Scope of the inquiry
The Work and Pensions Committee called for evidence for a Universal Credit update in January 2017. Since then, we’ve asked for more evidence on specific issues and published reports on different aspects of Universal Credit, which you can read about in these pages.
Our most recent report called on the Government to Overhaul Universal Support or put whole Universal Credit project at risk.
We’re currently looking into the Government’s plans for moving people who are already claiming benefits onto Universal Credit, which merges six “legacy” benefits into one, single, monthly household payment. The Government calls this “managed migration”. We’re also looking at the changes that the Government announced in the 2018 Budget.
In the Budget Statement on 29 October 2018 the Chancellor announced £1bn extra funding for Universal Credit. The Committee will be examining the detail of the Government’s plans, which address some of areas the Committee has been working on:
Support for the self-employed – the Department is going to extend the “Start- up Period” for all self-employed claimants to get their business up and running before they have to show a certain minimum income or lose the support of Universal Credit. The “Minimum Income Floor” currently kicks in after 12 months, which entrepreneurs have told the Committee does not reflect the realities of going into business for yourself. The Committee concluded that Universal Credit is “designed with little regard for the reality of self-employed work” and, contrary to the Government’s aspiration to support entrepreneurship and economic dynamism, actually poses a “very real risk” to both.
Bridging the gap - existing benefit claimants must make a brand new, online claim for their entire entitlement of any of the six benefits rolled into one single, monthly household payment under Universal Credit, and must wait the built in 5 weeks (20% wait much longer) for a first payment, like new claimants do. Many of them will be used to budgeting on weekly or fortnightly payments, and may not have anything to fall back on to tide them over, risking the increases in food bank use and rent arrears that have accompanied the rollout. The Department is planning to extend the two-week Housing Benefit run-on that claimants migrating to Universal Credit can currently receive, to income-related JSA, ESA and Income Support.
Problem debt - the Committee concluded that the five-week wait built into Universal Credit risks causing or compounding debt problems, and the Advance Payments introduced to tide claimants over are themselves a further debt. Persistent debt can prevent claimants from finding and staying in work, and the extra costs and pressures of debt can quickly spiral out of control. DWP's aggressive approach to collecting debts owed by claimants to Government and third parties can compound matters further, leaving claimants "swimming against a tide of unmanageable repayments" which "pile debt upon debt, trapping people in a downward spiral of debt and hardship". DWP "must not proceed with managed migration until it has assessed the contribution that the five week wait makes to claimant debt" and reformed its own debt collection practices. The Department is planning to reduce the maximum amount it will deduct from debt repayments from 40% of your monthly Universal Credit allowance to 30% - and the period over which Advances can be repaid will increase from 12 to 16 months. Evidence the Committee has received suggests that 30% is still far too high a deduction from each month’s benefit for most claimants to manage.