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Universal Credit Will Backfire Warns Think Tank

Government Welfare Reforms Set To Backfire As Claimants Don't Want Universal CreditThe proposed welfare reforms are not wanted by the majority of claimants or their landlords according to research by the Social Market Foundation.

Tenants with low incomes and families claiming benefit will be pushed further into financial difficulties and debt by the shift to monthly benefit payments under Iain Duncan Smith’s welfare reforms.

Attempts as part of the new Universal Credit system to encourage claimants to budget properly and make their own rental payments risk backfiring, the Social Market Foundation said.

It called for the introduction of an online budgeting tool allowing claimants to set the frequency of payments themselves and allocate income to different items of expenditure.

However the foundation stopped short of calling for landlords to continue to receive direct payments for tenants that were considered vulnerable or at risk.

Under the Universal Credit there will be one single monthly benefit payment – rather than weekly or fortnightly as at present – and all tenants will have to pay landlords themselves.

The Government says it will be “flexible” with those who struggle to manage their money.

Research by the Social Market Foundation, entitled Sink or Swim: the Impact of Universal Credit, found that most low income households were opposed to the moves, expressing fears that they would not be able to budget properly and could end up in rent arrears and even face eviction.

Nigel Keohane, the think tank’s deputy director and co-author of the report doubted whether plans by the Government to provide special arrangements for certain vulnerable individuals was adequate, stating: “The Government’s laudable aim that Universal Credit should prepare families for work, boost their resilience to financial shocks, and simplify the system is at risk of backfiring. By moving to a single monthly payment for all benefits, the Government is removing the markers and aids that families currently rely on to budget effectively. Our research shows that this will throw people in at the deep end leaving them either to sink or swim. This laissez-faire approach will create real problems not only for families themselves, but also for public service organisations, such as social and private sector landlords and childcare providers, that families will end up owing money to. Instead of mandating monthly payments and centrally planning which families to exempt, the Government should allow low income families to take the decision themselves through an online budgeting tool,” he said. “This would allow the reforms to work with the grain of wider government objectives like personal responsibility and increased financial capability rather than working against them as the current system seems set to do.”

A Department for Work and Pensions spokesperson said: “Universal Credit will be paid monthly because most people in work are paid that way and the system should help people get used to the patterns of working life. But we will make sure that no one falls through the cracks, and we are working with local authorities and the financial industry on how best to support individuals. We have always said we would be flexible with people who might struggle to manage their money.”

Hmmm…..If that last statement is true, then the DWP had better start preparing to open a separate department to deal with struggling landlords as the Universal Credit system is severely flawed and the majority of claimants don’t want direct payments because they are unable to cope at the present time, so what happens to them in 2013?

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Universal Credit Row Rages On

Universal Credit Payment Row Rages On

MP’s Fight Among Themselves As Universal Credit Row Gets Heated!

A parliamentary debate held earlier this month (September) saw MPs from both sides of the house getting a little hot under the collar, arguing about how payment of the new Universal Credit benefit, due to be introduced next year, should be made.

Universal credit is set to take over from Local Housing Allowance (LHA) and controversy surrounds the fact that ALL payments will be made directly to the claimant rather than to their landlord or the letting agent managing their rental property – just as LHA payments are paid now.

During the debate, Labour MP Alex Cunningham raised the concern that the new Universal Credit could result in large rent arrears being accrued and an increase in tenant evictions if payments are made directly to tenants, and claimants living in private rental properties should be given the option to have the payments made direct to their landlords.

Department for Work and Pensions (DWP) minister Iain Duncan-Smith however vehemently defended the decision for direct payment stating that “Benefit claimants shouldn’t be treated like children who can’t manage their own pocket-money. Claimants would benefit more by showing them trust, and that by doing so they would be more likely to cope better when they return to work.

The Residential Landlords Association (RLA), the National Landlords Association (NLA) and homeless charities Shelter and Crisis, have all lobbied the Government to give claimants the ability to choose how the benefit is paid, but they require the support of all UK landlords.

Property professionals, letting and managing agents, property investors and landlords need to get the weight of support behind the campaign and your help is required, please Sign the e-petition here.

UK landlords are warned to prepare for the worst case scenario and act quickly to evict tenants if rental arrears exceed 8 weeks, as it remains to be seen if the current rental arrears problems will worsen with the new Universal Credit benefit system.

If you have a problem with tenants in more than 8 weeks rent arrears please contact us and we can start eviction proceedings for you. Call Now on 0844 567 4001

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The UK’s leading tenant eviction specialists

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