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Universal Credit users should receive stop-gap starter payments

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19/10/2020
Universal Credit claimants should receive a starter payment to stop them facing a difficult choice of five weeks with no income or the risk of debt and hardship later on.

An influential group of MPs has called for starter payments to provide financial support for Universal Credit applicants who have to wait five weeks for the benefit.

Alternatively, those applying for the first time who need financial help to cover costs while they wait five weeks for the benefit, can apply for an advance payment. This is paid out of the first and subsequent monthly payments and while it’s interest-free, it needs to be paid back within 12 months.

However, the Work and Pensions Committee has suggested starter payments be give to UC applicants to ensure everyone has enough money for basics such as food and heating during the wait period.

Its Universal Credit: the wait for a first payment report finds that the current wait of at least five weeks causes difficulties in some households and the existing advance payment system could mean some are unable to afford the required repayments.

As such, the MPs said it leaves people with a difficult choice: five weeks with no income, or the risk of debt and hardship later.

By introducing a new payment – equivalent to three weeks of the standard UC allowance, “this would be a simple way of ensuring that new claimants had the money they needed for basic living essentials”, it said.

Further, for people moving from existing benefits, DWP should make the move seamless wherever possible and pay a starter payment in other cases, the MPs added.

And they suggested that the UC advances should be renamed ‘new claim loans’ to make clear they 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,” they said.

Other suggestions as part of the report include changes to the way historic tax credit is clawed back from people when they move to Universal Credit and for the government to make permanent the £20 per week increase in the standard UC allowance announced in response to the coronavirus pandemic.

Last week Prime Minister Boris Johnson confirmed that the £20 uplift will last until the end of the financial year, despite pleas from think tanks and charities to continue the £1,040 increased payment.

‘Advance loam system not working’

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.”

Timms added: “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.”

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