Unearthing the hidden problems in the system of Universal Credit

In this blog, Laura Robertson, Research Officer at Poverty Alliance, shines a light on some of the lesser-known problems inherent in Universal Credit.

The last six weeks have shown us that our sense of compassion is alive and well as people rush to volunteer, donate, and protect neighbours and loved ones. But it has also exposed some fundamental flaws in our social security system. The inadequacies of Universal Credit (UC) are now rightfully under the spotlight. Whilst the recent increase in the UC standard allowance has been welcomed, many issues remain – most notably, the five-week wait for a first payment, the digital by default system and in-work conditionality.  But there are also other significant issues facing new and current claimants, hidden within the complexities of UC, and less apparent in the media coverage. This blog seeks to bring attention to some of these.

1, Housing payments

One of the key elements of UC is the payment of housing costs directly to a claimant who is then responsible for paying their rent to their landlord. To counter the impacts of non-payment of rent and rent arrears, Alternative Payment Arrangements can be put in place allowing a landlord to request to have the housing costs paid directly to them. In Scotland, Scottish Choices also enable claimants to choose to have their housing element paid directly to their landlord. For claimants, these processes are meant to instil greater security that their housing costs will be paid on time. However, administrative and communication issues in the batch payment process of housing costs by the DWP to landlords have prevented this happening in practice. One of the key issues is the mismatch between when claimants are paid UC and local authorities are paid housing costs.[1] As a result, there is evidence of tenants having been contacted by their landlords about non-payment of rent. Instead of instilling security that rent will be paid on time, failures with the system put in place have caused anxiety and led to tenants fearing that they could lose their home. Thankfully, it has recently been announced that some of these issues are being addressed by the DWP, including improvements in communication via the landlord portal, which should add greater clarity to the system.

2. Habitual residence tests

Habitual residence tests[2] determine an individual’s right to reside in the UK. In order to successfully claim UC, people must provide evidence that they have a right to reside and are habitually resident. There is no publicly available data on the number of UC claims that have failed a habitual residence test, however, recent DWP management data reveals that 10% of UC full service claims with an associate habitual residence test closed due to failing the test in November 2019.

In 2015, habitual residence eligibility rules became stricter with EEA Jobseekers no longer entitled to apply for UC. In comparison to legacy benefits, EEA nationals also must show that they have a right to reside whilst they remain in the UK and the process requires both partners in a couple to meet the criteria. The National Association of Welfare Rights Advisors has raised numerous concerns with the process including that decision-makers do not have sufficient understanding of the criteria. The main issue is that UC claimants do not receive any payment whilst they are awaiting the result of their habitual residence test. The UK Government does not publish data on the average length of time a habitual residence test takes.

There has been a surge in the number of EU citizens in the UK who are refused UC due to failing a habitual residence test, recently highlighted by the Guardian. For these citizens, severe financial hardship is inevitable as they have no entitlement to any benefits through the UK social security system. An appeal is the only option available during which an individual is not entitled to any benefits. Currently, the UK government does not publish any information on how long appeals take.

3. Universal Credit and mental health

Employment and Support Allowance (ESA) is one of the six legacy benefits that is being replaced by UC. Whilst the delay of managed migration has halted current ESA claimants being moved onto UC, many experiencing mental health issues are now only entitled to UC. The Scottish Association for Mental Health (SAMH) states that UC does not work for people with mental health problems. In addition to the significant barriers presented by the digital by default system and the impacts of the five-week wait, UC presents other issues for people with mental health problems and those with health conditions including:

  1. UC claimants awaiting a work capability assessment are still expected to attend the Jobcentre as well as undertake work-related activities at the discretion of their work coach. ESA did not require claimants to look for work whilst waiting for their assessment.
  2. ESA claimants who are appealing a decision against their claim may have no other choice than to begin a claim for UC to access money during the appeal process and, even if successful with an appeal, cannot go back onto ESA afterwards.

As rising unemployment sweeps through the UK, and the numbers of people dependent on UC increase, it is essential that there is transparency and clarity on issues with the UC system so we can fix them. Research on the views and experiences of UC claimants and work coaches conducted by the Poverty Alliance and University of Glasgow will be published later this month.


[1] See the Scottish Federation of Housing Associations ‘Ask 3: Universal Credit payments to the landlord need to be fit for purpose’ – https://www.sfha.co.uk/news/news-category/sfha-news/news-article/universal-credit-payments-to-the-landlord-need-to-be-fit-for-purpose

[2] See Turn2Us for information and advice for claimants on the Habitual Residence Test – https://www.turn2us.org.uk/Benefit-guides/Habitual-Residence-Test/What-is-the-Habitual-Residence-Test

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