Labour criticises delays to universal credit reforms

Opposition parties and charities have criticised budget measures to improve the rollout of universal credit after it emerged that the changes will not be introduced until as late as April.

In his budget speech, Philip Hammond announced a £1.5bn fund to assist people moving to UC, promising a reduction of the six-week initial wait to five, easier access to initial loans and a two-week bridging system for housing benefit.

But giving details in the Commons on Thursday, the pensions secretary, David Gauke, said the reforms to UC – which is being gradually rolled out to replace a wider series of payments including tax credits and housing benefit – would not begin until next year.

He said that from January new UC claimants could seek bigger loans to see them through the waiting period, rising from 50% of their estimated monthly entitlement to 100%, with the repayment period extended from six to 12 months.

The elimination of a seven-day waiting period, so that the first payments come within five weeks rather than six, will be introduced in February, Gauke told MPs.

Another key reform, granting UC claimants who receive housing support an extra two weeks’ housing benefit payments to reduce the amount of rent arrears they might build up, will only be in place for new claimants from April.

Debbie Abrahams, the shadow pensions secretary, said the delays meant anyone who tried to claim UC from 14 November would still not get any money until after Christmas. “This will mean tens of thousands of families going without over the festive period,” she said.

Her concern was echoed by the Child Poverty Action Group. The charity’s chief executive, Alison Garnham, said the changes announced in the budget were helpful, “but the timing of their implementation is not”.

She said: “Thousands of households are in arrears and need the changes to happen now. If the seven-day waiting period isn’t removed until February and the housing benefit run-on doesn’t kick-in until April, more families will face desperate anxiety about money in the coming months and a miserable Christmas.”

What is universal credit?

Universal credit is the supposed flagship reform of the benefits system, rolling together six benefits (including unemployment benefit, tax credits and housing benefit) into one, online-only system. The theoretical aim, for which there was general support across the political spectrum, was to simplify the benefits system and increase the incentives for people to work, rather than stay on benefits.

How long has it been around?

The project was legislated for in 2011 under the auspices of its most vocal champion, Iain Duncan Smith. The plan was to roll it out by 2017. However, a series of management failures, expensive IT blunders and design faults have seen it fall at least five years behind schedule.

What is the biggest problem?

The original design set out a minimum 42-day wait for a first payment to claimants when they moved to universal credit (in practice this is often up to 60 days). After sustained pressure, the government announced in the autumn 2017 budget that the wait would be reduced to 35 days from February 2018. This will partially mitigate the impact on many claimants of having no income for six weeks. The wait has led to rent arrears (and in some cases to eviction), hunger (food banks in universal credit areas report notable increases in referrals), use of expensive credit and mental distress.

Ministers have expanded the availability of hardship loans (now repayable over a year) to help new claimants while they wait for payment. And housing benefit will now continue for an extra two weeks after the start of a universal credit claim. However, critics say the five-week waiting time is not enough and want it reduced to two or three weeks.

Are there other problems?

Plenty. Multibillion-pound cuts to work allowances imposed by the former chancellor George Osborne mean universal credit is far less generous than originally envisaged. According to the Resolution Foundation thinktank, about 2.5m low-income working households will be more than £1,000 a year worse off when they move on to universal credit, reducing work incentives. Landlords are worried that the level of rent arrears racked up by tenants on universal credit could lead to a rise in evictions. It's also not very user-friendly: claimants complain the system is complex, unreliable and difficult to manage, particularly if you have no internet access.

Gauke argued in the Commons that new claimants should not suffer over the festive period, as they would be able to take an advance payment of 50% of their entitlement immediately, and then have extra under the more generous loan system in the new year.

He hailed Hammond’s announcement as “a comprehensive package which responds to concerns raised inside and outside the house”.

Gauke dismissed Labour’s demand that the rollout of UC should be delayed. Nine per cent of eligible households are now on it, and 12% will be by February. Gauke said that although the budget announced some amendments to the schedule, it was not being delayed overall.

“We will continue to roll out universal credit in a steady and considered manner, and in doing so deliver a welfare reform that will positively transform lives,” he said.

But Abrahams said it was wrong to expect potentially vulnerable claimants to go into debt with advance payments just to see them through Christmas.

“What additional debt does the secretary of state expect the average claimant to incur? What does his department predict will be the average monthly repayment deducted from claimants’ income?” she asked. “Our position remains the same: our social security system should prevent people from getting into debt, not make matters worse.

“It is contrary to the ambitions of UC that instead of alleviating poverty it is going to cause it, let alone an insult to ask people who are not able to make ends meet under the government’s punitive reforms to bear even more risk, stress and concern.”

Abrahams argued that UC was failing on its “big picture” ambitions of reducing child poverty, simplifying the benefits system and ensuring work always paid.

She said the reduction of the six-week wait to five was still not enough and that the two-week extension to housing benefit payments, when that happened in April, still brought problems.

“This leaves a three-week gap, which is still too long for many to cope, leading to the arrears and even evictions that we have seen from the programme,” she said. “These measures for UC are not enough. They must be brought forward, amended and added to.”

Gauke dismissed the criticisms, saying: “Let’s not forget, this is a welfare reform that will positively transform lives. I am proud that this government is delivering.”

He rebutted a demand from the SNP’s Drew Hendry for the government to rescind a wider freeze on benefits, which campaigners have said is pushing more families into poverty.

Gauke said: “We fought the 2015 general election with a commitment to find savings in the welfare budget, and we will deliver those savings.”