Written evidence from Prof Peter Dwyer, Prof Lisa Scullion and Prof Sharon Wright [UCW0069]

1              Background

In presenting this evidence to the Committee we draw on analyses and understanding generated in three recently competed and on-going and projects which focus on social security policy/reform and the implementation of Universal Credit, i.e.:

1.1. Welfare conditionality: sanctions support and behaviour change (WelCond) (2013-2019). Funded by the Economic and Social Research Council. WelCond is the largest project of its kind in the UK to date. It involved interviews with 52 policy stakeholders, 27 focus groups conducted with practitioners and a large, repeat, qualitative longitudinal panel study conducted with nine groups of welfare service users (WSUs) subject to welfare conditionality in England and Scotland. WSUs were interviewed up to three times at on average twelve month intervals across a two-year period, between 2014 and 2017 generating a total of 1,082 interviews. (Conducted by Dwyer, Scullion, Wright and colleagues.)

1.2 Sanctions, support and service leavers: welfare conditionality and transitions from military to civilian life (SSSL) (2017-2019). Funded by the Forces in Mind Trust (FiMT), this project investigated transitions from military to civilian life and the interactions of ex-Service personnel with the social security system. Fieldwork included consultations with key national, regional and local policy and practice stakeholders alongside 120 qualitative longitudinal interviews with ex-services personnel. FiMT have recently funded a second project phase to commence in September 2020. (Conducted by Scullion and Dwyer.)

1.3  How well is Universal Credit supporting people in Glasgow? (2019-2020), funded by the Joseph Rowntree Foundation (JRF) and co-produced with The Poverty Alliance[i]. This project investigates how well Universal Credit supports people in Glasgow and includes insights into UC Scottish Flexibilities. The findings are based on qualitative research, conducted between February and August 2019, with 19 claimants (9 were interviewed twice) and 23 Jobcentre Plus staff, who took part in focus groups, with insights from two deliberative workshops (involving six claimants and 10 practitioner stakeholders). (Conducted by Wright and colleagues.)

1.4. The Welcond Project final findings were published in May 2018. The SSSL project final findings were published in June 2019 and JRF project findings will be launched in 2020. Here we focus specifically on the impacts of the initial five-week wait for Universal Credit etc. in line with the Committee’s call for evidence. The following paragraphs follow the order of the questions in the inquiry’s terms of reference.

2. Recommendations

2.1 We recommend that the five week waiting period for an initial UC payment be scrapped and replaced with a non-repayable standard advance payment made available to new claimants whilst their UC claim is being processed.

2.2 We recommend that the flexibilities which allow households in Scotland to receive Universal Credit payments on a fortnightly basis rather than on the current default monthly basis are extended across the UK.

2.3 We welcome the recent changes announced by the Chancellor in response to the Covid 19 emergency (e.g. the £1,000 increase in the Universal Credit standard allowance and the raising of the local housing allowance) and recommend that these changes be made permanent moving forward.

3              Indicative evidence

The indicative evidence set out below to support these recommendations is drawn from across the three previously noted studies.

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

3.1              Our research projects found many examples of claimants struggling to manage during and as a direct result of the wait for a first Universal Credit payment. Many claimants had ‘nothing to live on’ (Alice, UC recipient, 2019, JRF project) when plunged into financial shock by the long wait, of more than a month, between applying and receiving their first payment. Hardship and debt were commonplace. This was the case both for new claimants and those transitioning from legacy benefits. While waiting people, who in many cases were already living in relative poverty, were routinely left with little or no money to meet necessities like food and were forced to rely on others or use food banks.  This meant the financial impacts of the wait rippled out to deprived communities. Crucially, the length of the wait is longer than usual rent cycles, which created anxiety about missing rent payments, incurring arrears and realistic risks of eviction. This distress is produced by the flawed design of the UC five week wait and is avoidable. Some of our research participants missed a rent payment because of the wait, which triggered longer-term arrears and worsened existing debts.  Participants felt frustrated because they did not see any justifiable reason for such a long gap.  The wait for an initial payment was consistently identified as a key issue in exacerbating poverty:

“I did it on the computer [the initial claim], and then I had to go for a face-to-face at the Jobcentre…. The process itself wasn’t all that bad. It’s just this waiting seven, eight weeks to get paid. When you’ve got nowt, it’s horrific. It’s horrendous.” (UC recipient, wave a, SSSL project)

3.2               Furthermore, the standard waiting period for an initial UC payment was extended further for significant numbers of respondents who spoke of additional holdups due to administrative errors and delays:

“I went to hospital... The money doesn’t come because there’s something gone wrong on your claim, so you’ve got another month to wait... all these sort of like people in my life... it’s just overwhelming me... it’s making matters worse...” (UC recipient, wave a, WelCond project)

“That was absolutely terrifying. As soon as you start getting in debt, when you get into arrears like hundreds of pounds you start getting nasty letters from your landlord and possibly eviction as well... I was like a nervous wreck.” (UC recipient, wave a, WelCond project)

3.3              In total, it took nine weeks for the armed forces veteran below to receive his first UC payment. Reflecting on the impact of this at his wave b interview he stated:

“Waiting that long for so little money, I don’t think people realise, like, people whose issuing out the Universal Credit side of things – I still had bills to pay. I had no money to pay, so I was blacklisted with every credit referencing agency going because I just purely and physically couldn’t afford to pay for anything, and it got us in a real, real lot of trouble financially-wise… When I got my first payment from Universal Credit... My overdraft sucked most of my money up. I had to pay accommodation, I had to feed myself and not just that, I still had my kids to provide for... I was going to food banks, I couldn’t do anything.” (UC recipient, wave b, SSSL project)

Another respondent reported:

“Universal Credit. They messed it all up and I got made redundant, I sat eight weeks without any money. I had to go to foodbanks and everything… basically wait it out. It was a nightmare for that eight weeks. I ran out of gas, electric, everything. I was proper on my backside.” (UC recipient, wave b, WelCond project)

3.4              The initial five-week wait for payment stems from monthly payments in arrears being built into the UC system in an attempt to ‘reduce welfare dependency by mirroring the job market and are intended to ultimately make the transition into work easier’ according to government. However, Sir Iain Duncan Smith, who introduced UC as Work and Pensions Secretary, has himself since called for waiting times to be cut during the Covid 19 crisis.

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

3.5      While Advance Payments are made available to help tide people over during the initial waiting period, they are discretionary and only available as repayable loans deducted from any future benefit payments (set at below-poverty rates). Although advance payments helped avoid deep poverty and destitution in the short-term, claimants found it difficult to manage the impact of subsequent repayment deductions, which created long-term financial problems. As recipients pay back their Advanced Payments incrementally, out of subsequent UC payments, many already living in poverty must live on a reduced income moving forward, worsening budgeting problems and increasing future debt. Claimants’ finances were even further stretched by other deductions, taken off at source, for new and pre-existing debts or rent arrears.

“It’s a huge amount of money [advance payment deduction] when you’re living on very little.” (Anna, UC Recipient, 2019, JRF project)

“It [UC payment] should have been £300 something but because of this advance payment I had they've taken off £60 a month to pay that back.” (UC recipient, wave a, WelCond project)

“I was on Universal Credit. I said, 'Well, I can't wait for five to six weeks, because I've got two children here'. So they gave me an advance payment for £200, which is like £16 back, you've obviously got to pay it back. But obviously, I accepted the £200, because it had to see me until that child benefit was sorted out.” (UC recipient, wave c, WelCond project)

“When I come on this Universal Credit I had to get a loan off them as well, because we struggled, because they won't give you anything for the first five weeks. So I said, 'Well, how am I supposed to live on that, then?' It was a nightmare. Then I had to pay £100-odd back to them every time I got paid, so that was £100 out again. It was a nightmare; awful… I've had to pay that back. Which to me I thought was wrong that I had to get a loan off them, really, you know what I mean? Because it was them that changed me off my claim to a different one.” (UC recipient, waves a and c, WelCond project)

3.6      A policy stakeholder who we interviewed was pleased to report increased awareness of the right to access an Advanced Payment among her clients compared to the early days of UC rollout. However, she also pointed out that advancing money to poor people who were reliant on benefits further increased the future debts they had to service on very limited income. Faced with future reductions in benefits many resorted to borrowing money off family and friends or in some cases illegal lenders. 

“In the early days the DWP weren't promoting the advanced payment… People are now telling me that they offered them the advance and then paid it within days, so that bit of the system which wasn't working is now working to be fair. That's good… The problem you've got with the Advance is they offer you 50 per cent of your entitlement, so the repayments of the advance are a problem. What people have got to remember is it's a loan, so I'm now saying to people take the advance, ask them for the Advance, but be careful how much you borrow, borrow as little as possible, because it's only going to make you skint for another six months…  I did a study of 40 people for work and I think 38 of them had borrowed off family and friends to get them through the first 6 to 7 weeks. Three of them had gone to a loan shark to get them through the first six to seven weeks, which is very worrying because loan shark activity is increasing on our estates.” (PS50, Welfare rights adviser)

3.7       At best, Advance Payments provide only a short term fix to more systemic failings built into the UC system, i.e. an unnecessarily long wait for an initial payment and inadequate levels of benefit.

3.8      Many of the lowest paid do not receive their pay monthly. Many respondents therefore struggled to manage the switch from fortnightly to monthly payments that was introduced under UC. Although a minority did prefer monthly payments, most preferred fortnightly payments for two reasons. First, this reflected the reality of their budgeting practices. Second, inadequacies in the level at which UC is paid often led to a period towards the end of the month when respondents had no money left to pay for basic necessities.

“I would rather have been paid fortnightly. I’m not bad with money but I would rather be paid fortnightly because it’s a long wait.” (UC recipient, wave a, WelCond project)

“I still struggle. By the middle of the month I’ve got nothing. By, literally, the 18th, 20th, I’ve got nothing. I struggle for the last couple of weeks every single month, and that’s why I’m trying to get away from it. I’m trying to go and do anything just to get away from it, because you can’t survive on it. It’s impossible.” (UC recipient, wave b, WelCond project)

3.9       Sections 29 and 30 of the Scotland Act 2016 allow Scottish Ministers to introduce flexibilities in relation to UC with regard to the person to whom, and the time when, UC is to be paid. These are: 1. Having the option of being paid UC twice a month rather than monthly; 2. Having the option of any UC housing element being paid direct to social and private sector landlords; 3. The power to vary the amount of housing costs paid to people in receipt of Universal Credit; and 4. The power to split payments between members of a household. These flexibilities could, and should, be extended across the UK.

April 2020