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Universal Credit needs urgent reform to cope with Coronavirus

April 2nd 2020

Is Universal Credit up to the challenge of the Coronavirus outbreak, asks Victoria Winckler, Director of the Bevan Foundation

Coronavirus has, at a stroke, put around one in six of the Welsh workforce out of a job.  The UK Government’s Coronavirus Job Retention Scheme and self-employed workers’ income support scheme together provide unprecedented support to people whose livelihoods have been hit.  They provide at least some guaranteed income, and one that for many is a much better prospect than the alternative of Universal Credit. Unfortunately there are significant gaps in the coverage of both the job retention and self-employed scheme.

The gaps

There is a long list of people who have no alternative but to apply for Universal Credit. These include:

  • Employees who are made redundant by their employer, rather than being furloughed.
  • Employees whose hours and pay are reduced, rather than being furloughed or made redundant.
  • Employees who started a new job during March.
  • Employees who are unable to work because they are in a vulnerable group, self-isolating or sick, who cannot live on statutory sick pay of £94.25 a week.
  • Self-employed people who have started in business after April 2019 or who have not yet filed their 2018-19 tax return.
  • People with their own company who take their income as salary and dividends.
  • People who are unable to work because they are caring for children who are not in school.

There are already reports of nearly 1 million people trying to claim the benefit in just two weeks, with long phone queues and websites crashing under the demand.

The numbers claiming UC to date could well be the tip of the iceberg. 

We don’t know what the jobs market will be like in a few months time, but it is unlikely to be booming. Many businesses may well not survive three months of lock-down, and those that do come through could well face a very different economic climate after the virus has been contained – whenever that is.  And workers may well feel very differently about their jobs having had three months of enforced furlough.

Hardly surprisingly, there are forecasts of large increases in unemployment – with number possibly doubling to around 700,000 in the UK in a matter of months. Frankly these predictions look modest – I am old enough to remember 3 million unemployed people in the early 1980s.

It’s time Universal Credit is fit for purpose

The demands for reforms to Universal Credit long pre-date the Coronavirus pandemic. The UK Government has already made some welcome changes in recognition of the changed circumstances, including increasing the value of Universal Credit, upping local housing allowance to 30% of median rents, and ruling out sanctions during the outbreak.

But the likely surge in the number of people reliant on it make further changes imperative. These changes are:

  1. Speeding up payments:  The ‘five week wait’ and arrangements repayment of cash advances must be changed. Payments should be speeded up and arrangements for repayments slowed down so that they leave people with enough to live on during the crisis.
  2. Increasing local housing allowance further: increase the LHA allowance limit to match median rents rather than the lowest 30%, enabling more people to afford to stay in their homes.
  3. Ensure people who are unable to seek work e.g. because of childcare or self-isolation but have no income are eligible for Universal Credit.
  4. Increase awareness:  Many workers faced with losing their jobs will not be aware that they can apply for Universal Credit, still less know how to apply. Raising awareness and providing advice and support is vital.

This is not an academic argument about ‘incentives to work’ and such like, it is about providing the means of survival in extraordinary times.

Victoria Winckler is Director of the Bevan Foundation

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