Universal Credit is failing millions of people, particularly the most vulnerable, according to the influential Lords Economic Affairs Committee.
The Committee, which agrees with the original aim of Universal Credit, blames the scheme’s design for soaring rent arrears and the use of food banks.
Cuts to social security budgets over the last decade is causing widespread poverty and hardship, the Committee says whilst calling for urgent investment just to catch up and provide claimants with adequate income.
The temporary increase in the standard allowance in response to the Covid-19 pandemic shows that the previous level of awards was too low. The Committee argues that this increase should be made permanent.
The Government is using Universal Credit to recover debt, mostly £6 billion of historic tax credit debt. Deductions of up to 30% of the standard allowance, and in some cases more, can be taken from claimants.
This has left many households with less money than they are entitled, often at no fault of their own. Tax credit debt should be written off as it is unlikely to be repaid.
The five-week wait for the first Universal Credit payment is the main cause of insecurity. This wait entrenches debt, increases extreme poverty and harms vulnerable groups disproportionately. The Government should introduce a non-repayable two-week grant to all claimants.
The way that payments are calculated can result in large fluctuations in income month-to-month, making it extremely difficult for claimants to budget. The level of awards should be fixed at the same level for three months.
There should also be a mechanism to enable claimants to have an early reassessment if their circumstances change.
These are the main findings and conclusions that have been agreed unanimously by the cross-party House of Lords Economic Affairs Committee in its report, ‘Universal Credit isn’t working: proposals for reform’, published today.
Lord Forsyth of Drumlean, Chair of the Economic Affairs Committee, said: “Most people, including our Committee, broadly agree with the original aims and objectives of Universal Credit.
“However, in its current form it fails to provide a dependable safety net. It has led to an unprecedented number of people relying on foodbanks and not being able to pay their rent.
“The mechanics of Universal Credit do not reflect the reality of people’s lives. It is designed around an idealised claimant and rigid, inflexible features of the system are harming a range of claimant groups, including women, disabled people and the vulnerable.
“Universal Credit needs more money to catch up after 10 years of cuts to the social security budget. It requires substantial reform to its design and implementation, the adequacy of its awards, and how it supports claimants to navigate the system and find work.
“The five-week wait for a first payment must be replaced by a non-repayable two-week grant to all claimants. The monthly payment calculations which can result in big fluctuations to claimants’ incomes should be fixed for three months. Historical tax credit debt needs to be written off.
“The punitive nature of Universal Credit has not worked. It punishes the poorest by taking away their sole source of income for minor infractions.
“It needs rebalancing, with more carrot and less stick, particularly as large numbers of claimants will have ended up on it because of events completely out of their control.”