Government rejects House of Lords recommendations to ease financial exclusion

The Government has responded to a House of Lords Committee report on financial exclusion. In its response, it has rejected Committee recommendations to remove the requirement to remove waiting days from Universal Credit for all claimants and to allow direct payment of housing costs to landlords in England and Wales.

Committee recommendations on Universal Credit

In March, the HoL Committee on Financial Exclusion published “Tackling financial exclusion: A country that works for everyone?” Chapter 8 of this report dealt with welfare reform and financial exclusion, and considered how changes resulting from welfare reforms since 2012 have helped to address, or served to intensify, financial exclusion.

Recommendations stemming from this included:

• Abolishing the 7-day waiting period at the start of a Universal Credit claim, as this measure put claimants at “significant risk of falling into arrears”;
• Allowing greater flexibility in the frequency of Universal Credit payments in England and Wales, as per the models in Northern Ireland and Scotland;
• Permitting tenants to decide for themselves whether the housing costs element of Universal Credit is paid directly to them or to their landlord;
• Conducting a detailed, cumulative impact study of how changes introduced by the Welfare Reform Act 2012 have affected financial wellbeing and inclusion.

Government response to recommendations

The Government published its response to the Committee report in November. In respect of Universal Credit, the government has decided not to implement any of the suggested changes to the way in which the benefit is assessed or paid. The Department for Work and Pensions will continue to conduct research, evaluation and analysis of reforms to social security, although this falls short of a commitment to the impact study which the Committee recommended.

Government states existing measures provide “vital safety net for vulnerable people”

In rejecting the abolition of the 7-day waiting period, the Government pointed to the availability of budgeting support and advance payments for new claimants. Additionally, the Government stated that the system includes exemptions from waiting days for certain categories of people, pointing to these exemptions as a “vital safety net for vulnerable people and people who are unlikely to have earnings or resources to fall back on”. The Government states that such measures “…ensure that waiting days do not place people into hardship and for these reasons (we) are not persuaded of the strength of the case to remove them”.

In its response to a recommendation to allow for greater payment flexibility, the government stated that allowing for more frequent payments of benefit would “damage the ultimate goal of helping claimants take responsibility, manage their financial affairs and move back into work”.

In Northern Ireland, payments of housing costs are made directly to the claimant’s landlord, unless the claimant has elected to receive these directly. This differs from England and Wales, where direct payments can only occur in particular circumstances.  Whilst the HoL Committee recommended these claimants should have the option of direct payments in all circumstances, the Government stated that enabling claimants to pay their own housing costs would move them “closer to financial independence.”

Earlier in the year, Housing Rights joined several other organisations in calling for an urgent review of the rollout of Universal Credit in Northern Ireland. Our concerns are chiefly that sufficient work has not been undertaken to address concerns about rising rent arrears and to ensure that issues experienced with Universal Credit in Great Britain are not replicated in Northern Ireland.

Although there are several exemptions to the 7-day waiting period, recent DWP data indicates that 64% of new Universal Credit claimants serve these waiting days.  This 7-day period falls outside the claimant’s assessment period, and so benefit will never be payable in respect of this week. The continuation of this policy is particularly concerning in relation to housing, as this could immediately place tenants into a week’s arrears. This could have serious negative implications for claimants’ access to private rental properties, and potentially further encourage the practice of social landlords charging rent in advance.

Evaluation plans in Northern Ireland

Housing Rights welcomes the Department for Communities’ previous announcement that they will be evaluating the impact of all welfare reforms, including Universal Credit, by a Composite Evaluation Framework. The Department acknowledges that ‘Welfare Reform has the potential to impact all members of society in NI’, and therefore will be assessing the impacts of all reforms in relation to their four key strategic objectives of Welfare Reform: protecting the vulnerable, incentivising work, a fair welfare system, and encouraging personal and social responsibility. It is vitally important that these evaluations are undertaken and published, particularly in the current absence of the Assembly, to ensure that future decision-making is fully and broadly informed.  

It is also important to understand the limitations of the Universal Credit advance payments which the Government refers to. Unlike interim payments of other benefits, UC advances are not available to claimants as a statutory right, but are awarded at the discretion of the decision-maker. Advances for new claims are limited at 50% of the forecast first award, which is often a paltry amount; these are also recoverable from future UC payments. Housing Rights recently assisted a mother and son who received an advance of £297 to cover six weeks’ living costs. This immediately placed the client into arrears, as well as significant difficulties meeting basic and essential needs.

Housing Rights welcomes the default of twice-monthly payments of Universal Credit in Northern Ireland. In Great Britain, Universal Credit is by default paid monthly, with the purported intent of familiarising claimants with the frequency of salary payments. However, recent research by the Resolution Foundation has found that 58% of recent new claimants moving onto UC from employment received their wages either fortnightly or weekly, suggesting that Universal Credit’s monthly assessment period is not reflective of actual working UC claimants. The default position of paying claimants twice each month in Northern Ireland is, therefore, welcome.