News

24.10.17

Universal Credit responsible for rising rent arrears and food bank use, pilot council warns

The controversial Universal Credit (UC) system has forced more families into visiting food banks and has caused rent arrears to soar in its pilot borough.

Southwark Council, the first to roll out the scheme, turned to the Smith Institute to create a report on the effects of the new system on tenants.

The investigation – conducted in partnership with the London Borough of Croydon, Peabody and Family Mosaic – compared 775 tenants on UC to 249 people on the previous housing benefit system.

Findings concluded that rent arrears had risen in the area, which built up quickly in the first few weeks of the scheme and was difficult to compensate for even when money came through to tenants.

The knock-on effect of these issues has seen many people fall into debt and suffer from “considerable stress,” according to Southwark Council.

“Many people transitioning onto UC are already facing difficult circumstances due to unemployment, disability or low income,” commented Cllr Fiona Colley, council cabinet member for finance, modernisation and performance

“The wellbeing of those tenants, many of whom have desperate personal stories to tell, must be central to considerations of the new benefit system.

“This report highlights a number of areas where efforts should be focused to make improvements. These findings are consistent with and reinforce the recommendations that both Southwark and Croydon Councils have been making to the Department for Work and Pensions over the last year.”

The Smith Institute found that, by week 20, the average claimant had £156 of arrears. Southwark added that although only 12% of tenants have moved to UC, people in the borough already found themselves in over £5.3m of debt to landlords.

Rising debt levels have caused other problems too, with more people visiting food banks. One such institution had an increase in referrals of 94% – and had placed serious strain on local community support services.

A Department for Work and Pensions spokesperson commented: “This research into a small group of claimants was carried out over a year ago, now the vast majority of claimants receive their first universal credit on time and in full.

“The best way to help people pay their rent and to improve their lives is to support them into work, and under universal credit people are moving into work faster and staying in work longer than the old system. We also know that over time people adjust to managing monthly payments, and reduce their arrears.

“The majority of people are comfortable managing their money upfront but budgeting advice, upfront benefit advances and direct rent payments to landlords can be provided for those who need it.”

The implementation of UC has suffered multiple setbacks already, with the opposition previously calling on the government to scrap the scheme early this month and then winning a vote in the Commons to pause the rollout.

A debate on the issue will take place today in the House of Commons.

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