Tag: Work and Pensions Committee

Universal Credit £20 weekly increase must be extended, says Westminster committee

The Chancellor must maintain for another year ‘at the very least’ the £20 per week increase in Universal Credit (UC) and Working Tax Credit introduced to support families during the coronavirus pandemic, MPs say today.

  • Work and Pensions Committee calls for year-long extension of increase ‘at the very least’
  • Removal in April while pandemic still being felt would plunge hundreds of thousands of families into poverty
  • Any plans to replace rise with one-off payments must be abandoned amid concerns over fraud and impact on vulnerable

The report from the Work and Pensions Committee notes that since March the number of people claiming UC has doubled to around six million, while job vacancies remain far below pre-pandemic levels.

It warns that removing the payment as planned in April, while the effects of the pandemic are still being felt, would ‘plunge hundreds of thousands of households, including children into poverty’ while dragging those already in poverty ‘down into destitution’.

While the Committee recognises that continuing with the increase would come at a ‘substantial cost’, the Committee argues that this should be seen in the context of the Treasury’s own £280bn figure for total spending on coronavirus support measures this year. The Joseph Rowntree Foundation has estimated that keeping the £20 rise would cost around £6.4bn in the next financial year.

The report also calls on the Government to abandon any plans for one-off payments to replace the weekly rise. The Secretary of State confirmed to the Committee last week that the DWP had been asked to investigate such an option but said it was not ‘one of the Department’s preferred approaches to providing that financial support’.

The report has been published after evidence sessions with frontline support organisations and policy experts and the Secretary of State and Permanent Secretary last week.

Rt Hon Stephen Timms MP, Chair of the Work and Pensions Committee, said: “Removing the extra payment in March would represent a failure by Government – failure to recognise the reality of people struggling.

“Without regular support, hundreds of thousands of families will be swept into poverty or even destitution. Government must end the uncertainty and commit to extending this lifeline.

“The Chancellor faces difficult decisions about the public finances. He may find it hard at present to make the increase permanent. But the pandemic’s impact on the economy and livelihoods will, sadly, be with us for some time. An extension for a year should be the bare minimum.

“We must also hope that Rishi Sunak will listen to the groundswell of arguments against one-off payments as an alternative, including from his cabinet colleague at our Committee last week. There is broad agreement that a steady income is necessary to support people.”

Report findings and recommendations

Impact of removing the £20 per week increase (Chapter 2)

  • Analysis by the Joseph Rowntree Foundation (JRF) has concluded that withdrawing the temporary increase ‘will risk sweeping 700,000 more people, including 300,000 more children, into poverty’

One-off payments (Chapter 3)

  • The Committee shares the Secretary of State’s view that a steady income is the best way to support people and is concerned that one-off payments could increase the risk of fraud and about the risks to vulnerable people.

The proposed way forward (Chapter 4)

  • The Committee has previously called on the Government to make the £20 per week increase permanent with annual inflation-based increases. The report acknowledges however that ‘in the short term, the Chancellor faces some very difficult decisions about the public finances amid a great deal of uncertainty about the future.’
  • If the Chancellor cannot yet commit to making the increase permanent, he should at the very least extend it for a further 12 months. The Government should then announce its future plans for the rate of Universal Credit no later than the Autumn Statement 2021, to give claimants enough time to plan and budget.

MPs call for starter payments to provide financial support during wait for first Universal Credit payment

A starter payment should be made to people claiming Universal Credit (UC) for the first time to ensure that everyone has enough money for basics such as food and heating during the wait for their initial monthly payment, the Work and Pensions Committee says.

The Committee’s report on Universal Credit: the wait for a first payment finds that the current wait of at least five weeks causes difficulties for some households. While the existing system of Advance pay-ments for those in need can provide a valuable financial lifeline, the Committee is concerned that some people are unable to afford the required repayments.

The Committee warns that this leaves people with a difficult choice: five weeks with no income, or the risk of debt and hardship later.

The report concludes that the introduction of a new payment – equivalent to three weeks of the standard allowance – would be a simple way of ensuring that new claimants had the money they needed for basic living essentials. For people moving from existing benefits, DWP should make the move seamless wherever possible—and pay a starter payment in other cases.

Advances should still be available for people who need further support to get by, but they should be renamed ‘new claim loans’ to make clear that they will need to be repaid. The DWP should also recognise that a request for a loan is a clear indication that someone is struggling and offer support as early as possible.

Reflecting evidence from Sir Iain Duncan Smith, among others, the Committee has also called for changes to the way that historic tax credit is clawed back from people when they move to Universal Credit—and for DWP’s debt collection to follow best practice in the private sector.

In addition, the Committee calls on the Government to make permanent the £20 per week increase in the standard UC allowance announced in response to the coronavirus pandemic.

Rt Hon Stephen Timms, Chair of the Work and Pensions Committee, said: “There is a growing body of evidence that moving to Universal Credit leaves many reliant on food banks, falling seriously behind with their rent, and even experiencing increased levels of psychological distress.

“The Government’s response is that there is no proof that Universal Credit—and in particular the wait for a first payment—is the direct cause of those difficulties. So DWP needs to commission research, and quickly, to find out what lies behind these deeply worrying findings.

“Our social security system should not be leaving people without the money they need for food and heating.

“In the meantime, the Government must face up to the fact that its current system of Advance loans simply isn’t working. They leave people facing the toughest of choices: go without income for at least five weeks, or have repayments subtracted from their future UC payments—which are already barely enough to get by on.

“We cannot understand why people who are already claiming benefits need to wait for at least five weeks when they move to Universal Credit—especially when nothing in their lives has changed. Their move should be seamless.

“For people claiming benefits for the first time, or people who’ve faced a significant change in their circumstances, the Government should provide starter payments. Doing so would both cut down on the need for Advance loans and ensure that nobody is forced into debt just to be able to afford to eat and keep a roof over their heads.

“UC is a highly automated system. That has been a real strength over the last few months, with the huge influx of new claims caused by the coronavirus pandemic. But it can also be a major weakness, leaving people without the tailored support they need, and Ministers unable to make the changes they want to see.

“There is much the Government can do without completely dismantling the UC system: we hope that our proposals, taken together, offer practical solutions for making Universal Credit work for everyone who needs it.”

Key report findings and recommendations

Starter payments

  • All first-time claimants of UC should receive a starter payment equivalent to three weeks of the Standard Allowance.
  • The payment should be made two weeks after the initial claim and only once the claimant’s identity has been verified, to guard against fraud.
  • People claiming legacy benefits should be moved seamlessly to UC, but where they cannot be they should receive a starter payment instead.

The impact of the wait

  • The Committee received evidence from both organisations and individuals which suggested that a significant proportion of people face financial difficulties during the wait for a first UC payment.
  • Citizens Advice said that half the people it helps during the wait period are ‘unable to keep up with bills, rent or are forced to go without the essentials such as food and heating’.
  • The National Audit Office said that the wait for a first payment can exacerbate claimants’ debt and financial difficulties.
  • DWP must carry out research to develop its understanding of the possible impact of UC, particularly the wait for the first payment, on the use of food banks; on claimants’ levels of rent arrears; and on levels of psychological distress.

Advance payments

  • Even with starter payments, the Committee anticipates some people claiming will still need to ask for an Advance (a loan to tide them over during the wait).
  • The DWP risks misleading claimants, and damaging its own credibility, if it insists on denying the obvious fact that these Advances are interest free loans.
  • Advances should be renamed ‘new claim loans’ so it is clear that they need to be repaid.
  • The Department should offer support to anyone requesting a substantial Advance, as it would be a clear indication that someone is struggling with the transition to UC.

Tax credit debt

  • Repayments of tax credit overpayments can compound hardship for people who may already be struggling.
  • The Committee recommends that recovery of tax credit debt from people claiming UC should begin only when the claimant has repaid their Advance (if they have taken one out).
  • Repayments of remaining debts should be capped at 10% of UC standard allowance and written off entirely if they have not been pursued for more than six years.

Universal Support and Help to Claim

  • The DWP must invest in expanding and developing its Help to Claim service so it is closer to its original plans for Universal Support.
  • The service must go beyond assisting with an initial claim and should include debt advice, support for people struggling with repaying Advances and support for people with complex needs.

The Work Capability Assessment and support for disabled people

  • The Committee finds it troubling that, because of the time taken to complete a Work Capability Assessment, some disabled people and people with health conditions must wait much longer than five weeks to receive their full UC entitlement.
  • Four months, on average, is too long to wait and the DWP must work to speed up the process.

Coronavirus measures

  • In its report DWP’s response to the coronavirus outbreak, the Committee welcomed the decision to increase the standard allowance in UC and the basic element in Working Tax Credit by £20 per week.
  • The Government should now extend the increase past April 2021 and make the rise permanent.

Committee seeks answers to Universal Credit questions

The Work and Pensions Committee publishes the Government response to its report DWP’s response to the coronavirus outbreak.

The report, published in June, made a number of recommendations about supporting those claiming Universal Credit, as well as legacy benefits and those with no recourse to public funds due to their immigration status.

It also made recommendations on the HSE and called on the DWP to develop a strategy for dealing with the effects of the economic downturn.

Committee Chair Stephen Timms MP has now written to the Secretary of State Thérèse Coffey MP to press the Department on a number of points not addressed by the Government response.

Rt Hon Stephen Timms MP, Chair of the Work and Pensions Committee, said: “We don’t necessarily expect the Government immediately to accept every recommendation we make. But we do expect that it will at least explain its position. This response to our report leaves many questions unanswered.

“In the course of our inquiry, we heard concerns that the Government’s very welcome increases to some benefit rates would be undermined by the benefit cap. Ministers assured us in April that only a small number of people would be affected. In fact, DWP’s own statistics show that 84,000 households were newly capped between February and May this year.

“The Secretary of State also assured the House in May that she was looking very carefully at what could be done for people who had mistakenly applied for Universal Credit and left themselves worse off as a result. We recommended that the Government act urgently to put this right. It now seems that nothing is going to be done for these people. If that’s the case, the Government should say so clearly, and explain why.

“Just as importantly, there seems to be little acknowledgement of the role of the Department in planning for future pressure on the social security system. There needs to be a firm commitment to analysing how coronavirus has affected levels of poverty and a clear strategy—available for public scrutiny— for coordinating the employment response to the economic downturn.”