Damning report highlights major problems with universal credit

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The government spending watchdog warns universal credit is pushing claimants into rent arrears, and urges ministers to fix the system before rolling it out nationally.

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Housing associations and landlords have reported incresaes in rent arrears in areas with universal credit

The National Audit Office’s (NAO) ‘Rolling out Universal Credit report criticises the Department for Work and Pensions (DWP) for pushing forward with universal credit despite a series of problems. Full roll-out of universal credit, which replaces means-tested benefits and tax credits, is expected by March 2023.

The NAO expects universal credit to cost more than the benefits system it replaces and says the DWP will never be able to measure whether it has achieved its stated goal of getting an extra 200,000 people into work.

On top of this, the roll-out has been considerably slower than was initially intended and for many claimants, universal credit has caused hardship.

A survey by the DWP last week revealed that four in ten people claiming universal credit experienced financial problems several months into their claim.

The NAO states that the DWP has not shown ‘sufficient sensitivity’ towards some claimants and it does not know how many claimants are having problems with the programme or have suffered hardship.

According to the report ‘Rolling out Universal Credit’, housing associations and landlords have reported increases in rent arrears in areas where universal credit has been rolled out, which can take claimants a year to repay. Some private landlords say they are reluctant to rent to Universal Credit claimants.

Universal credit has also caused an 'upsurge' in the use of food banks. In three of the four areas the NAO visited, and for which data was available, the use of food banks increased more rapidly after universal credit was rolled out to the area. This echoes findings from the Trussell Trust, the largest operator of food banks in the country.

The NAO points to figures from last year that show around one quarter (113,000) of new universal credit claims were not paid in full on time. Late payments were delayed on average by four weeks. Some waited almost five months.

It says that the DWP does not anticipate payment timelines to improve significantly in 2018. On this basis, the NAO estimates that between 270,000 and 338,000 new claimants will not be paid in full at the end of their first assessment period throughout 2018. Those with more complex cases are more likely to be paid late.

The NAO report also highlights issues with the initial waiting period - previously six weeks, now five - after a new claim is submitted, which has led to around 56,000 people a month applying for a universal credit advance to help them manage before receiving their first payment. However advances are loans, usually repaid to the DWP through deductions from future universal credit payments.

The NAO concludes by urging the DWP not to expand the replacement benefits system before it can deal with higher claimant volumes. It says the DWP must learn from the experiences of claimants and third parties, as well as the insights it has gained from the rollout so far.

The NAO calls on the DWP to:

  • Improve the tracking and transparency of progress towards Uuniversal credit’s intended benefits.
  • Ensure that operational performance and costs improve sustainably before increasing caseloads through managed migration.
  • Work with delivery partners to establish a shared evidence base for how universal credit is working in practice.
  • Make it easier for third-parties to support claimants.

Amyas Morse, head of the National Audit Office, said, ‘The Department has kept pushing the universal credit roll-out forward through a series of problems. We recognise both its determination and commitment, and that there is really no practical choice but to carry on with the roll-out.

‘We don’t think DWP has shown the same commitment to listening and responding to the hardship faced by claimants.

‘We think the larger claims for universal credit, such as boosted employment, are unlikely to be demonstrable at any point in future. Nor for that matter will value for money.’

Sector comments

Imran Hussain, director of policy and campaigns at Action for Children, said, ‘It’s clear universal credit is failing children and leaving many families on low incomes struggling to keep their heads above water, while offering little or no value for money to the taxpayer.

‘By the end of this parliament, projections show over five million children will be living in poverty, due in part to the drastic cuts in dedicated support for working families. And hard as they try, it’s almost impossible for parents to give children the best start in life when they can barely afford to put food on the table.

‘When you have a system that’s so complicated that even Government advisers struggle to understand it, it’s time to rethink. We urge the Government to move quickly to make the system simpler and fairer, and crucially, reverse the cuts which are crippling ordinary working families across the country.’

Alison Garnham, chief executive of Child Poverty Action Group, said, ‘The picture the NAO presents is justifiably bleak. On the ground, new claimants can't even be sure they will be paid in full and on time. And how many people will be helped into work by the benefit is far from clear. 

‘There are clearly fundamental design and delivery problems in universal credit which must be fixed but it has also had its funding dramatically reduced so its capacity to deliver on the original aims has been compromised. 

‘Today's report must give ministers pause for thought. Will the Government press on with a programme that is demonstrably failing  - causing financial misery for families - or will it restore the money that's been taken out of universal credit in an effort to rehabilitate it for struggling families?’

A DWP spokesman said, 'Previous administrations poured billions into an outdated system with a complex myriad of benefits, which locked some people into cycles of welfare dependency. Whereas we are building a benefit system fit for the 21st century, providing flexible, person-centred support, with evidence showing universal credit claimants getting into work faster and staying in work longer.

'Universal credit is good value for money and is forecast to realise a return on investment of £34bn over ten years against a cost of £2bn, with 200,000 more people in work.

'Furthermore 83 per cent of claimants are satisfied with the service and the majority agree that it "financially motivates" them to work.

'As the NAO acknowledges, we have made significant improvements to universal credit as part of our "listen and learn" approach to its rollout, and it's on track to be in all jobcentres nationally by the end of 2018.'

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