What it's like to transition on to Universal Credit

Originally designed with the intention of “making work pay” by smoothing out transitions between paid work and welfare, Universal Credit is now being widely criticised for failing to deliver on its promises. Despite calls by a group of Conservative MPs for the next phase of the welfare benefit’s rollout to be paused, in early October the work and pensions secretary David Gauke said it would go ahead as planned.

Universal Credit replaces six means-tested welfare benefits (Jobseeker’s Allowance, Employment and Support Allowance, Income Support, Working Tax Credit, Child Tax Credit and Housing Benefit) with a single monthly benefit payment. This payment varies, dependent on an individual’s earnings the previous month.

Each Universal Credit recipient has to agree a “claimant commitment” with their adviser or job coach, which can include requirements to undertake up to 35 hours of job search and training per week. Benefit sanctions are applied for non-compliance. For the first time, Universal Credit has extended welfare conditionality to low-paid workers in receipt of in-work benefits such as tax credits and housing benefit. This means claimants have to attend mandatory appointments in order to keep receiving the benefit – even if they already work.

Although some supporters of Universal Credit argue that many of the current issues are indicative of a social security system undergoing a significant transition, our ongoing research project on welfare conditionality points to more systemic failings in how the new system is designed and implemented.

New claimants face a wait of up to six weeks before they receive an initial payment but some respondents in our study spoke of longer waits due to administrative errors and delays. While waiting, people are routinely left with little or no money for basic necessities like food and rent payments and consequently fall into debt.

According to the Department for Work and Pensions about half of all claimants living in areas where Universal Credit has been fully rolled out receive an advance payment. While these are available to help tide people over during the waiting period, they are discretionary and only available as repayable loans deducted from any future payments. This leaves recipients in the difficult position of having to live on a reduced income moving forward, potentially worsening budgeting problems between monthly payments.

Changes to the system

Rising debt problems have been further compounded by three further significant changes in how Universal Credit operates, compared to the benefits it replaces. First, many have struggled with the switch from fortnightly to monthly payments. During our interviews, one recipient in Scotland told us:

Hate this monthly pay. I don’t know how people survive on it. It was easier when you were getting paid fortnightly. At least you just had to get fortnight to fortnight. Getting it monthly, and then you’ve got all your bills coming out of it a month, and then you’re looking at £80-odd, or £100 for the month.

Scotland has just introduced new regulations allowing Universal Credit to be paid fortnightly.

Second, payment of the housing element of Universal Credit directly to the claimant, rather than the old system of directly to the landlord, has significantly increased rent arrears among vulnerable people. For those who are struggling to make ends meet or who have been sanctioned, the rent doesn’t get paid.

Third, many claimants are also struggling to get to grips with the variations in Universal Credit payment that occur each month. Because the benefit is paid in arrears, based on earnings for the previous month, the system assumes that moving forward any earnings from work will be at the same level the next month, with the amount adjusted up or down depending on previous monthly earnings. However, this is routinely not the case for a lot of people on flexible or zero-hours contracts. One in-work recipient of Universal Credit in Bath told us:

I’ve got rent arrears [£2,500] and just trying to sort of like survive, I can’t do it on my weekly payments… that’s when I’m working… I’m not sat on benefit waiting to get benefits… I’ve got no Universal Credit this month because apparently I earned too much.

Counter-productive consequences

Beyond these significant debt-related issues, it is surely time for a more fundamental rethink about whether welfare conditionality should be applied to people who are working but receiving Universal Credit. Requiring those already in work to attend interviews with job coaches under pain of sanction is plainly counter-productive. It does not meet with the needs of employers who want people to be at work rather than discussing options in Jobcentres, and it is a nonsense for a policy that is supposed to encourage engagement with paid employment to be sanctioning people for not attending interviews because they are working. As one in-work Universal Credit recipient from Manchester told our researchers:

I rang them up to say that I couldn’t come in because I was working full-time. So they said that was all right. Then I got a letter saying I’d missed my interview and they’ve taken me off Universal Credit. So I thought, you know what, just stuff you. I can’t be bothered with them anymore… So, basically, mostly I’ve struggled because I just can’t be doing with them.

For some recipients in our study, Universal Credit appeared to be working well. One man in Bath outlined how the mandatory training he had received helped him into work. He also said that for him, the monthly top-ups to his variable pay were helpful. That said, such voices were very much in the minority.

While we support the heightened calls for a pause in the rollout of Universal Credit, a more systematic rethink of the benefit is also required for it to be able to address the unintended outcomes and issues we’ve heard about in our research. Only then might Universal Credit start to deliver real social security in the future.

Peter Dwyer receives funding from the Economic and Social Research Council for research on welfare conditionality. He is a member of the Labour Party's Social Security Commission.

Sharon Wright receives funding from the Economic and Social Research Council for research on welfare conditionality.