NAO ‘uncertain’ UC will ever deliver value for money

A new report from the National Audit Office has slammed the welfare reform for not achieving its goals.

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Universal Credit has “taken significantly longer to roll-out than intended, may cost more than the benefits system it replaces, and the Department for Work and Pensions will never be able to measure whether it has achieved its stated goal of increasing employment.”

With that in mind, the National Audit Office (NAO) concludes that Universal Credit has not delivered value for money and is uncertain that it ever will.

Since the NAO last reported on Universal Credit in 2014, DWP has made some progress in managing the programme but has itself admitted it cannot measure whether Universal Credit will lead to its economic aim of getting an additional 200,000 people into work.

Universal Credit may also cost more to administer than the previous system of benefits it replaces, say the NAO, with current running costs at £699 per claim, against an ambition of £173 per claim by 2024-25.

DWP research states satisfaction among claimants of Universal Credit and those claiming benefits under the previous system is generally comparable to what it replaces.

However, in a recent survey by the DWP, four in ten of claimants who were surveyed stated they were experiencing financial difficulties.

The Department does not accept that Universal Credit has caused hardship among claimants but the NAO has seen evidence from local and national bodies that many people have suffered difficulties and hardship during the roll out of the full service.

The NAO states that the DWP has not shown sufficient sensitivity towards some claimants and that it does not know how many claimants are having problems with the programme or have suffered hardship.

In 2017, around one quarter (113,000) of new claims were not paid in full on time. Late payments were delayed on average by four weeks, but from January to October 2017, 40% of those affected by late payments waited in total around 11 weeks or more, and 20% waited almost five months.

Despite improvements in payment timeliness, in March 2018 21% of new claimants did not receive their full entitlement on time with 13% receiving no payment on time.

The NAO estimates between 270,000 and 338,000 new claimants will not be paid in full at the end of their first assessment period throughout 2018.

Those with more complex cases are more likely to be paid late. The DWP believes it will never achieve 100% payment timeliness because it needs by law to verify the claimants’ eligibility.

The department expected most claimants would have enough money to cope over the initial waiting period after their claim is submitted (previously six weeks, now five). In reality, nearly 60% of new claimants (around 56,000 a month) receive a Universal Credit advance to help them manage before receiving their first payment.

Increases in rent arrears since the introduction of Universal Credit in an area, which claimants can often take up to a year to repay, have been reported by local authorities, housing associations and landlords. Some private landlords told the NAO they have become reluctant to rent to Universal Credit claimants.

In three of the four areas the NAO visited and for which data was available, the use of foodbanks increased more rapidly after Universal Credit full service was rolled out to the area.

This agrees with the Trussell Trust’s report showing upsurges of 30% in foodbank use in the six months after Universal Credit rolls out to an area, compared to 12% in non-Universal Credit areas.

Local organisations which support claimants and assist in the administration of the benefit have reported incurring additional costs.

The Department says it has told local authorities it will pay them for additional costs associated with administering Universal Credit if they provide evidence of the expenses, but it places the burden of proof on the local authorities, uses its discretion on assessing claims and has not sought to systematically collect data on wider costs.

It will therefore have no means to assess the full monetary impact that Universal Credit is having.

The programme has necessitated a number of changes which have become increasingly embedded across the Department.

It would be so complex and costly to return to legacy benefits at this stage that the NAO believes there is no practical alternative but to continue with Universal Credit.

But they say the department must now ensure the programme does not expand before business-as-usual operations can deal with higher claimant volumes, and must learn from the experiences of claimants and third parties, as well as the insights it has gained from the roll-out so far.

The NAO recommends that the Department should capture intelligence on claimants’ issues and the opinions of delivery partners and external stakeholders in a systematic way.

Amyas Morse, head of the National Audit Office, said: “The Department has kept pushing the Universal Credit rollout forward through a series of problems. We recognise both its determination and commitment, and that there is really no practical choice but to keep on keeping on with the rollout.

“We don’t think DWP has shown the same commitment to listening and responding to the hardship faced by claimants.

“Maybe a change of mind set will follow the publication of the claimant survey on 8 June. We think the larger claims for Universal Credit, such as boosted employment, are unlikely to be demonstrable at any point in future. Nor for that matter will value for money.”

David Orr, Chief Executive of the National Housing Federation, said: “This report confirms what housing associations know, that Universal Credit is causing increased financial hardship for some tenants, and higher rent arrears for housing associations.

“There are serious problems with the system’s design and implementation. People need better support to make claims and should not be left without enough money to live on. It is unhelpful that the Government reduce 40% from people’s benefits to pay back a loan given to them to survive the month long gap before they receive their first payment.

“While we commend the Government’s openness to adaptions as part of their ‘test and learn’ approach, they must never lose sight of the fact that this system is being tested on real people whose lives are being severely impacted. Housing associations want to work with DWP to fix the cracks before more people are swept in.”

Jacqui McCluskey, Director of Policy at Homeless Link, said: “This new evidence highlights many of the same issues with Universal Credit (UC) that our members have experienced, and that we have been working with them to alleviate.

“That claimants have suffered financial difficulties and hardship is particularly concerning. People experiencing homelessness are unlikely to have the financial resources to support them while waiting for their first UC payment, and our members tell us that people in this situation have become reliant on foodbanks, run up huge arrears, or been served with eviction notices.

“Hardship payments, which must be paid back, are not suitable as they push people further into debt.

“While there are local examples of good working practices, we are also concerned that homelessness services are coming under increasing strain. Staff spend time helping individuals with UC claims, taking them away from supporting individuals to make important progress in other areas of their lives.

“Clearly improvements are needed if Universal Credit is to properly support the national strategy to end rough sleeping and the response to the Homelessness Reduction Act. As a starting point, we recommend reviewing hardship payments.

“Homeless Link will continue to provide evidence on how UC is affecting vulnerable people, and to work with the Department of Work and Pensions to bring about improvements.

“We’ll also work with our members to further develop partnerships between local JobCentre Plus and homelessness agencies to improve the support offered.”

SFHA Chief Executive, Sally Thomas, said: “This report echoes and vindicates the call by the SFHA and other organisations to pause the rollout of UC until its processes can be fixed to cope with the huge increase in numbers of tenants we are expecting will need support.

“The number of households in the social rented sector receiving housing costs is still barely above 10% of the total that will eventually move over to UC, but, even with that low number, our members are hard pushed to provide the necessary support.

“Ever since the introduction of welfare reforms the SFHA has sought to establish an effective and positive working relationship with the DWP and we will continue to do what we can in the best interests of our members and their tenants.

“We appreciate that the department is under huge pressure to deliver the system, but it must never be allowed to disregard the human cost of the decisions it makes.”

David Smith, Policy Director for the Residential Landlords Association, commented: “Whilst it is clear that Universal Credit is here to stay, today’s report recognises the difficulties faced by tenants and landlords as a result of rent arrears.

“The RLA’s most recent research found that 38 per cent of landlords have experienced universal credit tenants going into rent arrears over the previous 12 months.

“The RLA has previously called for a pause to the roll of Universal Credit, and it would seem prudent to do so as the Department undertakes its promised work to understand the impact of the policy on rent arrears.

“In the meantime, we welcome continued positive discussions with the Government and will continue to push for pragmatic changes to secure further improvements for tenants and landlords building on the changes announced in the autumn budget last year.”

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