Eimear Twomey, Tenancy Engagement Officer
Universal Credit has had a better week in the news thanks to the Chancellor’s promise in Monday’s Budget to increase the work allowances and extend legacy benefit run-ons. But welcome as those changes are, ministers are still ignoring how the drastic changes in the application process of the Universal Credit is causing significant financial hardship especially for those who are already struggling with debts.
Take Tom for example. In July, a change in his circumstances when he failed DWP’s notorious Work Capability Assessment triggered a new claim for Universal Credit. Tom came to us after all his benefits had stopped and he needed support with claiming Universal Credit. What confronted him was the dismal prospect of having to deal with at least five weeks of no money. Existing debts and a coincidental overpayment from his previous benefit meant this change happened at the worst possible time.
Tom requested an advance payment as he had no money at all. The purpose of the UC advance payment are to allow claimants to access an advance loan in the initial weeks before the first payment. This loan is subject to a rigid repayment system where the rates are set in relation to the amount that is borrowed. The first repayment is deducted on the first date of payment and are done so over a 12 month period.
Prioritising paying his bills and managing other payments, Tom applied for a £500 advance payment. At the time, he did not fully consider the implications of borrowing such a figure would have on his payment going forward. Currently, £48 is being deducted from his standard allowance every month to repay the advance payment. This is coupled with £85 in other deductions that include an overpayment and budgeting loan. In other words, he is losing nearly half his standard allowance – leaving him just £40 a week to live on. Whilst the DWP’s debt collection team can reduce the repayment rate of the other deductions, the recovery rate for the advance payment is fixed.
Unfortunately, DWP does not issue guidance on borrowing. We think it has a responsibility to provide advice to claimants on what is safe borrowing based on their individual financial circumstances. Furthermore, there should be more leeway given to extending the repayment period and reducing the recovery rate. This is particularly unfair for those on the lowest incomes and who are already struggling with other debts. Whilst DWP has allowed discretion to put a hold on starting deductions for the first three months, it is only issued in exceptional circumstances.
For Z2K that simply doesn’t allow the kind of flexibility vulnerable claimants like Tom need. He has had to resort to living off foodbank vouchers and borrowing from family to heat his home.
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