London Councils warn of ‘serious flaws’ in Universal Credit

The roll-out of Universal Credit in London could cost boroughs more than £23m in rental arrears, a new report has warned.

New research by the think tank Smith Institute warns that the five-week wait between making a successful Universal Credit claim and receiving the first payment is contributing to a spike in rent arrears.

The Smith Institute found that almost two-thirds of tenants saw a significant increase in rent arrears after claiming Universal Credit, with tenants accumulating an average of £240 in rent arrears in the 12 weeks after they first claimed.

The report was commissioned by Southwark Council on behalf of the London Councils group, which has urged the government to address the five-week wait as a ‘serious flaw’ in Universal Credit’s design.

Prior to the coronavirus pandemic there were around 135,000 working-age council tenants in London still claiming Housing Benefit.

If they were all moved to Universal Credit, in line with the government’s planned next steps, the Smith Institute expects that their rental arrears would cost London boroughs more than £23 million.

This comes at a time when London Councils is warning that boroughs collectively face a funding shortfall totalling £1.3bn this year due to Covid-19’s impact, with boroughs’ income falling fast while spending has increased.

‘The five-week wait is a serious flaw in Universal Credit’s design,’ said London Councils’ executive member for welfare, empowerment & inclusion, Cllr Muhammed Butt.

‘This important research clearly shows that claiming Universal Credit is accompanied by a significant spike in rent arrears for the majority of council tenants,’ added Cllr Butt.

‘The five-week wait leads to low-income households piling up debts, which undermines Universal Credit’s effectiveness as a welfare support measure but also contributes to the serious finance pressures faced by councils and other social landlords.

‘We’re calling on the government to fulfil its pledge to ensure Universal Credit works for the most vulnerable, which must surely include every claimant unable to afford their rent due to the five-week wait. Addressing the problems caused by the five-week wait should move to the top of the policy priority list – especially since the devastating economic impact of Covid-19 means more and more households are relying on Universal Credit to pay their bills.’

Photo Credit – Blank76 (Pixabay)