It should be our social security system – rather than foodbanks – that helps us keep our heads above water when we’re struggling. More flexibility in Universal Credit could make a big difference, says Iain Porter.
No one should have to rely on charity to meet their basic needs, but today’s report from the Trussell Trust shows how families are turning to foodbanks as they are swept into poverty by low pay, insecure jobs, rising costs, and shocks like illness or relationship breakdown. As a compassionate nation, we just should not accept this.
Our social security system should hold people steady against these currents. But new findings from Policy in Practice for JRF show that Universal Credit is adding to the turbulence rather than providing an anchor.
The biggest challenge people face as they move onto Universal Credit is the minimum five-week wait for the first payment. In many cases, the wait can be far longer because of errors or difficulties encountered in making the claim. People can take out a loan to tide them over – called an ‘Advance’ – but repaying this can leave them without enough to live on over the following year.
Pulled deeper into poverty
One new claimant told us how an accident temporarily stopped him working, but the long wait for Universal Credit pulled him deeper into poverty:
I can’t wait to go back to work because this is just a nightmare… I’m a month basically behind with everything now… plus paying back the Advance all the time… I was borrowing money off of friends and family to survive that first month but I’m still catching up with everything.
Another working claimant who moved from tax credits to Universal Credit was forced into unsustainable credit card debt, while having to tell her childminders that “I haven’t been paid, I can’t pay you this month but I still have to go to work and I still have to bring my child here”.
Around 2 million families are on Universal Credit, with a further 4.7 million set to move on to it by the time the rollout has been completed in 2023. We estimate that 2 in 5 families due to move onto Universal Credit will be unable to meet basic living costs during the five-week wait. That’s 2 million families struggling to stay afloat in an impossible situation, unable to afford the basics we all need to get by. Of these, around 700,000 will continue to face a shortfall as they repay their Advance over the following year.
Universal Credit redesign could be a lifeline
Universal Credit could be a lifeline for people experiencing poverty across our country – if these design flaws are fixed.
The changes should start by making it much more flexible. It’s only right that people should be allowed to backdate claims under any reasonable circumstances, without being held back by the current burdensome level of proof. This would enable many to receive their first payment sooner.
More flexibility in how Advances and other debts are recovered would also help. And everyone should have the choice to receive payments fortnightly instead of monthly, as they already do in Scotland from their second month. Ultimately, the Government should make fortnightly payments available from the start of a claim, meaning the first payment would come after two weeks.
However, there is an urgent need to get more help to people right now as Universal Credit rolls out at pace.
Firstly, to help families with children, child tax credit should ‘run on’ for two weeks after claiming Universal Credit. This would cost £430 million over the four remaining years of the rollout.
Secondly, the Government should introduce an upfront grant, which could be targeted at those most in need. Directing it to families who are unable to meet basic outgoings during the five-week wait would cost around £1.3 billion over the four years. Or for £300 million it could be focused solely on those expected to remain in shortfall during the following year.
Getting the transition to Universal Credit right is vital to ensure people are not pulled further into hardship when at their most vulnerable. But it’s also crucial for trust in the new system and its ability to fulfil its potential to stem the tide of poverty.