Cancelling debt will improve the lives of Universal Credit claimants

The government should cancel or delay reclaiming billions of pounds of old benefit debt that is causing real hardship to Universal Credit claimants, says a new Institute for Government report.

Despite Universal Credit’s dreadful reputation, the report concludes that it is no longer realistic to pause the programme, let alone scrap it. The government should now make it work better.

Universal Credit: Getting it to work better warns that debt repayment is a fast-emerging issue that currently affects 60% of claimants – 1.5 million people. The largest part of the debt – some £6bn out of a total of £10bn – is due to past overpayments of tax credits which are automatically reclaimed when claimants “migrate” onto Universal Credit – as they are doing in ever greater numbers.

When combined with the now notorious five-week wait for payment for new claimants, the issue of historical debt could damage Universal Credit’s reputation further and undermine its effectiveness.

The report argues that the improvements that are already being made to Universal Credit, plus some further measures, means that Universal Credit still has the potential to achieve one of its key aims: making the transfer into work, out if it, and back in again, smoother for its recipients.

The report calls on the government to:

• Address the issue of historic benefit debt repayment, by in effect ‘writing it off’ or significantly slowing down repayments.
• Provide new claimants, and those being transferred from tax credits, with a two-week ‘welcome grant’ to reduce the reliance on advances and the debt they are creating.

Nicholas Timmins, the report’s author and a senior fellow at the IfG said:

“Universal Credit has a terrible reputation. But the reality is that improvements to it have been made and it is now working better. The two most pressing issues are that more needs to be done to ease the transition on to Universal Credit, and something must be done to tackle the enormous sums of old benefit debt that Universal Credit is being used to recover. Failure to do that will undermine Universal Credit’s effectiveness.”

Notes to editors

1. The Institute for Government is an independent think tank that works to make government more effective.
2. For more information, including data to reproduce any charts, please contact [email protected] / 0785 031 3791.