This House of Commons Library briefing paper explores how Universal Credit has coped and changed during the coronavirus crisis so far, and what challenges lie ahead for this benefit.
Documents to download
Housing costs in Universal Credit (704 KB, PDF)
Roll-out of Full-Service and migration to Universal Credit
The Welfare Reform Act 2012 and associated regulations provide for the replacement of a number of benefits, including Housing Benefit, with a single monthly payment of Universal Credit (UC).
After some delays and a “reset” the DWP began rolling out “Full Service” – the final digital version of UC. As of 12 December 2018, UC Full Service became available in every part of Great Britain (and Northern Ireland). With some very limited exceptions, it is no longer possible to make a new claim for a “legacy” benefit or tax credit.
Existing claimants of legacy benefits may move to UC through “natural migration”, e.g. triggered by a change in circumstances. When a person moves onto UC, it will not normally be possible to move back to legacy benefits. The remaining legacy benefit and tax credit claimants will transfer to UC by a process known as “managed migration.” Managed migration will be tested in 2019 and is expected to be complete by the end of 2023.
The housing element of UC
Detailed provisions setting out how housing costs are calculated under UC were set out in the draft Universal Credit Regulations 2013 published in December 2012. The regulations were considered by the Social Security Advisory Committee (SSAC) – the Committee’s report was published alongside the draft regulations in December 2012. The Regulations were subject to the affirmative resolution procedure, meaning that they had to be approved by both Houses of Parliament. The Universal Credit Regulations 2013. (SI 2013/376) came into force on 29 April 2013.
The calculation of entitlement to assistance with rent payments is similar to the current Housing Benefit system. However, there are some significant differences. The default position is that UC is paid direct to claimants as a single monthly sum – claimants are responsible for ensuring that the housing cost element is paid to the landlord to cover the rent due. This involves a behavioural change for most tenants of social landlords. Alternative Payment Arrangements and budgeting assistance may be available in certain circumstances where claimants struggle to adapt. In addition, the minimum wait before first payment of UC is either 5 or 6 weeks from the point the person’s UC claim begins (the assessment period). In August 2015, the Government introduced a further seven-day “waiting period” (with certain exceptions) before people could become entitled to UC. The net effect was to increase the time people would have to wait for their first UC payment to a minimum of one month and 14 days. On 23 November 2017 the Government announced that this ‘waiting period’ would be removed from February 2018 in response to claims that it was causing hardship for claimants. This was achieved by The Universal Credit (Miscellaneous Amendments, Saving and Transitional Provision) Regulations 2018.
In relation to the housing costs element, there are significant concerns about the impact of waiting periods and other delays in paying UC on rent arrears.
Following what it described as “compelling evidence of the problems in the rollout of Universal Credit in its recent follow ups” the Work and Pensions Select Committee re-launched its inquiry into UC in February 2017. The inquiry was not concluded before Parliament dissolved on 3 May 2017, but evidence submitted demonstrated issues around rent arrears and hardship experienced for those claiming UC. The Employment Minister, Damien Hinds, responded to several issues raised in a letter of 1 March 2017. He pointed to the fact that some claimants had had rent arrears before claiming UC and expressed the view that newly arising rent arrears were expected to be of a short duration.
The Work and Pensions Committee opened an inquiry into the roll-out of UC on 12 September 2017. An oral evidence session held on 13 September 2017 saw witnesses representing public and private sector landlords express concerns about growing rent arrears and levels of tenant debt. On 21 September Damian Hinds wrote to the Committee setting out developments in relation to a Universal Credit Landlord Portal for social landlords, and advising that all social landlords would be offered the opportunity to acquire Trusted Partner status. This scheme allows landlords to identify vulnerable tenants and be paid rent directly before falling into arrears.
On 15 September 2017 the DWP published research commissioned from Ipsos MORI, Universal Credit Test and Learn Evaluation: Families, in which the five-week waiting period was identified as a key factor behind the accrual of tenant arrears after moving on to UC.
On 18 September 2017, the Chair of the Work and Pensions Select Committee, Rt Hon Frank Field, called on the Government to pause the roll-out of UC, saying:
Evidence from the first three Universal Credit boroughs shows they have amassed £8m in rent arrears, with more than 2,500 tenants in London claiming Universal Credit so far behind with their rent they are at risk of eviction from their homes.
We are hearing evidence of people being plunged into all sorts of vulnerability as a result of the debt, risk of hunger and homelessness, and resulting stress of being migrated onto Universal Credit, with its in-built 6 week delay in receiving a first payment and much longer waits for many people.
Following an Opposition Day debate on 18 October 2017 the House of Commons agreed by 299 votes to nil an Opposition motion calling on the Government to “pause” the roll-out of the UC Full Service. All Conservative Members, except for Dr Sarah Wollaston, abstained.
The day before this debate, the then Secretary of State, David Gauke, wrote to Frank Field setting out some detail on dealing with housing costs within UC and developments in relation to advance payments, alternative payment arrangements, and the position of private landlords.
On 26 October 2017, the Work and Pensions Committee published a report on the “baked-in” 6 week wait for UC, which it described as a “major obstacle to the success of the policy.” The Committee recommended that the Government reduce the standard waiting time for a first UC payment to one month.
On 23 November 2017, David Gauke announced what he described as “a balanced package of improvements that puts more money into claimants’ hands earlier, ensuring extra support for those who most need it.” This included the removal of the seven-day waiting period and new guidance for staff “to ensure that claimants in the private rented sector who have their housing benefit paid directly to landlords are offered that option when they join universal credit.”
2018 saw publication of several reports by; for example, the Joseph Rowntree Foundation, National Housing Federation, Residential Landlords Association, National Audit Office, and The Smith Institute for Southwark Council, as well as the Work and Pensions Select Committee, which highlighted ongoing issues with rent arrears and hardship experienced by claimants of UC. The Committee called on the Government not to proceed with managed migration “until it has assessed the contribution that the five week wait makes to claimant debt and reformed its own debt collection practices.” The Committee also recommended an overhaul of the Universal Support offer. The Government response was issued in January 2019. Secretary of State, Amber Rudd, announced that managed migration would be piloted with a small number of claimants from July 2019.
The Autumn 2018 Budget announced, amongst other measures, that maximum deduction rates would be reduced from 40% to 30% of a claimant’s standard allowance from October 2019 and an extension of the period over which advance payments can be repaid from 12 to 16 months from October 2021. Evidence submitted to the Work and Pensions Committee “suggests that 30% is still far too high a deduction from each month’s benefit for most claimants to manage.”
Research published by Citizens Advice in February 2019 concluded that the changes announced by the Government had started to help claimants but represented only a “dent in the problem”. Various bodies, including representatives of council and housing association landlords, and those that assist claimants are calling for further reforms to UC.
The devolved administrations
The Scottish Government has power under section 29 of the Scotland Act 2016 to make regulations in relation to the housing costs element of UC for claimants who rent their homes. The Scottish Government said it would use this power to abolish the Removal of the Spare Room Subsidy/bedroom tax and to make changes to the payment arrangements under UC.
Welfare reform in Northern Ireland was delayed – implementation began at the end of September 2017. The size criteria (under-occupation) provision came into force in Northern Ireland on 20 February 2017. The Department for Communities (DfC) is mitigating the impact of the deduction for social housing tenants up to March 2020.
Documents to download
Housing costs in Universal Credit (704 KB, PDF)
On Monday 18 January 2021, there will be an Opposition Day Debate on a Motion relating to Universal Credit and Working Tax Credit.
Key Universal Credit resources for caseworkers.