Universal Credit claimants face “impossible choice of hardship now or hardship later”

20 January 2019

The Work and Pensions Committee publishes the Government’s response to the Committee's report on Universal Support, alongside an exchange of correspondence concerning claimant debt.

Government Response


In its recent report on support for childcare costs under Universal Credit the Committee expressed deep alarm at DWP’s suggestion that parents struggling to find the upfront payment for childcare, to enable them to get back into work, should take out a “budgeting advance”. The Department claimed Budgeting Advances are “not a loan”, despite the Government’s own website stating that they are. Commenting, Chair of the Committee Frank Field said “It is simply irresponsible of Government to suggest that the way around this policy’s inherent problems is for struggling, striving parents to take on more debt - still more so to claim, untruthfully, that it is not a debt at all. It clearly is.” 

"Aggressive approach" to debt collection

The Committee had already raised serious concerns about DWP’s approach to claimant debt and to recovering debt in its previous report on Universal Support (Overhaul Universal Support or put whole Universal Credit project at risk).  Regardless of how DWP describes them, the Advance Payments introduced to tide people over the initial 5 week wait for their first UC payment are a debt which must be repaid out of current income going forward. The Committee said that 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 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". Yet , as the report noted, debt advice is not routinely offered as part of the “Universal Support” service intended to help claimants navigate the transition to Universal Credit.

Concern that DWP did not mention Advances are a loan which must be repaid

The Committee is today publishing the Government’s response to that report, on Universal Support, alongside an exchange of correspondence on the question of claimant debt (below). DWP asked the Trussell Trust, 11 days before Christmas, to promote Advance Payments to claimants coming to their network of food banks because they are suffering hardship and hunger during the 5 week wait. Chair Frank Field was “very concerned that DWP did not mention that Advances are a loan which must be repaid. The Committee has heard substantial evidence that many people who need to rely on food banks will already be swamped by debt. I contend that the ‘help’ the Department is offering would ‘simply pile another debt on top and add to [households’] misery’. I am aware that Citizens Advice has also expressed to us in multiple evidence submissions the view that Advance Payments are simply another form of debt.”

Citizen’s Advice said that “whether or not people understand the money has to be paid back, there are widespread affordability issues with repayments causing significant hardship well into claims….It has been clear for some time that people are struggling financially when they make a UC claim - this means that the first payment has to be made as soon as possible and in a way that does not create hardship down the road. As we understand it, not classifying advances as loans also means that people struggling with them will not be able to seek protection through the ‘Breathing Space’ or Statutory Debt Management Plans, which they will be able to with other debts.”

Letter from The Trussell Trust over problems with Advance Payments

Trussell Trust has expressed its concerns to DWP directly, and the Committee is publishing a copy of their letter to Universal Credit programme director Neil Couling alongside their response to the Committee, which summarises the significant problems of Advance Payments: 

  • Trussell Trust’s evidence suggests that Advance Payments are often an ineffective solution to the hardship faced during the five-week wait. They found that many people who received Advance Payments found them unhelpful, too little to cover costs or unaffordable to repay.
  • It is unclear how making the distinction between a loan and an advance helps claimants. Mr. Couling’s concern is that claimants who think Advance Payments are a loan “might be put off claiming”. If claimants do have reservations about taking on a loan, repayments are likely to be a factor. Given Advance Payments will have to be repaid, it is difficult to see why further awareness of the differences between an advance and loan will help to improve take-up.
  • While the DWP is making welcome steps to make benefit repayments more affordable, the changes announced in the 2018 Budget will not come in for some time, making the Department’s current push to recommend Advance Payments problematic.
  • The fundamental problem with the five-week wait is that many new Universal Credit claimants do not have income or savings to meet their living costs. Advance Payments may provide a temporary solution, but repayments will mean that this shortfall in income is simply deferred. The current system leaves claimants with the impossible choice of hardship now or hardship later.

Further information

Image: Creative Commons, DWP

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