Allowance and Employment Support Allowance[5]. However,  those whose main benefit income comes from tax credits will be disproportionately affected by the five week wait; Child Tax Credits is the main form of means-tested support for many families with children and supports those both in and out of work. For example, a lone parent on Income Support with two children will typically receive Income Support of £73.10 per week, but £117.40 a week of Child Tax Credit. For support to be equitable, there needs to be a financial equivalent available for tax credit recipients as well as those that were not previously claiming benefits.

Furthermore, repayments of advances should be manageable and set according to the claimants financial circumstances. If debt recovery has been renegotiated, this should only be reinstated to a higher rate if the claimant has agreed, or risk exposing the claimant to extreme financial hardship. In the current climate, there is a strong case for pausing the repayment of advance payments, to allow claimants to recover from the financial shock of the CoronaVirus.

In England and Wales, the Alternative Payment Arrangement of more regular payments is available for those that can’t manage single monthly UC payments and are at risk of ‘financial harm’. However, in reality these are difficult to access because of eligibility criteria; Nationally less than 2% of all households on UC in August 2019 had more frequent payments[6]. As well as further changes to the way in which advance payments are recovered, clients should be able to easily opt into receiving more frequent payments to match their other income. This would mean claimants being able to reduce the amount of time that they have to wait.

●        Is it possible to estimate any costs or savings to third parties (for example, support organisations)?

The five week wait puts pressure on services that support clients beyond the first full payment. Locally, there was a significant increase between the first two quarters and the second 2 quarters of 2019/2020 in terms of the proportion of all UC clients accessing support for deductions (5% compared to 3%). This indicates that as more clients reach first full payment, demand for support beyond the scope of Help to Claim increases. Removing the five week wait would likely relieve pressure on support services that help clients to manage deductions, including debt and budgeting services.

●        Are different mitigating options needed for different groups of claimants?

As well as the measures discussed above, particularly vulnerable clients may need additional support to access benefits promptly. This includes homeless claimants and prison leavers.

●        Are there barriers or potential unintended consequences to removing the 5 week wait—either for claimants or the Department? How can they be overcome?

It would be difficult to entirely remove the five week wait, while continuing to pay UC in arrears. If the initial payment were to be based upon estimated income in the upcoming month, in many cases this is likely to be calculated incorrectly resulting in overpayments in some cases. If these overpayments were to be recovered via deductions to the UC standard allowance, they could have a significant detrimental impact on the claimant’s income and ability to budget for many months.

April 2020