Universal Credit – particularly the sanctions regime and the five-week wait – was already causing problems before the pandemic at a time of record employment. Now we face record unemployment.
A report out last week showed that despite some improvements in the proportion of Universal Credit claims paid on time, the number of people having facing delays in payments is increasing as a result of Covid-19. In 2019 those new claimants who were paid late faced average delays of three weeks. Some 6% of households (105,000 new claims) waited around 11 weeks or more for full payment.
This is on top of the minimum five-week wait for payment that has always been part of Universal Credit’s design, supposedly to encourage people to find new work as fast as possible – something that is becoming increasingly difficult given the economic crisis we are facing.
The National Audit Office report says that, while many are accessing advances to tide them over this five-week period, they, of course, have to pay them back which places them in a cycle of debt from which many will find it difficult to emerge.
Many claimants, says the report, are already struggling financially before they apply for Universal Credit – 49% of claimants are reported to have had no earnings in the three months before they applied.
The five-week wait for Universal Credit was already a big cause for concern before the coronavirus. That was at a time of record employment. This has now been turned on its head and we now face record unemployment. While the Chancellor has extended the coronavirus ban on evictions until the end of August and a three-month mortgage holiday was imposed in March, late summer is likely to be a time of reckoning for many, with the beginning of the tapering of the furlough scheme due in August, prompting employers who have not yet announced job losses to start taking action.
We’ve seen this week that local authorities are beginning to cut back jobs too. For parents there are the additional problems of lack of summer childcare, making it difficult to return to work and forcing them onto annual leave [which many will have already used up] or unpaid leave.
We know from countless surveys before pandemic that many families are living on credit until their next pay cheque and many in work are reliant on food banks. The scale of the disaster is huge, even if there is not a second – and possibly subsequent – strikes from Covid-19. And we also, of course, face the economic consequence of a potential no-deal Brexit, with the Institute of Directors says only a quarter of business leaders are fully ready for the end of the Brexit transition period in December.
The response has to be on a similar scale to avoid long-term unemployment and widespread, entrenched poverty. It’s not just about creating jobs, but about creating the right jobs that meet the needs of those looking for them, for instance, with regard to childcare. The DWP is increasing its Universal Credit work coaches, who check up on whether claimants are keeping to their commitments about, for instance, the number of jobs they apply for.
Failure to meet the commitments can result in an individual’s benefits being reduced or sanctioned, leading to further debt. Universal credit sanctions were suspended during the first months of the coronavirus pandemic, but have recently been reintroduced. It signals a worryingly punitive approach to benefits at a time when the need for them is urgent and jobs are scarce.