Nearly a million people apply for Universal Credit in a fortnight
The staggering figure is up from a typical 100,000 claim count in a two-week period and five times higher than the equivalent peak volumes during the financial crisis.
Think Tank Resolution Foundation said although the government has committed billions of pounds to support employers, encourage retention and bail out the self-employed, it is inevitable that unemployment will rise.
And for those who lose their jobs or fall outside of the recently announced government schemes for financial support, Universal Credit (UC) is a “crucial cushion to soften falls in income and prevent hardship,” it said.
However, both the Resolution Foundation and Salvation Army are calling for UC to go further to help more people.
They suggest the capital rules preventing those with savings from accessing the support should be removed, meaning single or couples with a joint £16,000 in capital will be eligible.
Further, the government should make advance payments of UC widely available and suspend the repayment of these advances for six months for all new claimants to encourage take up.
Currently, people who apply to receive UC have to wait five weeks for a first payment, and the only alternative is to take out an advance payment loan.
In the last fortnight, 70,000 people have applied for advance payment loans and the Salvation Army warns the current UC system means there will be a ‘coronavirus debt crisis’.
It says immediate changes should be made to move advance payments to a grant system, otherwise thousands could face the choice between buying food and repaying their UC bridging loan.
Rebecca Keating, The Salvation Army’s director of employment plus, said: “The Universal Credit loan system could cause a coronavirus debt crisis. Thousands of people who never thought they would have to rely on state support are now making a Universal Credit claim.
“Many of these will be forced to take out the bridging loan which will just move their money problems five weeks down the line. We are particularly concerned by those working on zero-hour contracts that don’t have the same legal rights of other employees. Many will not have a financial safety net to help avoid getting into debt straight away.
“The government has made some helpful changes to help people access benefits such as removing the requirement for people to attend job centres appointments for the next three months, but requiring a loan to cover a five week wait for financial support is the point of critical failure that the government must address. Not only will this add stress for people already struggling with the fall-out from the pandemic, but also leave a lasting legacy if too many people are shouldering too much avoidable debt.”
A single UC claimant (aged 25 or over) is eligible for a standard allowance of £409.89 per month from 6 April, up from the current £317.82 per month.