Thousands of people claiming Universal Credit have taken out emergency loans amid fears the Government’s flagship benefit is plunging families into debt, HuffPost UK has found.
The Department for Work and Pensions has confirmed through a Freedom of Information request that almost 70,000 claimants have used a so-called Budgeting Advance – an early payment of their welfare cheque to pay for unexpected costs.
The figures, from April last year to March this year, only include the parts of the country where Universal Credit, which brings six benefits into one single payment, has been rolled out fully.
By March, the number of people on the benefit was 820,000. Many of those areas had only been delivering the scheme for matter of weeks. The average amount of the loan was £360.
HOW THE UNIVERSAL CREDIT ROLL-OUT STANDS
Critics say the figures demonstrate people on the scheme exist on a financial tightrope.
The Work and Pensions Select Committee of MPs pointed to a National Audit Office report stating that 44% of claimants are still going further into debt nine months in to receiving their payments.
Under Universal Credit, claimants are paid in one monthly payment in most cases, rather than weekly or fortnightly.
The Department for Work and Pensions dismissed suggestions that taking out a Budgeting Advance could be linked to struggles related to the benefit, pointing out similar loans had existed for decades.
Frank Field, chairman of the Work and Pensions Select Committee, told HuffPost UK: “Where will it end? Despite the DWP’s ludicrous state of denial, these figures further demonstrate the welfare state’s new-found role in destroying the moral economy of the working-class.
“Universal Credit is designed in a way that is so alien to how families budget that it is systematically plunging tens of thousands of people into debt.
“Worse still, the Committee is beginning to receive evidence of the debt advice, which is supposed help people through this mess, being nothing more than an empty promise from the DWP that is not delivered.
“If DWP will not accept the reality of the havoc it is wreaking on people’s lives, how can we hope they will ever fix it?”
Margaret Greenwood, Labour’s Shadow Work and Pensions Secretary, said: “The severity of the Government’s cuts to Universal Credit mean that too many people receiving it are experiencing real hardship.
“The Government must pause and fix Universal Credit so that people are not pushed into poverty by a benefit that is meant to protect them from it.”
A Department for Work and Pensions spokesperson said: “In Universal Credit, Budgeting Advances help people to pay for sudden unexpected costs, such as a fridge breaking down.
“The advance is interest-free and can be paid back over 12 months. These types of advances have existed for decades and were available on the legacy system in the form of Budgeting Loans.”
HOW BUDGETING ADVANCE WORKS
A Budgeting Advance can help pay for emergency household costs, the DWP website says, such as to buy a new cooker or for help getting a job or staying in work.
It is a loan and has to be repaid through regular Universal Credit payments, which will be lower until it is fully paid back.
It has to be repaid within 12 months. Claimants can get up to £812 if they have children.
The loan is different to the advance on the first Universal Credit payment, which ministers introduced in recognition that those moving on to the system had to wait six weeks to be paid. This has now been reduced to a five week wait.
Universal Credit replaces housing benefit, child tax credit, income support, working tax credit, jobseeker’s allowance, and employment and support allowance.
The much-maligned welfare reform, and specifically how it has been implemented, has received fierce criticism even among Conservative backbenchers during a series of regional trials.