Written evidence from SCOPE [UCW0081]

Summary

Scope is pleased to respond to this consultation into the wait for a first Universal Credit payment. Scope is a pan disability charity, and as such we have regularly heard from disabled people who have told us about the financial difficulties they have faced as a result of waiting for their first Universal Credit payment. We have gathered information from our helpline and online community to inform our response.

Question 1: To what extent have the mitigations the Government has introduced so far helped to reduce the negative impact of the five week wait for UC claimants?

1.1.  The welfare system exists to provide a financial safety net to anyone who needs it. But many disabled claimants are finding that the five-week wait for a first UC payment is putting them in a worrying financial situation ([1]). Scope has heard from disabled people about the impact of the five-week wait on their financial resources.

1.2.  The Disability Benefits Consortium found that during the five week wait it was common for disabled claimants to have to borrow money to manage their finances during this time, while many also could not afford to pay housing costs ([2]).

1.3.  The Department for Work and Pensions (DWP) have attempted to mitigate the negative financial consequences of the five week wait for claimants by offering them the option of an Advance Payment to cover costs in the meantime, with many claimants end up taking up this option. In October 2018, around 60 per cent of people making a new claim received an advance payment for the DWP ([3]).

1.4.  However, because Advance Payments are then deducted from subsequent UC payments, they are only a short-term solution which risks creating financial problems for claimants over the longer term.

1.5.  Disabled people in particular are more likely to suffer financially as a result of going to debt. Scope has found that disabled people on average face extra costs of £583 a month ([4]). This figure takes into account the Personal Independent Payment/Disability Living Allowance benefit which disabled people can claim to help meet their extra costs.

1.6.  Households with a disabled member are also twice as likely as households without to have unsecured debt totalling more than half their household income ([5]). Disabled people also have an average of £108,000 fewer savings and assets than non-disabled people ([6]).

1.7.  Given the extra costs disabled people face and the lower than average savings, disabled people are already vulnerable to any drop in their income. It is therefore likely that having to wait five weeks for their first UC payment or receiving a lower amount of UC due to the need to pay back an advance payment will result in financial difficulties for many disabled people who need to claim UC.

1.8.  It is clear that advance payments in practice, though initially a welcome source of financial assistance, only result in delaying the financial pain that disabled claimants would have faced as a result of the five week wait. If advance payments therefore fail to provide effective mitigation to the financial issues faced by disabled claimants and others during the five week wait, then it is clear that they have failed in their core function.

1.9.  As part of the managed migration pilot when it is restarted, and throughout the expansion of UC, it is essential that the DWP develops an understanding of the particular impact of the five week wait on disabled people and the use of repayable payments, and works to solve any issues which arise.

Recommendation: When it restarts, DWP uses the managed migration pilot in Harrogate to examine the impact of the five week wait on disabled claimants who participate in the trial

Question 2: What is the best way of offsetting the impact of the five week wait?

2.1.  Scope believes that the simplest and most effective option to offset the impact of the five week wait is to make the advance payment a non-repayable grant.

2.2.  As we have stated above, many disabled claimants find receiving an immediate advance payment helpful in ensuring they do not fall into financial difficulty whilst waiting for their first official UC payment. But losing part of their subsequent UC awards so they can pay back that advance payment can lead to many disabled claimants struggling to meet their day-to-day costs.

2.3.  Replacing the advance with a non-repayable grant would mean claimants can receive the financial support they require to cover them during the five week wait without reducing any of their future UC payments and putting them into debt.

2.4.  According to modelling conducted by Policy in Practice, it would cost the DWP an estimated £1 billion to introduce non-repayable grants for households who are expected to be in shortfall during the five week wait ([7]).

2.5.  Policy in Practice’s modelling suggests that just over a million households each year will be financially affected by the five week wait. Given the large number of people who will benefit financially from making the advance payment non-repayable (including many disabled claimants), we believe it is worth the high costs of the policy. 

Recommendation: DWP to replace the current system of advance payments with non-repayable grants

2.6.  We note that, in her recent appearance in front of the Select Committee, Therese Coffey explained that turning advance payments into non-repayable grants would be difficult to administer operationally. She also told the committee that it won’t be possible to remove the five week wait due to the difficulty of making operational changes to UC.

2.7.  We would suggest the committee explore with the Secretary of State and DWP officials in more detail why any operational issues with UC preclude reforming the five week wait.

Recommendation: The Work and Pensions Select Committee should question the Secretary of State for Work and Pensions and senior officials in the DWP to ascertain why operational issues on UC prevents changes to the five week wait.

Question 3: Are different mitigating options needed for different groups of claimants?

3.1.  Through our helpline and online community, Scope regularly hears from disabled people who have experienced financial problems as a result of waiting five weeks for their first UC payment, or who are in debt as a result of paying off an advance payment.

3.2.  As a pan disability charity, Scope is responding to this consultation on behalf of those disabled claimants who have been affected by the five week wait.  And it is important that the views and experiences of disabled people are taken into account by DWP when considering a solution to this issue.

3.3.  However, we recognise that the five week wait impacts not only disabled people but claimants from other vulnerable groups as well.

3.4.  Because of this, we believe that any solution to the five week wait, whether our preferred option of a non-repayable grant or an alternative one, should be made available to any claimant who may need it, not just those who are disabled.

Question 4: Are there barriers or potential unintended consequences to removing the five week wait - either for claimants or the Department? How can they be overcome?

4.1.  Although we are recommending DWP provides disabled and other UC claimants with more more money in the form of non-repayable advance payments, we recognise that the evidence so far suggests that the risk of fraud increases with a more generous welfare system.

4.2.  The National Audit Office found that, after advance payments were introduced in July 2018, the number of suspected fraud cases more than quadrupled from 179 in July to 1,632 in December 2018, with monthly fraud cases peaking at 15,044 in July 2019 ([8]).

4.3.  Disabled people, particularly given their precarious financial situation, are particularly vulnerable to being affected by fraudulent cases either caused by errors from others or by accident.

4.4.  However, we are confident the DWP is capable of managing this risk. Fraud cases for legacy benefits is fairly low – figures for 2018-19 found that there was a total of 2,300 benefit cases caused by fraud, with a further 1,800 caused by claimant or official errors ([9]).

4.5.  Nevertheless, the committee should seek to question the DWP on how they intend to mitigate the risk of any potential increase in fraudulent cases as a result of non-repayable grants replacing the current advance payments. 

4.6.  Whilst there is a possible unintended consequence from introducing non-repayable grants, the current DWP solution to the five week wait of offering claimants an advance payment loan has resulted in unintended consequences for many disabled claimants.

4.7.  By offering a loan which must be paid back in a certain timeframe, and then subsequently taking part of that claimant’s UC award each month to reclaim that loan, the DWP are simply delaying the point at which many disabled claimants are suffering financially.

4.8.  Furthermore, the DWP’s chosen solution to this, extending the period by which claimants can repay their advance payment, although welcome, only has the unintended consequence of lengthening the amount of time a claimant remains in debt.

4.9.  By providing claimants with the option of a non-repayable grant instead of the advance payment loan, the DWP will be removing a unintended consequence of advance payments which could cause financial difficulties for many disabled claimants.

April 2020