THE WELCOME CENTRE – WRITTEN EVIDENCE (EUC0030)
The economics of Universal Credit
- The Welcome Centre is a large, independent foodbank in Huddersfield, West Yorkshire, providing support across the area of south Kirklees. We provide practical crisis support to individuals and families, and offer one to one advocacy, guidance, and support for our clients.
- The Welcome Centre operates on a referral basis; approximately 120 organisations currently make referrals to our service, and all of the people referred to us are suffering disadvantage and financial hardship. Last year we distributed 14,159 crisis support packs supporting 4,258 people; almost a third of our beneficiaries were children.
- Last year we received 4,049 referrals for Universal Credit claimants, this represents 40% of our total referrals.
- We are submitting evidence to the Economic Affairs Committee inquiry into the economics of Universal Credit as we would like to highlight the impact that Universal Credit has had on our clients, and also on our resources as a small charity.
How well has Universal Credit met its original objectives?
- Universal Credit has failed to meet several of its original objectives:
- Aim: Smooth the transition into work by offering a single benefit that removes the distinction between being in and out of work. New Universal Credit claimants must wait 5 weeks for their first Universal Credit payment, during this time many of them are forced to rely on the food bank for support with basics such as food and toiletries; this does not represent a ‘smooth the transition into work’.
- Aim: Offer a simpler support, with one system replacing multiple systems, therefore reducing administration costs and the propensity for fraud and error. The ‘simplification’ of the benefits system is very much a systems-based approach that does not prioritise the needs of claimants. By consolidating six benefits into one, making the benefit online, reducing payment frequency, and paying the full benefit straight to the claimant, the system is simplified for those administering it. However, it is not simpler for the claimants relying on the system, many of whom do not have online access, cannot manage their budget on a monthly payment cycle, and have challenges managing the housing element of their payment. These three issues are common in driving people to visit The Welcome Centre for support.
- Aim: Tackle poverty both through increased take-up since the system will be simpler and from increased reward from employment for the customer. Last year TWC had more than 4,000 referrals for Universal Credit claimants – this is completely at odds with the aim of tackling poverty. In addition to the claimants reliant on food bank support throughout the five week wait period for Universal Credit, in-work Universal Credit claimants also rely on The Welcome Centre food bank for support. They are driven to visiting the food bank because they are unable to manage their budget with a Universal Credit income that fluctuates monthly depending on their wage income. In addition to the practical support The Welcome Centre provides to alleviate poverty, we also provide a large amount of one to one support to help people manage their Universal Credit claim; the system is not ‘simpler’ if claimants need a support worker to navigate it.
Were the original objectives and assumptions the right ones? How should they change?
- UC is an online benefit; the entire system is based on the assumption that claimants have access to a computer or smart device, have access to the internet, and have a reasonable level of computer literacy. This is not the case for many of our clients at The Welcome Centre.
- Case study: Mark worked full-time in quite a physical job, but had to be signed off work sick due to back pain. Mark was only entitled to statutory sick pay, so he was advised to apply for Universal Credit whilst he was signed off work. Mark had never claimed benefits before and was unsure what to do. Mark had no PC or smartphone, and delayed applying for Universal Credit because he didn't know where to get help in completing the online application. Eventually, Mark was referred to The Welcome Centre because he was really struggling to manage. As well as supporting Mark with food and toiletries, The Welcome Centre helped Mark to make his Universal Credit claim. Unfortunately though, by the time he was referred to The Welcome Centre Mark was already in arrears with his rent, water, and council tax bills.
- Case Study: John is 58 years old. John has dyslexia, and had never used a computer before making his Universal Credit claim. John had help to set up a Universal Credit account, but after the initial set-up, he wasn't able to log in and check his journal. As a result of this, John failed to attend an appointment and his benefits were stopped. Whilst his benefits were stopped, John had to be referred to The Welcome Centre food bank as he was unable to feed himself without his benefits income. As well as food bank support, The Welcome Centre also helped him do a mandatory reconsideration, which resulted in his benefits being re-instated. The Welcome Centre also had to find John ongoing IT support to help him avoid being in the same situation again in future. The Welcome Centre referred John to a specialist IT course, so that he could learn to use a PC at his own pace, and receive ongoing support to help him manage his Universal Credit claim in the meantime.
- As illustrated by these case studies, many people do not have the ability or access to manage their benefit online, and experience significant financial hardship as a result. This has a negative economic impact not only on the individual claimants and the charities supporting them but also on the wider economy in the form of rent arrears, council tax non-payment, and utility bill arrears.
- Universal Credit needs to be accessible to everyone in society, lack of access to a computer or smart device should not be a barrier to accessing Universal Credit.
Which claimants have benefited most from the Universal Credit reforms and which have lost out?
- The fact that the housing element of Universal Credit is paid in arrears is causing claimants to fall into rent arrears. Some claimants are facing eviction as a result of this, particularly those in the private rental sector.
- Case Study: Jackie lived in a private rental property and had never been in rent arrears. Jackie had always had a good relationship with her landlord. Jackie had to open a Universal Credit claim and did not have any savings to cover her rent during the five week wait period for her first Universal Credit payment, meaning that even if her claim had been straight forward she would have had to go into rent arrears. Unfortunately, there was an issue with her Universal Credit claim, which meant that she did not receive her housing element. Because she was already five weeks behind with her rent, her landlord notified her that he could not wait any longer for her rent payment, and threatened to start the eviction process. Jackie was very worried about being evicted, and felt her only option was to take out a payday loan of more than £600 so she could pay her rent. This saved Jackie from eviction, but means that she now has high interest debt, which will take her years to pay off. During this period, Jackie had to rely on the food bank to help her with food and other essential items.
- Issues and delays in administering Universal Credit can cause issues for working parents, in some cases resulting in job loss.
- Case study: James was a single parent with a full time job. James was granted full custody of his two young children from a previous relationship. James arranged for before and after school childcare for his children, whilst he was at work. James applied for a new Universal Credit claim, which would have helped him cover his childcare costs and allowed him to continue working. However, there was a delay regarding the childcare element of his Universal Credit, and as a result James fell into arrears with his childcare provider. Ultimately, the delay in resolving the childcare element of his Universal Credit claim meant that James could no longer afford childcare for his children before school and so could not get to work on time. James lost his job, and had to rely on The Welcome Centre to support him and his children with food.
How has the world of work changed since the introduction of Universal Credit? Does Universal Credit’s design adequately reflect the reality of low-paid work?
- Many low-paid workers, whether in the gig economy or on zero hours contracts, have fluctuating income, that varies both in amount and regularity of payment. The current Universal Credit system is not flexible enough to cope with this, making it very difficult for working claimants to manage their budget.
- Universal Credit is paid monthly, to better reflect the experience of employment. However, many low-paid jobs pay fortnightly rather than monthly. Not only does this mean that Universal Credit does not better reflect the experience of low-paid work, it actually causes additional complications to the Universal Credit calculation payment calculation periods.
If Universal Credit does not adequately reflect the lived experiences of low-paid workers, how should it be reformed?
- Make the system easier to access and navigate for claimants who are unable to manage their claim online.
- Make the system more responsive to claimants fluctuating employment income, so claimants can better manage their budgets.
- Give claimants the option of monthly or fortnightly payments.
- Give claimants the option to have the housing element of their claim paid direct to their landlord, to help them with budgeting and reduce the chance of claimants falling into rent arrears.
Submitted by The Board of Trustees of The Welcome Centre, Huddersfield
24 February 2020