Written evidence from The Salvation Army [UCW0079]

Executive summary

The Salvation Army operates a wide variety of residential and community-based support services across a range of sectors, including homelessness, modern slavery, employment, and debt advice, throughout the UK. Our network of over 640 corps (church-based community centres) also offers support to local people in need of practical and emotional assistance on a daily basis. Through their day-to-day work each of these residential, community, and church-based services come into regular contact with people who require help to make and manage their claims for Universal Credit.

As a system, Universal Credit presents a series of challenges to people who are less able to adapt to its default settings. These challenges include things like the difficulties faced by people without ready access to the internet in adjusting to a ‘digital by default’ approach. Yet time and time again across Salvation Army services, one challenge stands out as being the most frequent and difficult to negotiate for people: the five-week wait for a first payment.[1]

To its credit, the Government has acknowledged the strain the five-week wait places on people and put in place mitigations. The most readily available of these mitigations is an Advance Payment. Due to its ubiquity, The Salvation Army has chosen to focus its submission on how best to maximise the positive impacts of Advances.  

In assessing the viability of its suggested reforms, The Salvation Army has measured its analysis against four main criteria. These criteria include the need to:

• guarantee eligibility to the largest possible number of claimants;
• minimise the practical difficulties of implementation;
• provide a cost-benefit analysis; and
• improve the functioning of Universal Credit as a whole, rather than simply fixing a problem in isolation.  

The Salvation Army has also taken into account the current situation in relation to the Covid-19 outbreak and the need for immediate measures to support people, in addition to those already announced by government.

Based on this assessment, The Salvation Army recommends that as part of its final report, the Committee suggest to government that it:

• make data on the performance of current and future mitigations publicly available so that their performance can be analysed and their impact measured;
• limit the level of debt that new claimants accrue during any gap between when they become eligible for Universal Credit and when they actually apply by allowing claims to be backdated for up to one assessment period;
• remove the five-week wait by converting Advances into non-repayable grants for all claimants in the short-term, moving towards a more targeted intervention over time;
• immediately suspend all ongoing repayments of Advances for at least three months;
• provide a sustainable solution to people’s wider financial issues by attaching the option of an automatic breathing space period to new Universal Credit claims for claimants experiencing problem debt; and
• reduce caseloads for Work Coaches and Universal Credit Case Managers to allow better identification of vulnerabilities, including the existence of problem debt, amongst new claimants.

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?

Figures from the English Housing Survey reveal that in 2017/18,[2] 4.5 million households (19 per cent of all households) were living in the private rented sector, while 4 million households (17 per cent of all households) were living in the social rented sector.[3] Based on sampling from both forms of tenure, the English Housing Survey estimates that around 63 per cent of private renters and 83 per cent of social renters possess no savings.[4] These figures underline the precarious financial position of a significant proportion of households in England.

This widespread lack of financial resilience means that any necessary transition to the social security system can prove problematic for people, especially if a claim is delayed for any reason. It can also lead to difficulties if a claim is unexpectedly interrupted at any point. Salvation Army churches aim to collect information about the needs of the people they support via a system known as Practical Assistance Records. Over a six month period, between November 2018 and April 2019, the churches using Practical Assistance Records revealed that almost half (47 per cent) of the people they supported had requested assistance due to issues relating to benefit changes or delays.

Under the legacy benefits system, a new claim for the main out-of-work benefits takes an average of two weeks to process. Through its introduction of monthly assessment periods, Universal Credit has extended this period significantly. As a result, for those with no savings, any new engagement with Universal Credit necessitates a minimum period of five weeks (one month plus three to four days to process a BACS payment) with no income.

Analysis by Policy in Practice on behalf of the Joseph Rowntree Foundation (JRF) indicates that 700,000 households yet to move to Universal Credit have insufficient savings to cover the five-week wait.[5] For some, the wait for a first payment can extend beyond five weeks. As of April 2019, 17% (n. 17,000) of new claims to Universal Credit that month did not receive their first payment on time.[6] As these delays are usually related to difficulties verifying a person’s identify or providing the requisite documentation, they disproportionally affect claimants with more complex personal circumstances.[7]

In recognising the unique challenges posed by the five-week wait to those with limited financial resilience, the Government deserves credit for introducing a series of mitigations. At present, the main mitigating measure is an Advance Payment. The basic premise behind an Advance is that people can receive up to the full value of their first Universal Credit payment ahead of time. Instead of waiting for the full five weeks, Advances are typically paid within three days. In exceptional circumstances, an Advance can be paid same day.

The size of an Advance and the swiftness of its administration mean that it is the most comprehensive solution to any prospective financial hardship during the five-week wait currently available to claimants. The DWP has even gone as far as to suggest that due to the existence of Advances, people should not be subject to hardship over the course of their claim.[8]

Yet, despite its potential for positive impact, there remains a lack of publicly available government data concerning Advances. Using a variety of different sources, it is possible to get an idea of the scale of their usage. A Freedom of Information request from March 2020 details that “From 2013 to the latest date available, 4,257,000 Universal Credit Advances have been issued.”[9] As part of their appearance before the Committee on 25 March 2020, the Secretary of State confirmed that of the 230,000 new claims for Universal Credit made during the first week of lockdown provisions following the outbreak of Covid-19, 30 per cent (n. 70,000) had requested an Advance.[10]

These figures indicate the level of immediate financial need faced by many new Universal Credit claimants. The Salvation Army does not doubt that in certain cases, receipt of an Advance will indeed prove a positive experience for people. At present, however, there is no systematic way of verifying this. As part of its 2018 audit of the roll out of Universal Credit, the National Audit Office (NAO) confirmed that the DWP had struggled to provide it with the information it had requested on the impact of waiting days on claimants and the use of Advances.[11] 

By contrast, there is a wealth of evidence from third parties to suggest that Advances can in fact cause sustained financial harm.[12] These harms often stem from the need for claimants to repay the value of an Advance from subsequent Universal Credit payments. Crucially, these deferred consequences are less to do with a lack of information and/or understanding on the part of claimants as to how an advance works, although this can certainly be a factor. Instead, the future consequences of the need to repay an advance from limited income are often obscured behind an immediate and pressing need to meet today’s costs and obligations; the need to pay rent or feed one’s family.   

The psychological impact of immediate need and how it negatively impairs people’s ability to fully consider how a current action will affect future circumstances is well established within academic literature.[13] However, because of a lack of internal data and limited capacity to collect information from third parties, Universal Credit is currently unable to establish the full extent of the problem and how best to fix it.       

The NAO’s 2018 audit attributes some of this to the adversarial nature of conversations about Universal Credit.[14] Yet, with the number of new claims for Universal Credit having increased substantially in recent weeks due to the outbreak of Covid-19, it is more imperative than ever for the Government to find a way to overcome the current impasse. With current projections estimating that the UK could lose a significant proportion of its current GDP due to Covid-19,[15] it is vital that people are not exposed to options that might cause them unintended future financial hardship, which in turn might limit their participation in the necessary economic recovery.     

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

One important area where existing mitigations do not appear to have had a positive impact is the general perception of Universal Credit amongst third parties, and the effect this can have on their behaviour. In assessing the impact on landlords, the NAO found that “there is an increase in average rent arrears as claimants move on to Universal Credit. This increase starts to accelerate before they make their Universal Credit claim, indicating that there could be a delay before they make their claim. Arrears rise starkly as claimants wait a month for their first payment.”[16]

This increase in arrears is substantiated by different pieces of research from organisations, including Peabody,[17] The Smith Institute,[18] and Shelter.[19] In the worst cases, it has contributed directly to evictions and homelessness.[20] Given the large increase in new claims for Universal Credit during the Covid-19 outbreak, it is likely that a substantial number of people will be at risk of amassing arrears due to the length of the new claims process. The Government’s ban on evictions during the Covid-19 outbreak will provide welcome relief for many claimants in the short term. However, as this ban is only temporary (it is currently scheduled to last for three months), this protection will ultimately come to an end before many have been able to resolve any outstanding arrears, heightening the prospect of future eviction.  

Further to the immediate consequences for tenants, the general level of arrears associated with Universal Credit, to which the five-week wait is a contributory factor, appears to have led to an increasing level of distrust among landlords. As part of its most recent survey of private landlords, the Ministry for Homes, Communities & Local Government (MHCLG) found that almost half (47 per cent) of landlords surveyed were unwilling to let their properties to Universal Credit claimants.[21]

This finding is indicative of a situation where claimants can now find themselves pre-emptively excluded from large swathes of the housing market due to Universal Credit’s reputation alone. Crucially, this sense of scepticism has developed at a time when a variety of mitigations, including Advances, were readily available and being taken up by claimants.

As processing times and claimant awareness have improved, the use of Advances has increased. As part of its survey of Universal Credit full service areas, the DWP recorded that 61 per cent of the survey’s sample of claimants had received an Advance.[22] Government has welcomed this increase on the grounds that Advances should prevent claimants from suffering further hardship.

Again, although this may well be true for many claimants, it is impossible to verify this claim using publicly available government data. Yet, even according to the DWP’s own research, the idea that Advances should prevent hardship appears misleading. In its survey of full service areas, the DWP found that four in ten respondents were still experiencing real financial difficulties eight to nine months into their claim.[23] The survey also reveals that some groups of claimants were more likely to be experiencing arrears across both waves of the survey, including “those who have received an Advance Payment from Jobcentre Plus in the last three months prior to the second survey”.[24]       

From the experiences of Salvation Army residential, community, and church-based services, a common cause of persistent financial strain for Universal Credit claimants is the presence of debt. According to internal data, 392 people were receiving support from a Salvation Army debt advice service as of 31 December 2019. Of these 392 people, 24 per cent (n. 94) were Universal Credit claimants.

The presence of debt is also pervasive amongst Universal Credit claimants at Salvation Army homelessness services. Between March 2019 and February 2020, 46 per cent (n. 3274) of people interviewed as part of their initial referral to a Salvation Army homelessness service in England were in receipt of Universal Credit. Over the same period, 40 per cent (n. 1660) of people who completed a support plan at one of these services requested help to overcome debt-related issues. A support plan is completed by a person once they’ve begun working with a service to outline the things they would like assistance with, as well as what they would like to achieve over the course of their interaction with The Salvation Army.

Although it is not possible from this data alone to tell how many people at Salvation Army debt advice and homelessness services also received an Advance, we know from other pieces of research that this will often be the case.[25] Importantly, it is also clear that the need to repay an Advance can adversely affect people’s management of their Universal Credit claim,[26] as well as compound issues related to other pre-existing financial liabilities and repayments.[27]

Although the Government has made a series of welcome reforms to the rate and frequency of deductions for Advances, when combined with further deductions for overpayment, they can still result in sizeable deficits. In certain cases, total monthly deduction rates can reach up to 40% of a person’s standard allowance.[28] Recent modelling suggests that around 500,000 current claimants face deductions greater than 20% of their standard allowance, with this number expected to rise to 1.2 million people following further roll out.[29] 

As the part of Universal Credit that people use to meet their daily costs of living, deductions from the standard allowance can have a real impact on people’s standard of living. The need for people to attend foodbanks to compensate for this loss of income is well documented.[30] This ongoing inability to meet the need for basic necessities can drive people to take extreme courses of action, and will often disproportionately impact on certain groups including women. In 2018, having spoken to five charities supporting vulnerable women, the BBC published an article detailing the experiences of several women who had been forced to resort to sex work in order to survive the five-week wait.[31]   

In 2019, the Committee held an inquiry to investigate the connection between Universal Credit and survival sex. During the inquiry, numerous organisations contributed evidence highlighting the role of the five-week wait in causing people to engage in sex work, as a means to pay for their immediate survival needs. As part of their evidence, Changing Lives[32] and the English Collective of Prostitutes[33] reported having to support women vulnerable to exploitation because they were in debt.

Both organisations also drew attention to the inadequacy of Advances in alleviating hardship among the women they supported, and how the need to repay an Advance was a cause of additional financial hardship. During its final report, the Committee recorded that: “Several organisations supplied us with case studies of women they had supported who had gone into, or gone back into, ‘survival sex’ because of the amount of UC they were paid after deductions of Advances and other debts was not enough to live on”.[34]

From the experiences of Salvation Army residential, community, and church-based services, it is clear that the kinds of complex needs revealed to the Committee during its inquiry into Universal Credit and survival sex are not always readily identifiable. This can make it hard to provide people with the right kind of support at the point where they might request an Advance, or if they come into financial difficulties later on as a result of the need to repay it.

The Salvation Army welcomes the Government’s ongoing efforts to improve Universal Credit’s ability to identify specific vulnerabilities among claimants. However, we remain concerned that many of the difficulties in this area appear systematic, making them all the more difficult to rectify. Indeed, from the very beginning, there seems to have been a lack of awareness as to how Universal Credit’s unique features would affect particular groups. The DWP’s Universal Credit equality impact assessment, for example, makes no reference to either monthly assessment periods or the wait for a first payment,[35] despite both elements representing a significant divergence from the legacy benefits system.

At an operational level, high caseloads appear to be hampering people’s ability to hold the necessary conversations to establish what support might be required across the course of a claim. Research by The Salvation Army details how participants repeatedly highlighted the time-limited nature of initial meetings with Work Coaches during the new claims process. Due to their brevity, the focus of these initial interactions was limited almost exclusively to signing claimant commitments, with little or no time spent discussing individual circumstances or needs.[36]

Participants felt that this was the result of Work Coaches being rushed for time due to excessively high caseloads. This sense is corroborated by a Freedom of Information Request from August 2019, which asked for the ratio of Work Coaches to Universal Credit claimants at six jobcentres in the South West. According to the response from the Department, at Weymouth 17.85 Work Coaches were responsible for 4,926 claimants, while at Bournemouth 37.01 Work Coaches were responsible for 9,896 claimants.[37] High caseloads also appear in other areas of Universal Credit. An answer to a written parliamentary question in February 2020 by the Minister for Welfare Reform revealed that, on average, Universal Credit Case Managers are each responsible for 463 cases.[38]

What is the best way of offsetting the five-week wait?

Over the long-term, The Salvation Army believes that the most comprehensive and beneficial reform the Government could make to Universal Credit would be to reduce the  length of its assessment periods from one month to two weeks. This would enable people to receive payments every two weeks, including during the first two weeks of their claim. Rather than find appropriate work arounds, this would resolve the problems created by the five-week wait in a systematic and sustainable way.

The Salvation Army is, however, aware of the scale of this reform and that it would require significant amendments to relevant legislation and Universal Credit’s IT system. These changes should not be rushed and should be subject to the appropriate Parliamentary scrutiny. Given the time this reform would take to implement, The Salvation Army has not considered it in any depth as part of this submission. This is primarily because of the need for a solution, which can be swiftly implemented in the wake of the Covid-19 outbreak and the subsequent increase in need it has produced. Nevertheless, we believe that it should be kept under review by government with a view to its possible implementation at a later date.  

At the present time, The Salvation Army believes that best way to off the five-week wait is to convert Advances into non-repayable grants. In coming to this conclusion, The Salvation Army has measured its analysis against four main criteria. These criteria include the need to:

• guarantee eligibility to the largest possible number of claimants;
• minimise the practical difficulties of implementation;
• provide a cost-benefit analysis; and
• improve the functioning of Universal Credit as a whole, rather than simply fixing a problem in isolation.  

During the following sections, The Salvation Army has also considered the need to target this intervention to specific groups, as well as any potential unintended consequences to removing the five-week wait and how these might be overcome.

Ensuring availability for the largest possible number of claimants:

Access to Advances is governed by eligibility criteria. In certain cases, these criteria can involve the need to provide ‘genuine’ evidence of financial need and that any previous Advances issued to a person have not been received without following a claim through to the entitlement stage.[39]

In most cases, however, the usual eligibility criteria for an Advance, including the need to explain the reasons for an Advance, verify one’s identify, and provide bank account details,[40] are reasonably straightforward to satisfy. Once these criteria have been satisfied, Advances are usually paid via BACS transaction in three working days. In exceptional circumstances, an Advance can be paid same day. Eligibility for an Advance is also not restricted to people taking advantage of other forms of mitigation. For example, someone in receipt of a Housing Benefit run-on can also apply for an Advance if necessary.

Due to its straightforward eligibility criteria and swift payment, an Advance is easily the most commonly used form of mitigation for the five-week wait, with as many as 61 per cent of new claims taking advantage of their availability.[41] This suggests that any improvements made to the system of Advances would have a wide scope of beneficiaries. As a result, of the mitigations listed by the Committee outside of making fortnightly payments available from the start of a claim, converting Advances into non-repayable grants has the greatest potential to reduce any harm caused by the five-week wait across the claimant population as a whole.

By contrast, extending run-ons for legacy benefit payments will by definition only improve the situation for people who are currently claiming legacy benefits. In addition, although there are currently a significant number of people claiming legacy benefits, any improvements made to run-ons are clearly time limited given the intention to phase out all legacy benefit claims in all but a handful of specific cases over the next few years. It should, however, be noted that any extension of run-ons from say two to four weeks would be extremely useful in limiting any potential hardship caused by the impending process of managed migration.

The Salvation Army is aware that any change from now, unless it were applied retrospectively, would have the unintended consequence of excluding people currently repaying Advances, including those who have made a claim in recent weeks due hardship caused by the outbreak of Covid-19. To help overcome this unintended consequence, The Salvation Army recommends that the Government should immediately suspend all Advance repayments for a minimum of three months. This would bring Advances into line with arrangements that have been made for the suspension of deductions to people’s claims for overpayments until at least July 2020.[42]      

Minimising the practical difficulties of implementation:

In The Salvation Army’s view, the practical challenges to implementing a system of non-repayable grants appear relatively minimal. To the best of our knowledge, it would not, for example, require significant amendments to Universal Credit’s existing IT infrastructure. It would also not require changes to primary legislation and could be executed using the Secretary State’s current powers via statutory instrument.[43] In practice, this would entail the Secretary of State writing off any repayment owed to the DWP following issuance of an Advance.

This makes it ideal for the fast changing nature of the current situation and the potential for significantly increased levels of hardship following the outbreak of Covid-19 among people who would otherwise not be required to rely on Universal Credit. The Salvation Army is aware of the Secretary of State and officials’ recent testimony to the Committee, which suggested that converting Advances into grants was not “operationally feasible”.[44] Given the scale of current need and the potential for future hardship as a result of worsening macro-economic conditions, it would be useful for the Department to provide some further detail and clarity on what they see as the main impediments to this option.

Providing a cost-benefit analysis:

The upfront cost of converting Advances into grants is largely dependent on the size of the group to which the intervention is applied. Estimates provided by Policy in Practice and the JRF provide a baseline figure of £4.3bn. This represents the cost of grants for 100 per cent of the analysis’ total cohort and would apply to around 4.3 million households over four years. Yet, depending on the level of targeting employed, the cost is reduced to potentially as little as £116 million. An intervention of this size would apply to roughly 200,000 households over four years.[45]    

It is important not to view these costs in isolation. Although they involve upfront investment, they also offer considerable economic, social, and administrative and operational returns. For example, problem debt has a variety of negative economic and social impacts for society as a whole. One prominent study by Baker Tilly on behalf of StepChange estimates these costs to be as high as £8.3bn a year.[46] 

As noted during this submission, the potential for Advances to contribute to problem debt is considerable. At a time when the UK risks losing a considerable proportion of its current GDP due to the outbreak of Covid-19,[47] converting Advances into grants would likely reduce the prevalence and extent of the costs highlighted by Baker Tilly and StepChange across the Universal Credit claimant population. This in turn will prove essential in helping people to return to work as soon as possible following the end of Covid-19 lockdown measures. 

There is also considerable scope to reduce administrative costs for third parties and government departments. A report by the Residential Landlords Association (RLA) shows that over the course of the preceding 12 months, 23 per cent (n. 135) of landlords had reported being required to use official proceedings to regain properties from tenants claiming Universal Credit due to arrears.[48] Of those landlords who responded to a question about what could be done to prevent evictions of Universal Credit claimants due to arrears, 70% (n. 104) believed that repossessions and their associated costs could be avoided by changing how Universal Credit is calculated and paid.[49]

The cost of recovering unpaid debts also has a cost for the DWP. As a previous answer to a written question by Gavin Newlands MP reveals, the use of collection agencies to recover unpaid debts in 2015/16 was £1.64 million.[50] By removing the need to repay Advances, this cost to DWP would likely be reduced significantly.

Finally, there are certain operational benefits to converting Advances into non-repayable grants. Previously, temporary accommodation’s housing costs were paid through Universal Credit. However, following the experiences of local authorities, including Croydon and Southwark, involved in the Universal Credit full service pilot areas, it was decided that temporary accommodation would be removed from Universal Credit.[51]

The main reason for this decision was that the then six week-wait for a first payment of Universal Credit was not compatible with local authority guidance, which stipulates that households should not ideally be placed in temporary accommodation for longer than six weeks. This meant that it was impossible for the local authorities involved in the pilot to abide by these terms and receive rent through the housing costs element of Universal Credit. If Advances were converted into non-repayable grants this raises the prospect of a solution, which could see temporary accommodation moved backed into Universal Credit.

Improving the functioning of Universal Credit as a whole

When considering any prospective changes to Universal Credit, it is essential to consider whether supplementary amendments are required to maximise the benefit produced by the primary reform. This is especially important when considering how best to eliminate or reduce the root cause of people’s hardship.

As The Salvation Army has attempted to show, converting Advances into a non-repayable grants has the potential to: help relieve immediate financial hardship across a significant proportion of the claimant population; be implemented relatively quickly in order to help people through the ongoing Covid-19 outbreak; and produce considerable financial, social, administrative and operational benefits.

In order to fully achieve this potential, the Government should consider combining this measure with a series of supplementary reforms. For example, there is evidence to suggest that people will often delay making a claim for Universal Credit because of other priorities, including caring for family members or looking for alternative employment.[52] This can result in claimants accruing additional debt in the interim.

To minimise this, Universal Credit should be amended so that claims can be backdated to the point at which the claimant became eligible, as opposed to when they actually made their claim. This period of backdating should be limited to one assessment period to ensure that claims for backdating were not open ended.   

It is also vital to ensure that claimants experiencing debt have the opportunity to access a sustainable support solution. The Government has recently announced that from 2021, it will be introducing a new 60-day ‘breathing space’ period to help resolve problem debt. The application of a breathing space period “will see enforcement action from creditors halted and interest frozen for people with problem debt. During this period, individuals will receive professional debt advice to find a long-term solution to their financial difficulties.”[53] 

This new policy is based on an impact assessment, which forecasts that the new breathing space period will assist 700,000 people during its first year of operation, rising to in time to over a million a year.[54] To guarantee that the policy meets this target, the Government should consider attaching the option of an automatic breathing space period to all new Universal Credit claims where the claimant is experiencing problem debt.

The benefit of a breathing space period attached to Universal Credit would be dependent on its successful take up by claimants. As a result, the Government should continue with its efforts to improve the identification of specific vulnerabilities among claimants at the earliest possible stage of a Universal Credit claim. As The Salvation Army has suggested elsewhere,[55] one simple way to help achieve this aim is to reduce the size of current caseloads for Work Coaches and Universal Credit Case Managers. Salvation Army Employment Plus services have seen real successes in helping people to make and manage their Universal Credit claims with individual caseloads of no more than 50. 

Conclusion:

In conclusion, The Salvation Army believes that converting Advances into grants represents the best way in which to relieve the continuing and often severe hardships faced by people during the five-week wait. The Salvation Army is clear that this represents an essential reform in the short term to protect people and the wider economy against the worst effects of the Covid-19 outbreak. Over the medium to long term, this reform could also bring about a level of sustainable change, provided that it was combined with the necessary supplementary measures.    

To achieve this, The Salvation Army recommends that as part of its final report, the Committee suggest to government that it:

• make data on the performance of current and future mitigations publicly available so that their performance can be analysed and their impact measured;
• limit the level of debt that new claimants accrue during any gap between when they become eligible for Universal Credit and when they actually apply by allowing claims to be backdated for up to one assessment period;
• remove the five-week wait by converting Advances into non-repayable grants for all claimants in the short-term, moving towards a more targeted intervention over time;
• immediately suspend all ongoing repayments of Advances for at least three months;
• provide a sustainable solution to people’s wider financial issues by attaching the option of an automatic breathing space period to new Universal Credit claims for claimants experiencing problem debt; and
• reduce caseloads for Work Coaches and Universal Credit Case Managers to allow better identification of vulnerabilities, including the existence of problem debt, amongst new claimants.

April 2020