Universal Credit ‘punishes the poorest’ say peers as they call for reform

The controversial benefits scheme is to blame for soaring poverty and record-high foodbank use, a scathing Economic Affairs Committee report said

The benefits system is “failing millions of people” and major changes must be made to protect society’s most vulnerable, according to a searing Lords’ report on Universal Credit.

The Economic Affairs Committee blamed the scheme for soaring rent arrears and the use of foodbanks, and said the temporary increase in payments during the Covid-19 crisis proved that the standard rate was too low – calling for the increase to be made permanent.

The peers pointed to the five-week wait claimants face before receiving their first Universal Credit as the main factor pushing people into deep poverty, entrenching debt and harming women and disabled people disproportionately. Echoing repeated calls from campaigners since the scheme was introduced, the committee wants a non-repayable grant to be given to everyone while they wait to start receiving Universal Credit.

The system was introduced in 2010 with a view to condensing six benefit payments into one, and has been blasted by anti-poverty campaigners ever since for pushing people deeper into hardship.

Committee chair Lord Forsyth of Drumlean said: “Most people, including our committee, broadly agree with the original aims and objectives of Universal Credit. However, in its current form it fails to provide a dependable safety net. It has led to an unprecedented number of people relying on foodbanks and not being able to pay their rent.

“The mechanics of Universal Credit do not reflect the reality of people’s lives. It is designed around an idealised claimant and rigid, inflexible features of the system are harming a range of claimant groups, including women, disabled people and the vulnerable.

“The five-week wait for a first payment must be replaced by a non-repayable two-week grant to all claimants. The monthly payment calculations which can result in big fluctuations to claimants’ incomes should be fixed for three months. Historical tax credit debt needs to be written off.”

The peers even called for tax credit debt to be written off after observing how it impacts people who are already struggling to make ends meet. Ministers are using Universal Credit to recover £6bn of historic tax credit debt, the report said, meaning up to 30 per cent of what a claimant is usually paid can be deducted, leaving families out of pocket.

Tory peer Lord Forsyth added: “The punitive nature of Universal Credit has not worked. It punishes the poorest by taking away their sole source of income for minor infractions.

“It needs rebalancing, with more carrot and less stick, particularly as large numbers of claimants will have ended up on it because of events completely out of their control.”

The UK has “some of the most punitive sanctions in the world”, the report said, with little evidence to suggest they help but plenty indicating that they harm the mental health of already vulnerable people. They want the Government to redesign the system so that sanctions are a last resort.

Also among the Lords’ proposals was a shift in how Universal Credit claimants are supported. Helping people into work should be a priority, they said, particularly in light of Covid-19 job cuts, and the work allowance should be raised. Doubling the number of work coaches, as the Government is currently doing, is unlikely to do enough to support people into jobs given the state of the labour market.

The Joseph Rowntree Foundation said the hard-hitting report highlighted the scale of reforms needed, adding: “Now more than ever we need social security systems to be a lifeline to our families in these turbulent times.”

Childcare support should be removed from the Universal Credit scheme entirely and made a standalone benefit paid in advance, the report added, as paying costs in arrears stops people from getting back into work.

Welfare minister Will Quince said Covid-19 had proven effective during the pandemic.“We welcome the acknowledgement by the committee that Universal Credit is here to stay and we will consider their recommendations in detail,” he added.

Image: EPA/Andy Rain