Third Report: Universal Credit: the wait for a first payment

DWP has previously adopted a sceptical attitude towards the evidence linking food bank use with Universal Credit. The Minister has now recognised that the Department needs to do more to improve its understanding of the what causes food bank use … Read more DWP has previously adopted a sceptical attitude towards the evidence linking food bank use with Universal Credit. The Minister has now recognised that the Department needs to do more to improve its understanding of the what causes food bank use to increase. This is a welcome step. The Department has still not published its own analysis of the drivers of foodbank use, which it commissioned in 2018 and which it originally planned to publish in October 2019. We recommend that the Department publish this work without delay. Show less

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DWP should publish details of the meetings that it holds with stakeholders, like the Trussell Trust, to ensure that the public and Parliament know that important and well-regarded research, such as that produced by the Trussell Trust, is considered when … Read more DWP should publish details of the meetings that it holds with stakeholders, like the Trussell Trust, to ensure that the public and Parliament know that important and well-regarded research, such as that produced by the Trussell Trust, is considered when policy and operational decisions are made. The publication should include the topics that were discussed and any actions that the Department decided to take following the meeting. (Paragraph 36) Moving to Universal Credit without a change in circumstance Show less

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We recommend that DWP should eliminate the five week wait for all claimants moving to Universal Credit through managed migration, including for claimants moving from tax credits. Those claimants should continue to receive their existing benefits during their first monthly … Read more We recommend that DWP should eliminate the five week wait for all claimants moving to Universal Credit through managed migration, including for claimants moving from tax credits. Those claimants should continue to receive their existing benefits during their first monthly assessment period. They should then be offered the option, from day one of their Universal Credit claim, of choosing fortnightly payments of their award. This would ensure a smooth and seamless move from legacy benefits to Universal Credit for people whose circumstances have not changed. Show less

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We recommend that DWP set out, in response to our report, a detailed analysis of how our recommended approach could work in practice. It should also assess how the costs of this approach would compare with the costs of its … Read more We recommend that DWP set out, in response to our report, a detailed analysis of how our recommended approach could work in practice. It should also assess how the costs of this approach would compare with the costs of its existing plans to pay run-ons and final payments of legacy benefits to claimants who move via managed migration. (Paragraph 56) Starter payments in Universal Credit Show less

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We recommend that the Department pay all first time claimants of Universal Credit a “starter payment” equivalent to three weeks of the Standard Allowance of Universal Credit. This payment should be made two weeks after the initial claim, and only … Read more We recommend that the Department pay all first time claimants of Universal Credit a “starter payment” equivalent to three weeks of the Standard Allowance of Universal Credit. This payment should be made two weeks after the initial claim, and only once the claimant’s identity has been verified, to mitigate the risk of fraud. The starter payment should also be given to people who move to Universal Credit by “natural” migration, in cases where it is not possible for them to be moved seamlessly to Universal Credit. Show less

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Terminally ill people already face thousands of pounds of additional costs because of their illness, and the money provided by Universal Credit counts more than ever. We welcome the fact that the Department has been reviewing how the Special Rules … Read more Terminally ill people already face thousands of pounds of additional costs because of their illness, and the money provided by Universal Credit counts more than ever. We welcome the fact that the Department has been reviewing how the Special Rules are working, but that review has now lasted for more than a year. We urge the Government to publish its review without further delay, no later than 30 November Show less

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The starter payments we have recommended would also be available to people making claims under the Special Rules for Terminal Illness. We recommend that the Department consider what further support it could offer to people making claims for Universal Credit … Read more The starter payments we have recommended would also be available to people making claims under the Special Rules for Terminal Illness. We recommend that the Department consider what further support it could offer to people making claims for Universal Credit under the Special Rules for Terminal Illness. That might include paying the starter payment more quickly on receipt of a DS1500 form; offering a larger starter payment to people making claims under the Special Rules; or proactively offering backdating (beyond the current limit of a month) of claims to people diagnosed with a terminal illness who have, understandably, not made a claim immediately on becoming eligible. (Paragraph 80) Advance payments Show less

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We recommend that Advances should be renamed “new claim loans”, so that it is clear to claimants that they will need to be repaid. Before a new claim loan is granted in full, the Department should provide personalised budgeting support—when … Read more We recommend that Advances should be renamed “new claim loans”, so that it is clear to claimants that they will need to be repaid. Before a new claim loan is granted in full, the Department should provide personalised budgeting support—when possible, with a face-to-face option—with a full assessment of the claimant’s financial situation and the impact that future repayments of the loan will have on their household finances. We recognise that, for people in acute financial crisis, it may be necessary for the Department to pay part of the loan before this support can be offered. Show less

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The Department should strive to bring in the extension to the repayment period and lowering of the deduction cap sooner than planned, no later than April 2021— recognising the likely increase in the numbers of claimants over this winter. We … Read more The Department should strive to bring in the extension to the repayment period and lowering of the deduction cap sooner than planned, no later than April 2021— recognising the likely increase in the numbers of claimants over this winter. We also recommend that the deduction cap should be reduced further, to 10%, in recognition of the fact that deductions are taken from an income already set at subsistence levels. If this acceleration involves deprioritising other planned changes or developments in the build programme, the Department should set out what these are and provide a revised timescale for their introduction. Show less

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We welcome the announcement of the Breathing Space scheme, which is scheduled to be introduced next year, and the Government’s confirmation that Advances in Universal Credit will be covered by the scheme. We find it disappointing, however, that debts in … Read more We welcome the announcement of the Breathing Space scheme, which is scheduled to be introduced next year, and the Government’s confirmation that Advances in Universal Credit will be covered by the scheme. We find it disappointing, however, that debts in Universal Credit will be “phased in” over time rather than introduced straight away. We recommend that DWP works with HM Treasury to address any technical barriers in order to ensure that Advances are included in the scheme from its launch, so that Universal Credit claimants can benefit from the support it offers straight away. Show less

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Some people in financial distress during the wait for their first payment can face a difficult choice between using their Advance to pay their housing costs, or to cover other essential costs, such as food or heating. No one should … Read more Some people in financial distress during the wait for their first payment can face a difficult choice between using their Advance to pay their housing costs, or to cover other essential costs, such as food or heating. No one should find themselves in arrears—or facing eviction—during this time. We recommend that anyone claiming an Advance should be given the option, at the outset, of having the housing element of the Advance paid directly to their landlord. This would ensure that claimants’ housing costs are covered during the wait for their first payment, and that they will not face the risk of falling into arrears or eviction as a result. Show less

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We recommend that vulnerable claimants or claimants with specific needs are prioritised for having the housing element of their Advance paid directly to their landlord. This could include people with learning disabilities, people with mental illness, people who have previously … Read more We recommend that vulnerable claimants or claimants with specific needs are prioritised for having the housing element of their Advance paid directly to their landlord. This could include people with learning disabilities, people with mental illness, people who have previously been homeless, or people with drug or alcohol addiction. (Paragraph 115) Increased financial support Show less

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We recommend that the Department invests in expanding and developing Help to Claim so that the service can provide support to people beyond the application process. This should include debt advice, support for people who are struggling with Advance repayments, … Read more We recommend that the Department invests in expanding and developing Help to Claim so that the service can provide support to people beyond the application process. This should include debt advice, support for people who are struggling with Advance repayments, and tailored support for people with complex needs who need additional support throughout their claim. The service should also offer digital support—for example, supporting people to make use of the online journal to maintain their claim. This would bring Help to Claim closer to the original plans for Universal Support. Show less

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DWP must immediately make improvements to the Universal Credit system to formalise how it identifies and defines vulnerable claimants, as part of its overall approach to safeguarding vulnerable people. This will be a substantial piece of work, and DWP should … Read more DWP must immediately make improvements to the Universal Credit system to formalise how it identifies and defines vulnerable claimants, as part of its overall approach to safeguarding vulnerable people. This will be a substantial piece of work, and DWP should set out when it expects to achieve this. The new mechanism should, as the Minister for Welfare Delivery suggested, include the ability to identify vulnerable and disadvantaged groups and specific cohorts of people. DWP should gather data to identify whether any such groups are more likely to experience problems during the wait for first payment, delays to their payment, or any other issues throughout their claim. DWP should proactively use this information to expedite claims for these people, ensuring that they do not face further delay, and to provide the additional support that they need. Show less

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Support organisations have expressed concern that DWP’s approach to data sharing and consent has had a detrimental effect on their ability to support vulnerable claimants. The Department now says it is exploring options for improving its model Universal Credit: the … Read more Support organisations have expressed concern that DWP’s approach to data sharing and consent has had a detrimental effect on their ability to support vulnerable claimants. The Department now says it is exploring options for improving its model Universal Credit: the wait for a first payment 83 of explicit consent. We urge the Department to publish more detail about how this exploration is being progressed, including when the Department expects progress to be visible to observers and experienced by claimants. We echo the Social Security Advisory Committee’s recommendation that DWP should consider applying the implicit consent model to Universal Credit, or at least consider what improvements it can make to the model of explicit consent. More broadly, DWP should review its approach to how it works with people and organisations that support claimants, including support workers, housing associations and local authorities. (Paragraph 145) Payment timeliness Show less

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The recovery of Tax Credit debt from claimants’ Universal Credit awards clearly presents problems. However, the option of returning responsibility to HMRC now would be too challenging to deliver in practice. Instead, we recommend that DWP should continue to collect … Read more The recovery of Tax Credit debt from claimants’ Universal Credit awards clearly presents problems. However, the option of returning responsibility to HMRC now would be too challenging to deliver in practice. Instead, we recommend that DWP should continue to collect these debts, but that recovery should only begin when the claimant has repaid their Advance (if they have taken one out). Repayments of any remaining debt should be capped at 10% of the Universal Credit standard allowance per month. Debts that have not been pursued for more than 6 years should be written off entirely, in line with the approach taken in the private sector. We also recommend that the FCA’s approach be extended so that it covers public sector debts, including tax credit overpayments and Advances in Universal Credit. This will help ensure that best practice from the private sector is reflected in DWP’s approach to debt. (Paragraph 170) Universal Credit: the wait for a first payment 85 Backdating Show less

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We welcome the Minister’s recognition that the Department needs to improve its understanding of the reasons why so many people claim for Universal Credit long after they become eligible. The Department must prioritise this work so that it can tackle … Read more We welcome the Minister’s recognition that the Department needs to improve its understanding of the reasons why so many people claim for Universal Credit long after they become eligible. The Department must prioritise this work so that it can tackle the problem. We recommend that the Department investigate why people take time to start a Universal Credit application and publish the results of these findings by the end of the financial year. It should use this analysis to inform its communications with claimants, to encourage people to apply for Universal Credit at the right time. Show less

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Many claimants are simply unaware that they can ask for their claim to be backdated by a month. Even when they do ask for backdating, they sometimes face an intrusive and bureaucratic process. We recommend that the Department review the … Read more Many claimants are simply unaware that they can ask for their claim to be backdated by a month. Even when they do ask for backdating, they sometimes face an intrusive and bureaucratic process. We recommend that the Department review the use of evidence for backdating and works with work coaches to find a way to make the application process less burdensome on claimants. The Department should publish the information that work coaches use to advise claimants on backdating. It should work to increase awareness of the option for backdating from day one of a person’s claim, and of the circumstances in which somebody may be able to see their claim backdated. Show less

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Currently, backdating is only permitted up to a month before the claim was submitted. Given the seriousness of the life events which might allow the backdating of a claim—bereavement, serious illness, relationship breakdown—this period seems astonishingly short. We recommend that, … Read more Currently, backdating is only permitted up to a month before the claim was submitted. Given the seriousness of the life events which might allow the backdating of a claim—bereavement, serious illness, relationship breakdown—this period seems astonishingly short. We recommend that, in specified circumstances, the Department allow backdating to the point at which the change in someone’s life occurred, rather than strictly a month before. Show less

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The Universal Credit Transition Fund is an initiative to support vulnerable people in applying for Universal Credit as soon as they are eligible, and rightly puts organisations that work most closely with these groups at the centre. Timely applications to … Read more The Universal Credit Transition Fund is an initiative to support vulnerable people in applying for Universal Credit as soon as they are eligible, and rightly puts organisations that work most closely with these groups at the centre. Timely applications to Universal Credit will mitigate the impact of the five-week wait. The disruption created by coronavirus this year has left the future funding of the Fund in some doubt. We recommend that the Department and HM Treasury continue the Universal Credit Transition Fund by renewing its funding for the next financial year. (Paragraph 183) Improving payments Show less

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We recommend that the Department provide new and clearer guidance for Work Coaches to mitigate the impact of the wait and monthly payment system by making the option of more frequent payments under Alternative Payment Arrangements easy for all claimants … Read more We recommend that the Department provide new and clearer guidance for Work Coaches to mitigate the impact of the wait and monthly payment system by making the option of more frequent payments under Alternative Payment Arrangements easy for all claimants in England and Wales to access. This option should be offered to all claimants, alongside clear information about how the payment process will work. The Department should review how it uses evidence for Alternative Payment Arrangement applications, following reports that it puts people off applying. Show less

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We recommend that the Department publishes the guidance given to Work Coaches when they advise people on APAs, to improve transparency in the process. The Department should make clear when and how a claimant is made aware of APAs both … Read more We recommend that the Department publishes the guidance given to Work Coaches when they advise people on APAs, to improve transparency in the process. The Department should make clear when and how a claimant is made aware of APAs both during their Universal Credit application and once they start receiving their payments. The Department should publish the rates at which people are unsuccessful in their applications for an Alternative Payment Arrangements, and what reasons the Department might give a claimant if it denies their request for more frequent payments. DWP should also ensure that work coaches are making claimants aware of the option of split payments, where a household’s payment can be divided and paid into two separate accounts. Show less

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Universal Credit works best when it mirrors people’s daily lives. Payments which align with people’s rent schedules could make it easier for claimants to budget and plan. We recommend that the Department explain in response to our report whether it … Read more Universal Credit works best when it mirrors people’s daily lives. Payments which align with people’s rent schedules could make it easier for claimants to budget and plan. We recommend that the Department explain in response to our report whether it is feasible for landlords to tag the tenancy agreement to the claimant’s Universal Credit claim so that payments are made in line with their rent schedule. If this is not possible, the Department should set out what aspects of the design of Universal Credit it would need to adapt to build in this flexibility for claimants. Show less

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We recommend that the DWP improve the quality and detail of its published data on alternative payments, by publishing its figures on how many people revert to monthly payments from the twice monthly payment option in England and Wales. DWP … Read more We recommend that the DWP improve the quality and detail of its published data on alternative payments, by publishing its figures on how many people revert to monthly payments from the twice monthly payment option in England and Wales. DWP should give detail to these figures by publishing analysis on why people may revert to monthly payments and demonstrate how it monitors people’s experiences of Scottish Choices or more frequent payments under APAs. It should use this analysis to better advise claimants and to identify possible improvements to the policy. (Paragraph 202) Speeding up payments – shortening the fifth week Show less

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Faster Payments offer the Department a quick and efficient way to pay claimants. They could, if more widely used, reduce the time that people have to wait for a first payment. The Department already has plans to increase its use … Read more Faster Payments offer the Department a quick and efficient way to pay claimants. They could, if more widely used, reduce the time that people have to wait for a first payment. The Department already has plans to increase its use of Faster Payments. That will have costs and will require work across multiple bodies, including the Treasury and the banks. We recommend that the Department maintain its target to increase its proportion of Payments permitted by banks, to shorten the fifth week of the Universal Credit: the wait for a first payment 87 Universal Credit process. We urge the Department to set out in more detail its proposed strategy for rolling out Faster Payments, including its expected timings and its plans for engagement with the banking sector, in response to this report. (Paragraph 208) Improving the assessment system Show less

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We recommend that the Department assesses a model in which it estimates people’s daily pay rate from data it already receives from HMRC, as suggested by Ferret Information Systems, and in which it would make payments from day one of … Read more We recommend that the Department assesses a model in which it estimates people’s daily pay rate from data it already receives from HMRC, as suggested by Ferret Information Systems, and in which it would make payments from day one of the claim with reconciliation in month two. We request that the Department share information on what data that it receives from HMRC, including whether it knows how frequently people are paid, and makes clear what parts of its system are and can be automated. (Paragraph 232) Conclusion Show less

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The wait for a first payment of Universal Credit is not the only source of the problems people face, but it can exacerbate them. For people who may already be going through a difficult time, enduring five weeks—or longer—without any income can push them into crisis.

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The Trussell Trust’s data, described by the National Audit Office as the best research it has seen, establishes an association between Universal Credit and food bank use. We share the National Audit Office’s view that the Department should conduct further research to understand these findings better. We would also encourage …

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We also heard evidence which suggests that people on Universal Credit are more likely to have rent arrears than people still claiming legacy benefits. The Department’s own data show that, while some people who come onto Universal Credit have pre-existing rent arrears, the level of these arrears rises much more …

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There is also research which found evidence of an increased prevalence of psychological distress, following the introduction of Universal Credit, among people affected by the policy. The research was not able to delineate whether a change of benefit system in itself—such as moving to Universal Credit—was a driver of the …

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DWP should conduct or commission research, before the end of this financial year, to develop its understanding of the impact of Universal Credit, particularly the wait for the first payment, on the rising use of food banks; on claimants’ levels of rent arrears; and on claimants’ mental health and mental …

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People who are moving to Universal Credit through managed migration are doing so because of a decision by the Government. Nothing in their own circumstances has changed. Under the Government’s plans, however, they would have to wait at least five weeks for their first payment of Universal Credit. We see …

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At present, the Government plans to mitigate the impact of the five week wait on this group of claimants by offering two week run-on payments of some, but not all, of the legacy benefits they are currently receiving. That is a sticking plaster, which costs public money, leaves claimants with …

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The evidence we received was overwhelmingly in favour of some form of initial, non-repayable payment for new Universal Credit claimants. That would give new claimants the money they need for basic living essentials like food and heating, without requiring them to repay a debt to the Department from their future …

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We have considered the various options carefully. In recommending a course of action, we have chosen an approach which offers simplicity: a simple amount of money, so it is clear to claimants what they can expect, and a simple process, which does not require the Department to carry out any …

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Advance payments can provide a valuable lifeline to people who might otherwise face going five weeks—or longer—without any income. The changes that DWP has introduced so far, especially allowing people to request Advances equivalent to their entire expected award and extending the repayment period, are welcome. However, there is clear …

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Even with starter payments of the kind we have recommended, we anticipate that some claimants would still need to ask for an Advance to cover their immediate 80 Universal Credit: the wait for a first payment costs. But some claimants might no longer need to ask for an Advance, and …

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The Department continues to claim that Advances are not loans, but we find that argument impossible to accept. Advances must be repaid at a set rate, over a set period. The Department risks misleading claimants, and damaging its own credibility, if it insists on denying the obvious fact that Advances …

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For this group of claimants, the burden of future repayments of Advances is likely to be particularly difficult to bear. Given that benefits broadly provide people with a subsistence level of income, any system that reduces that monthly income, including through repaying an advance, is very likely to cause people …

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DWP has capped the deductions that claimants can face from their Universal Credit award at 30%, and yet in some circumstances, such as where a claimant has rent or fuel arrears, or benefit sanctions, DWP can deduct more than this amount. Nick Universal Credit: the wait for a first payment …

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The Department says that claimants who are struggling can already defer repayments of their Advance for three months. But the evidence we have heard from charities who work with claimants is that this option is not effectively communicated. Without reliable data on how often it is used, it is impossible …

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DWP was right to increase the standard allowance for Universal Credit and support for housing costs as part of its response to the pandemic. Benefit rates, and in particular support for housing costs, had become detached from the actual cost of living—in particular from the cost of private rents—and people …

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Help to Claim is a hugely valuable service for people who are applying for Universal Credit. But its focus is on helping people to complete their initial claim. It does not provide support for people throughout their claim, to help them to manage debt, personal budgeting, and maintaining their claim …

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DWP currently lacks a comprehensive system for recording and tracking claimants’ needs. The introduction of pinned notes is a step in the right direction but, as the National Audit Office said, pinned notes are the digital equivalent of a post-it note on a file: they do not enable staff to …

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DWP has made substantial progress in improving payment timeliness,. The Department has increased the proportion of people paid on time from just over half in 2017 to over 90% in 2020—a significant feat given the recent upsurge in Universal Credit claims. However, the overall rise in claimant numbers mean that …

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We welcome the announcement of funding for the recruitment of over 13,500 new Work Coaches—double the current number—over the next financial year. This is an ambitious programme of recruitment. The Committee would welcome a written update from the Department, by the end of the calendar year, on how the recruitment …

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We acknowledge that most disabled people and people with health conditions receive the core elements of their claim on time. However, we find it troubling that, because of the time taken to complete the Work Capability Assessment process, people must wait much longer than five weeks to receive their full …

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The Universal Credit application process requires claimants to provide a great deal of information about their circumstances, to enable the Department to assess their claim. When they have done this, Universal Credit claimants rightly expect that they should be paid the full amount they are entitled to, on time. For …

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Repayments of tax credit overpayments can compound hardship for people who may already be struggling. The evidence that some people are left unaware of these debts, which can be several years old, until they make a claim for Universal Credit, is particularly concerning. Despite HMRC’s assurances that people are routinely …

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While monthly payments do mirror the world of work for many, DWP’s own figures show that a significant minority of people who claim Universal Credit received or continue to receive weekly or fortnightly wages. Other sources suggest that a majority of claimants may be paid more frequently than monthly. This …

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While Scottish Government data shows a quarter of people revert from More Frequent Payments under Scottish Choices, DWP’s research does not provide a detailed understanding of how the Department monitors how more frequent payments work for people, and what it might to do improve the policy.

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It is disappointing that suggestions to improve Universal Credit have apparently been thwarted by an IT system which was supposed to be developed in an agile fashion, yet seems to be anything but. It is unfortunate that such a rigid, clunky IT structure was adopted for UC which makes improvements …

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The monthly assessment is a core part of design of Universal Credit for the Department and is the guiding reason behind the five-week wait and payment in arrears. Although the Department says that most people in the wider economy are paid monthly, there is evidence that a significant proportion of …

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The coronavirus pandemic has put the Universal Credit system under unprecedented strain. It has also highlighted the strengths of its digital, automated processes: a manual system could not have coped with millions of new claims in such a short time. But that strength can also be a weakness. An automated …

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The five week wait for a first payment of Universal Credit is an inevitable consequence of the fixed monthly assessment period. It is very difficult to remove the wait for 88 Universal Credit: the wait for a first payment all claimants without a complete dismantling of the UC system. But …

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