Recognising the recent concerns raised both in Parliament and by third sector organisations about universal credit, the Government have announced that they in the Autumn Budget that they will:
- Offer an interest-free advance of up to a month’s worth of universal credit within five days for those who need it and who have an underlying entitlement to universal credit. The recovery period for these advances will be extended from the current six months to twelve months. This will be in place from January 2018.
- From February 2018, the seven day waiting period will be removed, so that entitlement to universal credit starts on the first day of the application.
- From April 2018, those already on housing benefit will continue to receive their award for the first two weeks of their universal credit claim.
- It will be easier for claimants to have the housing element paid direct to their landlord.
- Hidden in the accompanying Budget documents was confirmation that universal credit roll-out will slow-down between February 2018 and April 2018 and that roll-out will not be complete until December 2018 (rather than September 2018 as previously announced).
In the Budget the Chancellor confirmed a £1.5 billion package of changes to universal credit in order to address some of the recent concerns raised about the impact of roll-out on claimants. Although the changes are welcome, we are disappointed that no changes were announced to the rules for self-employed claimants in universal credit.
Citizens Advice has welcomed the Chancellor of the Exchequer’s changes to Universal Credit.Chief Executive of Citizens Advice Gillian Guy said “The changes announced by the Chancellor today are a very welcome step towards fixing the problems with Universal Credit, and show the Government is acting on our evidence about the impact it’s having on people’s lives. These changes should make a significant difference to the millions of people who will be claiming Universal Credit by the time it’s fully implemented. We’ll continue to keep a close eye on the roll-out of Universal Credit and make sure they do.”
“The next step will be to make changes to work incentives, so that no one is left worse off under Universal Credit than they would be under previous benefits.”
Anne Fairpo, Chair of LITRG: “These changes to universal credit are, of course, welcome. However, we are disappointed that the Government failed to take the opportunity to change the rules for self-employed claimants in universal credit. Since 2010, we have raised concerns about the design of universal credit for the self-employed. In our recently published report ‘Self-employed claimants of universal credit – lifting the burdens’1 we once again outlined the main shortcomings of the system and proposed what we believe to be a workable alternative. Without these changes, we think there is a real risk that those thinking about starting out in self-employment will be dissuaded and those already in self-employment may be forced to give-up.”
“Perhaps one of the harshest parts of the current rules is the minimum income floor and its impact on self-employed claimants with fluctuating incomes or one-off large business expenses. We acknowledge that there must be a balance between protecting public funds on the one hand and supporting self-employed businesses on the other, however we do not believe the current rules achieve this balance. By changing the rules to allow self-employed claimants to average their income over a period up to 12 months as well as extending the start-up period and adopting our other recommended changes, the Government could achieve a better balance without penalising those who do have sustainable business when viewed over a longer period. It is disappointing that today’s Budget did not take the opportunity to address these flaws.”
Chief Executive of Child Poverty Action Group Alison Garnham said “We were the first to sound the alarm over the waiting days for universal credit, so we’re pleased the Chancellor has acted to remove them and put in place new arrangements for receiving advances as part of an emergency rescue package, but this should have been the budget that ushered in much needed structural reform of Universal Credit to revive the central promise to strengthen the rewards from work and that didn’t happen.”
“Our new analysis finds while effective tax rates may have improved for some families, big falls in family income caused by cuts and changes to Universal Credit have left many worse off overall, overwhelming any gains from increases in the ‘national living wage’, personal tax allowances and help for childcare. Families on universal credit who want to get better off through earnings gained little from the Budget.”
“What happens to universal credit will shape the future for children in low-income and just managing families. The budgets of ordinary families will not be fit for the future until the work allowances in universal credit have been restored to support parents who want to bring home higher wages.”
Johnny Timpson, Scottish Widows’ commented on changes to Universal Credit and commitment to stimulating the housing market: “Improving financial resilience is a key priority for UK households and while the removal of the Universal Credit seven-day waiting period, easing of access to advance payments and housing benefit extension are all welcome, the benefit freeze to 2020 remains in place and claimants will face a reduction in the value of income replacement and top up benefits. No changes have been made to better accommodate those on fluctuating incomes, especially the self-employed. The Universal Credit two-child limit and the earnings limit also remain unaltered.”
Shakila Hashmi, Head of Money at comparethemarket.com, said: “For a government that has been accused of losing touch with young people, the Chancellor has succeeded in delivering a budget for the millennial generation. Stamp duty is a prohibitive tax that only serves to widen the gap between generations who are able to afford a home and those who cannot get a foot on the property ladder, as house prices continue to edge higher each year. Abolishing stamp duty for many first time buyers will go some way to helping the affordability crisis facing younger people. A commitment to more affordable travel for 26-30 year olds will also bring welcome financial relief to those already spending thousands of pounds a year commuting to and from jobs based a long way from their homes. Significant house building, combined with meaningful reform to stamp duty, are major steps to bridging the home ownership gap between old and young in this country.”
What the Government needs to remember is that people do not struggle, and in particular fall into debt, because of frivolous spending or living beyond their means. Almost 26% of individuals experiencing severe financial strain start racking up more unsecured debt a mere five days after payday, and 55% fall back on credit cards before the 15th of each month, with their salary barely stretching to a fortnight. These are people using credit for essentials like food, rent and utilities, not luxuries.
Pearse Flynn, Executive Chairman of Creditfix said “The Chancellor’s comment about getting more people into work will help individuals, but completely disregards the reality that those who are employed are still struggling. In Quarter 3 2017, the average personal debt level was £20,136 and 86.36% of people struggling with money are either in work or retired. This is the real reflection of those who are just about managing with the increasing cost of living, and they do not deserve to be forgotten.”
“It is important to give attention to income equality, which may be better than recent years. However, those struggling with their personal finances have felt the average amount of personal debt increase year-on-year, right across the country. People are still stuck in a spiral of debt.”
“We welcome a focus on investment in Maths education – something we believe will help improve people’s ability to budget and manage money from a young age. Currently, a significant number of individuals in debt do not believe they had nearly enough help in schools, with 73.8% not having any lessons on money management whilst in education.”