Although the Labour Party are opposed to Universal Credit in its current, unforgiving format, until we are in power we cannot stop the rollout. What we can do, however is to do out best to support the people it affects in our community.
With this in mind, one of our members Tony Cooper, a former specialist advisor for the Citizens’ Advice Bureau, has put together this guide on how it might affect you, and what we can do to help if someone you know is affected.
What is Universal Credit?
Universal credit is a new benefit system which is replacing many of the current benefits and tax credits. It is for individuals and families of working age, whether they are working or not.
Why is universal credit being introduced?
Universal Credit is being introduced to simplify the benefits system. At the moment there are separate benefits for different purposes, such as, for example, child tax credits which help meet the costs of raising a child, and housing benefit to help with the costs of rent. Universal Credit is a single payment intended to meet different types of costs.
When will Universal Credit be introduced?
2014-16: Some claimants and families with children in selected areas started receiving Universal Credit.
2016-18: Universal Credit started being rolled out gradually across the UK from May 2016. This is only for new benefit and tax credit claims, and for significant changes of circumstances. When this happens will depend on where claimants live. It’s expected to hit Folkestone and Hythe around May 2018.
2019-2022: People receiving existing benefits and tax credits will be moved to Universal Credit. This will either happen when there is a significant change to your circumstances, or when the Department for Work and Pensions (DWP) decides to move you onto Universal Credit.
Compared with the current benefit system, Universal Credit is different in a number of ways
The main changes for most people are:
• It is a single benefit payment.
• It is paid monthly into a bank account in arrears.
• It is claimed online
• Claimants have their own online account
• Claimants working and paying tax through the PAYE system will find benefit is calculated on income figures their employer sends to HMRC
• NO requirement to have to tell the Department for Work and Pensions (DWP) about every change in income
• Money for rent is paid directly to claimants and not to their landlord in most cases
• Some expenses will need to be updated regularly on your account (monthly).
Preparing for Universal Credit in 5 steps
Step 1: Monthly payments and budgeting
When Universal Credit is introduced, claimants will get one monthly payment for all their benefits at once – so they may need to change the way that they manage their money each month.
How to help
Preparing for monthly payments:
Take a look at the way they budget.
When do they pay their bills?
How do they pay them?
Will they need to make any changes?
Make sure they are aware of the difference in priority and none-priority debts. For instance, a debt which results in a lasting and potentially serious situation, like not paying the rent, is a priority debt. Non-priority debts are where there is some leeway, or where non-payment doesn’t result in serious ramifications.
Step 2: First payments and bank accounts
When a first claim for Universal Credit is made claimants will have to wait over a month before they receive their money. They can apply for an advance payment but this won’t cover the whole amount, and they will have to pay it back in the form of a loan.
How to help
Make sure they claim an advance payment within 21 days of making their claim, and make this clear in any notes you make.
Free bank accounts: Any bank or building society can offer a fee-free basic bank account, but since September 2016, the nine largest banks are required to offer them .
Step 3: Set up a bank account
Universal Credit will be paid directly into a claimant’s bank account – so make sure you have an account that can receive it.
How to help
Make sure they can pay their rent and other bills from the account you set up.
Current and basic bank accounts, and some credit union accounts should be able to do this.
If they have been turned down for a bank account in the past they can still open a basic bank account – see step 2 above.
Step 4: Changes to rent and council tax payments
Under Universal Credit, payments to help with rent will be paid directly to claimants and not directly to their landlord.
Rent is a priority debt and claimants can lose their home and be declared intentionally homeless.
Universal credit does not include a council tax reduction. They will need to apply to Shepway separately to get council tax reduction. Those with significant mental impairment could be eligible for council tax reductions.
Claimants will need to speak to their bank and arrange payments to pay their rent via standing order.
Step 5: Claiming Universal Credit online
As Universal Credit is claimed and managed online, claimants will have to log in to their Universal Credit account regularly to check their messages and update their records. They will also be expected to communicate with the Jobcentre online, as well as attend appointments or comply with directions from the Jobcentre. Failure to do so can lead to a sanction as can leaving work without good cause.
There are four types of sanction of various lengths.
Sanctions and The Claimant Commitment
Sanctions under Universal Credit mean that there will be more people who will be sanctioned than under the previous benefits system.
The rate of sanctions under Universal Credit is expected to be three times that of JSA. It is possible to be sanctioned even if you are in paid work. Sanctions are a suspension and loss of Universal Credit for various lengths of time depending upon the level of the breach.
Hardship payments are available at 40% of benefit levels, but are repayable in the form of a loan.
Different types and lengths of sanction:
1. Lowest level = Loss of UC for 7 days and for each day until requirement
2. Low level – first failure = loss of UC for 7 days
second failure (within 12 months of the first) = loss of UC for 14 days
third and subsequent failure (within 12 months) = loss of UC for 28 days
3. Medium level – first failure = loss of UC for 28 days
second and more failure = loss of UC for 91 days
4. Higher level – first failure = loss of UC for 91 days
second failure = loss of UC for 182 days
third failure = loss of UC for 1,095 days
The Benefit Cap
Universal Credit and the Benefit Cap
Universal Credit is not only subject to sanctions but the Benefit Cap as well. The Benefit Cap is a limit to the total amount of money claimants can get from benefits. It will only apply if you get Housing Benefit or Universal Credit.
The limit stands at:
£384.62 per week for single parents and couples with or without children
£257.69 per week for single people
The cap is applied to the benefits paid to the household, so all the benefit paid to a claimant and their partner and dependent children who live in the household are added together to reach the cap.
The cap is applied by reducing either Universal Credit or Housing Benefit so that claimants don’t get more than the cap limit.
If it is applied through Housing Benefit they will always receive at least the minimum amount of Housing Benefit which is 50p per week.
Which benefits are included in the Benefits Cap?
The cap will apply to the households combined income from:
Child Tax Credit
Employment and Support Allowance – except where it’s paid with the support component
Housing Benefit – although there are some exceptions
The Benefits Cap does not affect any of these people:
People who are over pension age.
Those who live in supported accommodation.
Those receiving Working Tax Credit or who work enough hours to claim Tax Credits.
People who do not get Housing Benefit or Universal Credit.
People who have been employed continuously for 12 months and who lose their job through no fault of their own will not have the cap applied for the first 39 weeks of their claim.
Claimants or families where a household member is receiving DLA or PIP; AA; Support Component of ESA; Limited Capability for Work related activity element of Universal Credit; Industrial Injuries Benefits or War Widows’ or Widowers’ Pension.
People who claim Universal Credit and who earn at least £520 per month either themselves or between both partners of a couple.
People who are eligible for Carer’s Allowance or Guardian’s Allowance.
How to help
What to do if a claimant is subjected to the Benefits Cap:
Check whether the decision is correct.
Check whether the claimant or a family member could get a benefit which would give them an exemption from the Benefit Cap such as, for example, Personal Independence Payment.
Consider if they could increase their hours or take a job to avoid the cap.
Consider reducing their outgoings so they can manage on their reduced income.
Ask Shepway District Council if they are eligible for Discretionary Housing Payment (DHP) to help with your income shortfall.
Challenging Universal Credit decisions
1. Mandatory reconsideration
If you think a decision made about Universal Credit entitlement is wrong you can contact Department for Work and Pensions (DWP) and ask them to look at the decision again, explaining why you think it is wrong.
If you still think the decision is wrong after receiving the mandatory reconsideration notice you can make an appeal to the tribunal.