Tag: Work and Pensions Committee

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.”

DWP and changes in the world of work: have your say

DWP is currently experiencing unprecedented demand for its services due to coronavirus, which has had a substantial, immediate impact on the services it is able to provide and the way that it deploys its staff.

But alongside this, DWP faces much longer-term challenges.

In particular, the Government has described the “Fourth industrial revolution” as “New technology […] creating new industries, changing existing ones and transforming the way things are made.”

These changes may have a more fundamental impact on the services that DWP needs to provide.

Some analysis suggests that the types of jobs available will change substantially.

The number of jobs available may be reduced as more services are automated, with low and medium skilled jobs—those that Jobcentre Plus has traditionally concentrated on—most at risk.

As work changes, it may also be necessary to review the legal framework that underpins employment, to make sure that workers continue to have appropriate status and protections in law.

More options

Some commentary has suggested that these changes may require the Government to consider more radical options to ensure that people have enough money to live on: for example, experimenting with a Universal Basic Income (UBI).

Westminster’s Work and Pensions Committee wants to take a broad look at the implications of the Fourth Industrial Revolution for DWP.

Chair’s comments

Chair of the Work and Pensions Committee, Rt Hon Stephen Timms MP said: “DWP is focused on getting unprecedented numbers of Universal Credit claims processed and in payment.

“That is the right focus during the current crisis, but DWP also faces much longer-term pressures.

“The Committee wants to look at the implications of innovation in technology for the future of employment, and to understand what more DWP needs to do to ensure that the people it serves are properly supported to find, keep and progress in work.”

Call for written submissions

The Committee would like to hear your views on the following questions. You do not have to answer all of the questions.

  1. What are the main challenges that DWP faces as a result of the “Fourth Industrial Revolution”?
  2. What do we know about the possible likely impact on the labour market? For example:
    Are some sectors or types of jobs more likely to be affected than others?
    Are some groups of people more likely to be affected than others?
    What new types of jobs and opportunities could become available?
    s it likely that there will be a reduction in the number of jobs available?
  3. Is there a need to consider new, long-term approaches to addressing change in the labour market: for example, introducing a Universal Basic Income (UBI)?
    Is UBI an appropriate short-term response to shocks in the labour market?
    What can the Government learn from the international evidence on UBI?
  4. Are DWP Work Coaches well equipped to advise people who are looking for work on new and emerging sectors and jobs?
    How could DWP improve the training and advice it offers to jobseekers?
  5. What support, advice and training should DWP offer to people who are looking to progress in work, or take up more hours?
  6. What is DWP’s role in ensuring that young people have the skills they need to get into and progress in work?
  7. How could DWP work more closely with employers to ensure that claimants have the skills they need to find work in the future labour market?
  8. As the workplace changes, will it be necessary to change the legal definition of employment to ensure that people continue to have the appropriate legal status and protections? Might any other legal changes be needed?

The closing date for submissions is Monday 29th June.