Fears over 38-day wait for Universal Credit

Published by 24publishing for 24dash.com in Housing and also in Central Government, Communities, Local Government, Universal Credit

The Government should allow all Universal Credit claimants to opt for fortnightly payments for a temporary period following fears people will have to wait 37-38 days after their claim before receiving their first payment, according to the Centre for Economic and Social Inclusion (CESI).

The CESI is also concerned those claiming housing costs will be unfairly penalised because they will have less of their income ignored in their benefit entitltement when moving into work.

Universal Credit, which comes in next October, will replace six income-related benefits, including housing benefit, with a single monthly payment to claimants.

However, the CESI believes the move to monthly payments in arrears is likely to “disadvantage” claimants who "will be required to wait 37-38 days after their claim before receiving their first payment".

It said: "We consider that the risks associated to moving to monthly payment, alongside all other changes, outweigh any (at this stage theoretical) benefits. Indeed it is plausible that moving to monthly payment will lead to greater financial hardship, debt and money worries – which could in turn reduce the likelihood of claimants being able to focus on finding and keeping work."

The Government says the move to monthly payments is about "helping people budget effectively" and to "reflect the world of work, where 75% of all employees receive wages monthly".

The draft regulations set out that claimants will be able to apply for a temporary "payment exception" for things like greater payment frequency, splitting payments between joint claimants or paying housing costs directly to the landlord.

However, the CESI wants the Department for Work and Pensions (DWP) to scrap the set criteria for applications for higher frequency payments – where decisions will be made by a member of staff – so all claimants can opt for fortnightly payment for a temporary period.

It says the same rules should apply to joint payments, allowing the Universal Credit to be split within a couple for a temporary period.

Claims made under Universal Credit will be joint claims but where one fulfils certain other basic conditions of entitlement, it proposes treating the claim as single, which the CESI fears will “unfairly disadvantage women”, as male partners are more likely to be the main claimant of benefits in a household.

The CESI warned: “In DWP research service users were concerned that joint payments would be unworkable where relationship status was more transient, or in households where specific problems existed such as drugs or alcohol abuse.”

As part of Universal Credit the Government also intends to simplify proposals on earnings disregards – i.e. those that will have specific amounts of their earnings ignored in working out their housing benefit to incentivise work.

However, those claimants in receipt of the housing support element of Universal Credit – who will have a higher award than those with no housing costs – will have lower earning disregards than those with no housing costs.  

Therefore, a working household claiming housing costs will have less of their income disregarded than a household without housing costs who will be allowed to keep more of their income.

The CESI said: “We do not consider that there is a strong policy rationale for separate disregards for those with and without the housing element, and maintaining separate disregards leads to unnecessary complexity.”

The Government says new financial products to help benefit claimants better manage their money will be set up alongside Universal Credit - which include things like individualised accounts with access to direct debit facilities and pre-paid cards  - to help claimants budget.

It is also developing a transitional protection system to ensure there are no cash losers as a direct result of the move to Universal Credit, where circumstances remain the same.

A DWP spokesperson said: "Many organisations welcome a simper benefit system and agree that Universal Credit is a good thing.  

"We are testing Universal Credit as its developed so that we know what works and what needs adjusting, including piloting direct payments with housing benefit claimants and working with Local Authorities to see how they can help claimants with the transition onto the new benefit from 2013. We are also making sure that claimants who are not yet ready to budget for themselves on a monthly basis are protected and assisted onto the new system."