Universal Credit (UC) is an ‘ongoing financial risk for local authorities and other social landlords’ and is having a ‘serious detrimental affect on the lives of claimants’.
These are the words of Victoria Mills, cabinet member for finance, performance and Brexit at Southwark Council, one of the first areas where UC was rolled out.
As the largest local authority landlord in London, Southwark has been monitoring the impact of UC with the aid of the Smith Institute think tank, which has researched the issue. Mills doesn’t mince words in her description of the new welfare system in the third such report published this week.
In her foreword to Safe as Houses 3 Mills called again for an urgent halt to the UC rollout until ‘radical steps’ are taken to ‘fix the broken system’. She argued that, ‘UC is failing to improve the support, resilience and financial independence of those who are claiming it compared to the previous benefits system’.
The Department for Work and Pensions (DWP) had previously said that the concerns raised over UC were due to teething and has tweaked the system but Mills said this report – which has gathered data after these changes were made – indicates that more fundamental improvements were needed. She also questioned the decision to test and learn from Southwark residents, causing them hardship, and losing the council money, with no recompense.
The main issues identified with UC in this report, and in the previous two, was the five-week waiting period and the fact the benefit is paid monthly in arrears.
Some 30 weeks after going onto UC, on average 73.5% of claimants are in rent arrears. Within the first week of claiming they are, on average, thrown into 40% of rent arrears. Southwark Council has estimated it will have to foot £5.6m in rent arrears by 2024-25 if changes are not made.
The Southwark report found rent arrears were higher among claimants with multiple UC claims. It recommended that the DWP look into whether those in and out of work, or with fluctuating earnings, were more susceptible to arrears under the UC system.
There was some positive news in the report that there was a noticeable decrease in the levels of arrears, which the report attributes to the increased use of the Alternative Payment Arrangements (APAs), rather than other reforms made. APAs ensure the housing benefit portion of universal credit is paid direct to the landlord.
Latest figures showed claimants in the first wave of roll out in 2016 were on average six weeks in arrears, compared to two weeks in arrears for the later 2018 group of claimants.
APAs were originally brought in to help in a handful of difficult cases. However, today around 40% of Southwark tenants on UC have now entered APAs, indicating they are needed more routinely, and may need to be set up earlier.
However, despite this, arrears under UC in both 2016 and 2018 groups were still higher than under the previous housing benefit system. And the report stressed that while APAs can help control rent arrears they did not prevent them.
* Prior to the Southwark report launch it was reported in the national press that the Labour Party, if they gained power, planned to implement a two-stage fix to UC, before scrapping it completely.
* The Residential Landlords Association has said private landlords renting to people on UC have reported that 54% are in rent arrears. It wants to see wider use of APAs.
View from a food bank: "People don't have enough money"
Chris Price, the chief executive officer of Pecan, the Southwark food bank, said: “In the two years since it was rolled out we have seen an increase in 50% coming through to the food bank - a really big increase.
“Previously, people came in because they had experienced a short term blip or glitch – something had gone wrong. This was why we advised that people should only come to us three times within a six month period.”
The food bank has now relaxed this guidance as Price explained that with UCt the 'glitch' period has lengthened because claimants are having to wait five weeks to receive any money. When they do finally receive a payment, they are having to use some of it to pay back a loan they took out to cover the initial waiting period.
“People don’t have enough money to live on so they are having to use food banks on a routine basis, rather than on an emergency basis. When UC is set at a legal minimum that you are supposed to be able to live on, and then you’re having money taken off of that – people don’t have enough money.”
Price explained that claimants also face the challenge of having to manage inconsistent incomes, as flexible working and weekly or fortnightly payments mean they are thrown on and off universal credit, which is paid monthly. On low incomes, there is little margin for error and so fluctuations like this are extremely challenging and a contributory factor to rent arrears.