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Rising Rent Arrears Blamed on Universal Credit
Citizen Advice Scotland (CAS) has published a new report that says the overwhelming factor behind the 47% increase they have seen in people seeking advice for rent arrears is the roll-out of Universal Credit.
The increase, which has grown since 2012, has also been attributed to a number of other factors, but the primary reason the charity says is the roll-out of Universal Credit.
The report will come as no shock to many, as over the summer, a number of UK Housing Organisations highlighted that the roll-out was flawed and causing debt, suffering, and hardship.
In Scotland, they reported 65% of Universal Credit Tenants were in arrears, whilst another report by the private sector, Residential Landlord Association, reported nearly a third of private landlords (29%) had already evicted tenants for rent arrears caused by Universal Credit.
What is Universal Credit?
When Universal Credit was first announced in 2010, it was initially presented as a new benefit that would simplify the existing benefits system and make it easier for people to move back into work.
The idea was it would replace six existing benefits and roll these into one.
The six benefits it was replacing were:
- Income Support
- Income Based Employment Support Allowance
- Income Based Job Seekers Allowance
- Working Tax Credits
- Child Tax Credits; and
- Housing Benefit
So why is Universal Credit forcing millions into debt?
The reasons why Universal Credit is forcing millions into debt is complicated, but much of it is to do with the delays that claimants experience in getting paid, with some of them waiting up to six weeks for their first payment after making a claim.
It, however, is also to do with the fact that many of those struggling whilst they wait, have to apply for an advance payment on their Universal Credit, which is then deducted from their benefits by as much as 40% once it starts getting paid, leaving them critically short and unable to budget.
Another factor is because Universal Credit is paid monthly in arrears and how much someone gets is assessed using their income from the previous month. Where people have fluctuations in their wages, this leads to fluctuations in how much Universal Credit they get.
Also, how frequently people are paid by their employer can affect how much Universal Credit they receive.
In the case of someone who is paid weekly, for example, they may receive five pay’s in some months, rather than four; or for those who are paid fortnightly, they may receive three instead of two. This means in those months, it may look like they have earned more, even if what they have been paid is only what they are normally paid. This may mean they receive no Universal Credit that month and may have to re-apply the following month.
This can even happen for those who are paid monthly, where employers pay them early because of bank holidays or Christmas.
Increased calls for the roll-out of Universal Credit to halt
As the roll-out of Universal Credit continues, the Government is coming under increasing pressure to halt it until “fixes” can be found for the Scheme.
To-date its implementation has been through a phased approach in certain locations, where only new claimants of the old benefits had to apply.
However, the aim of the Government is to make the benefit available to all new claimants by December 2018.
Then there is the next phase which is called “managed migration”, and is expected to begin in 2019, and will see those already on the six existing benefits being transferred onto the new one.
The BBC, however, is reporting that the UK Government may now be ready to spend hundreds of millions of pounds to soften the implementation and mitigate the worst effects it will have on those existing claimants.
It has been suggested, for example, that those in receipt of Income Support, Job Seekers Allowance and Employment Support Allowance will be allowed to continue receiving those benefits for the first two weeks once they have made their claim for Universal Credit.
There is also a suggestion the level of deductions people will face when they are paying back an advance from their Universal Credit will also be reduced from the current 40% to 30%.
It is also believed more help will be offered to those who are self-employed.
Controversially, however, it is believed that the continued payment of Child Tax Credits will not be allowed, as the tax credit system is not compatible with Universal Credit system and this will mean those households, with children in them, will continue to suffer.
If you are experiencing financial difficulties caused by the rolling out of Universal Credit and are struggling with debts, you can call a Carrington Dean Adviser on 0141 326 0398 for advice.