Landlords are welcoming reports that the Government could cut the Universal Credit waiting time from six weeks to one month.
The former work and pensions secretary, Iain Duncan Smith, who initially proposed Universal Credit, is among a growing number of politicians who are urging the Government to reduce the waiting time for payments, which is pushing some claimants into rent arrears.
He told Sky News: “One of the reasons I resigned from Government was I didn’t actually agree with the additional waiting days. This is something the Government needs to look at in the Budget.”
His comments arrived after the Government, under increased pressure over Universal Credit, gave into demands over scrapping call charges to the Universal Credit helpline. Some claimants were being charged up to 55p per minute to contact the service.
Now, it is believed that the Government is on the verge of a U-turn over Universal Credit, following public pressure and a threatened backbench rebellion.
It is understood that ministers are preparing to announce a reduction to the waiting time for the first payment of the new benefit system from six weeks to one month, which will be welcome news for landlords.
The Policy Director of the Residential Landlords Association (RLA), David Smith, responds: “The current six weeks delay before Universal Credit claimants receive any money causes many tenants to get into rent arrears, causing problems for them and their landlords. Any move to reduce this waiting time is very welcome.
“A reduction to four weeks would be more reasonable and bring payment schedules into line with those in the world of work.”
We have compiled a helpful guide for landlords and their tenants to understand the new benefits system. Read it for free here.
This news comes just days after a study by two councils, which have been guinea pigs for the new regime, revealed that the Universal Credit system is pushing poor tenants deeper into rent arrears and sending food bank referrals soaring.
Southwark and Croydon councils in south London warned that, without rapid changes, the new system could have a devastating effect across the country as it is rolled out over the next few months, warning that arrears could reach “many hundreds of millions of pounds” and that tenants could face severe hardship. One food bank reported an increase in referrals of 97%.
Ministers have been warned that the widespread evidence of hardship caused to many tenants by the 42-day waiting time risks turning the new welfare policy into a “new poll tax”.
The report examined rent accounts for 775 social housing tenants in the two boroughs, who had moved onto Universal Credit between August and October 2016, comparing them with 248 rent accounts held by tenants who moved onto the older housing benefit system during the same period.
The study found that 36% of those moving onto Universal Credit failed to pay rent at all in the first week and, on average, accrued rent arrears for each of the next 11 weeks. At this point, arrears stabilised, but were not fully paid off. At the end of the study period, 406 of the 775 households on Universal Credit were in a worse financial position than at the start. On average, each Universal Credit tenant ran up arrears at a rate of 60p per day.
Total arrears for this group rose by £89,000 over the period.
Southwark said that, although just 12% of its social housing tenants were on Universal Credit, they have collectively built up £5.8m in rent arrears. The average Universal Credit household was £1,178 in arrears, compared with £8 in credit for the average council rent account across the borough.
The report continued that, by week 20, tenants in receipt of Universal Credit were, on average, £156 in arrears, while those on housing benefit were in credit. Universal Credit tenants were far more likely than housing benefit claimants to fail to pay the full rent owed – more than a third underpaid rent by 75%.
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In addition, the long waiting time associated with Universal Credit was a key cause of stress, anxiety and depression for claimants. There was a common perception among claimants that the system was inflexible and challenging to navigate. Those tenants used to being paid weekly or fortnightly found it particularly difficult to move to a system of monthly payments.
“Participants in this research almost universally have experienced financial hardship as a result of transitioning onto Universal Credit, notably as a result of the significant delays to payment,” the study states.
Universal Credit problems have also stretched local hardship services. As well as the local Pecan food bank reporting a 97% increase in referrals in the first three months of the year, Southwark Council’s emergency support scheme handed out 34% more food parcels over the same period.
Fiona Colley, Southwark Council’s Cabinet Member for Finance, Modernisation and Performance, says: “This report’s stark evidence is why we need to lead this debate; I implore the Government to listen to how this is affecting the poorest and most vulnerable people in our borough, and the potential effects reverberating nationally.
“Universal Credit, in its current form, has the potential to be catastrophic, not just for residents at an individual level, but for councils’… [budgets for housing].”
She continues: “The arbitrary delay in receipt of money – particularly for those already in difficult situations, such as temporary accommodation -could mean a spiral of debt, poverty and people not being able to afford to eat. I cannot think of a more compelling reason to push for change on this.”
Alison Butler, Croydon Council’s Deputy Leader and Cabinet Member for Homes, Regeneration and Planning, adds: “This report underlines the major flaws in Universal Credit, which is placing more and more Croydon and Southwark families in rent arrears and at risk of losing their home. The Government needs to fix this policy now or risk devastating thousands more people, not only in Croydon but nationwide.”
The councils claim that more flexibility for tenants to arrange to have the housing benefit element of Universal Credit paid direct to the landlord would ease the transition period, along with a shorter waiting time for the first payment to claimants.
The new welfare system was created to simplify the benefits regime, by combining six existing entitlements, including unemployment benefit, housing benefit and working tax credit, into one monthly payment. However, the long-delayed programme – currently five years behind schedule – has run into huge criticism as a result of huge cuts, and administrative errors and complexity.
The Labour Party, which supports the general principle of Universal Credit, is seeking a pause to the rollout so that issues can be resolved. After the Labour leader, Jeremy Corbyn, raised the problem of claimants being charged 55p a minute when calling the helpline on a mobile phone, the Work and Pensions Secretary, David Gauke, announced that this line would be made free.
Later that day, the Party inflicted a symbolic House of Commons defeat on the Government, with the passing of an opposition day motion calling for a pause in the rollout. It was passed by 229 votes to zero.
A Department for Work and Pensions spokesperson concludes: “This research into a small group of claimants was carried out over a year ago, now the vast majority of claimants receive their first Universal Credit on time and in full.
“The best way to help people pay their rent and to improve their lives is to support them into work, and, under Universal Credit, people are moving into work faster and staying in work longer than the old system. We also know that, over time, people adjust to managing monthly payments and reduce their arrears.
“The majority of people are comfortable managing their money upfront, but budgeting advice, upfront benefit advances and direct rent payments to landlords can be provided for those who need it.”