Paying welfare benefits on a monthly basis and making claimants directly responsible for their rental payments could push some low-income households into debt, the Social Market Foundation has warned.
In a report published today, the think-tank said most households feared that the planned changes, to come in with the Universal Credit next year, could leave them short of cash and at greater risk of eviction. It also raised concerns that people who lost their job could wait for more than a month before receiving any income.
Sink or swim: the impact of the Universal Credit, is based on 30 in-depth interviews with low-income families on how they would adjust to six of the coming welfare reforms.
‘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,’ said Nigel Keohane, SMF deputy director and co-author of the report.
‘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 landlords and childcare providers, that families will end up owing money to.’
The think-tank called for low-income families to be able to determine for themselves how frequently they received payment through the use of an online budgeting tool.
‘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,’ Keohane said.
A Department for Work and Pensions called the report ‘odd’ as it highlighted problems that were already being addressed.
He told Public Finance:‘We’ve always been clear that for some people fortnightly payments will remain an option,’ adding that the department was working with councils on ways to equip people with financial and budgeting skills.
