Government must get Universal Credit ‘battle ready’ for the UK’s unemployment crisis

The Government must get Universal Credit ‘battle ready’ for the UK’s growing unemployment crisis by encouraging more people to claim, extending eligibility to more middle-income households, getting more advance payments out to those who desperately need them, and publishing real time data on what support is getting through, according to a new Resolution Foundation briefing note published today (Thursday).

With the current economic downturn standing out as an unemployment crisis, the Foundation notes that Universal Credit (UC) has been thrust onto the front line of the battle to protect people’s living standards during an unprecedented economic shock.

Despite the Government’s welcome job retention and self-employed workers’ income support schemes, which are due to become operational in late April and June respectively, job losses are already mounting rapidly. Last week, the DWP disclosed it had received an average of 371,000 claims in one week – five times more than seen in a month at the peak of the financial crisis.

With many more claims likely in the coming weeks and months, even if the current surge rates slow, the briefing note sets out what more the Government can do to ensure that the new benefit system provides the prompt income support that millions of people will need to get through this crisis.

It adds that the fact UC has not broken down in the face of such unprecedented demand shows that the move to a digital first system has made it more resilient than many people thought, and that the extra resources the DWP is pouring into the system are making a big positive difference.

In order to get to get UC ‘battle ready’ for its key role in this unemployment crisis, the briefing note calls on the government to:

  1. Encourage more people to claim. Many people who lose their jobs will not be covered by the government’s wage subsidy schemes and UC will therefore be their only source of income support. But they may be put off by misleading headlines about it taking five weeks to receive support. The Government should therefore advertise UC as the first line of income support, and target higher take-up among entitled groups.
  2. Extend UC to more middle-income households. The government should scrap the ‘capital rules tests’ that reduce support for those with savings over £6,000 and ‘disentitle’ those with savings over £16,000. The briefing notes that for a couple with children, who have saved a £16,000 deposit for their first home but have now lost a job, these capital rules would disentitle them to £1,400 of support a month, and up to half their deposit over six months of unemployment.
  3. Speedup payments. The government can further assuage fears of the ‘five week wait’ by widely advertising the advance loan system, and encouraging take up of them wherever needed by delaying repayments for at least six months. This would bring UC into line with the deferral schemes available to firms and mortgage holders.
  4. Show how the system is coping. Given the essential role UC will need to play in fighting the economic crisis, the government should provide at least weekly updates of claims made, claims processed and payments (including advance loans) made. This would help to reassure potential claimants that help is getting out to people, and provide transparency around whether DWP has sufficient resources to cope.

Karl Handscomb, Senior Economist at the Resolution Foundation, said:

“Despite all the focus elsewhere, Universal Credit is the front line of our response to the economic crisis for low-to-middle income households. The Government needs to ensure that it is ‘battle ready’ for this crucial role.

“Despite the hugely welcome wage and income subsidy schemes for furloughed employees and self-employed workers, a huge number of people are still going to lose their jobs and need immediate income support to avoid hardship. For these people, Universal Credit will be the key source of help.

“The Chancellor has already announced a £7 billion plan to make the system more generous. The key challenge now is to encourage more people to claim UC, process those claims rapidly, and get payments out to people as soon as possible.

“The roll-out of Universal Credit in recent years has been beset by controversy. But its performance over the next few months is the real test of this new benefit system – as it provides a living standards lifeline to millions of households.”