Brits on Universal Credit should get six extra months to pay back advances over coronavirus
BRITS on Universal Credit should get an extra six months to pay back advance loans which have kept them afloat during the coronavirus crisis, a think tank has said.
The Resolution Foundation found hundreds of thousands of Brits were afraid to take-up advance Universal Credit loans because of the strict repayment rules - and urged the Government to relax them.
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The think tank is urging the Government to delay reductions in payments by at least six months if they take out an advance to tide them over during the initial five-week-waiting period.
It would give Brits more breathing room before their benefit payments are reduced to payback the loan.
Other repayments - including debt for people who were paid too much - have been paused while the country grapples with coronavirus, but people have still had to pay back advances.
More than 2 million Brits have turned to Universal Credit to keep the lights on during the coronavirus crisis.
According to the think tank many were too scared to take on more debt to ask for an advance loan on the Universal Credits payments, which would tide them over.
Taking out an advance loan means later Universal Credit payments are reduced.
Policy boffins said the Government should encourage people to take up the loan by extending repayments by an extra six months - otherwise people could be left unable to make ends meet.
Researchers found that only one in three new Universal Credit claimants asked for an advance payment.
Around 45 per cent of people saying they had enough income or savings to rely on to get them through the waiting period.
But two in five admitted they didn't take up the advance payments because they were afraid to take on more debt.
One person quoted in the report said: "All the horror stories were the ones that put me off applying – I didn't quite understand, when they say you’ll get x amount but your claims will be less, it says it will be clawed back.
"I don't want to be in that situation where I’ll be worrying about a debt."
The Sun launched the Make Universal Credit Work campaign to slash wait times for first payments so people aren't forced to sell their belongings or take out loans to survive - and to make it easier for people to get back to work.
The Sun wants to Make Universal Credit Work
Universal Credit replaces six benefits with a single monthly payment.
Universal Credit replaces six benefits with a single monthly payment.
One million people are already receiving it and by the time the system is fully rolled out in 2023, nearly 7 million will be on it.
But there are big problems with the flagship new system - it takes 5 weeks to get the first payment and it could leave some families worse off by thousands of pounds a year.
And while working families can claim back up to 85 per cent of their childcare costs, they must find the money to pay for childcare upfront - we’ve heard of families waiting up to 6 months for the money.
Working parents across the country told us they’ve been unable to take on more hours - or have even turned down better paid jobs or more hours because of the amount they get their benefits cut.
It’s time to Make Universal Credit work. We want the government to:
- Get paid faster: The government must slash the time Brits wait for their first Universal Credit payments from five to two weeks, helping stop 7 million from being pushed into debt.
- Keep more of what you earn: The work allowance should be increased and the taper rate should be slashed from from 63p to 50p, helping at least 4 million families.
- Don’t get punished for having a family: Parents should get the 85 per cent of the money they can claim for childcare upfront instead of being paid in arrears.
Together, these changes will help Make Universal Credit Work.
Join our or email UniversalCredit@the-sun.co.uk to share your story.
The think tank said Universal Credit had managed the first hurdle of the coronavirus crisis - but the Government needed to bolster the system to ensure it could look after Brits as the UK looks set to plunge into the worst recession in 300 years, with record unemployment.
Senior economist at The Resolution Foundation Karl Handscomb said: "Universal Credit has been on the frontline in fighting the UK's economic shock.
"More claims have been processed in the four weeks of the coronavirus crisis than in the first nine months of the financial crisis.
"The benefits system has proved remarkably resilient in the face of such demand, with three quarters of claimants satisfied with the process. But even tougher challenges lie ahead.
"The typical employee loses close to half their income if they enter unemployment and move onto benefits.
"This will pose significant challenges for those facing long periods without work.
"Universal Credit has been a success of the crisis so far - but Government should act now so it can repeat those successes in the months and years ahead."
The think tank also urged the Government to consider scrapping the taper rate - which means households with savings over £6,000 have their payment reduced.
Chief Executive of the Standard Life Foundation Mubin Haq said: "The current system penalises those who have modest savings and it is essential the government looks at this again - a system which disincentivises saving amongst some of the lowest income households cannot be right.
A Government spokesperson said: “Universal Credit has stood up to the challenge of more than 2.5 million claims since 16 March.
"we are doing whatever it takes to ensure people are supported through these unprecedented times, including injecting £6.5bn into the welfare system, rolling out income protection schemes, mortgage holidays and additional support for renters."
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