‘No Surprises’: Why the problems with Universal Credit were entirely predictable

Paul Hickman – Professor of Social Policy and Housing at Sheffield Hallam University

Universal Credit (UC), the Government’s flagship welfare reform, is in difficulty with ‘bad news’ stories about it abounding. It has been criticised for having fundamental design flaws, such as the absence of effective data sharing between the Department for Work and Pensions (DWP) and social housing landlords, and the requirement for new claimants to wait at least six weeks for their first benefit payment.

Recent studies suggest that these design flaws, along with others, have resulted in the marked increase of arrears rates for tenants who have moved onto UC. The Guardian found that eight out of ten social housing tenants who had moved onto UC had fallen into rent arrears or had seen increases in the level of their pre-existing arrears. A survey by Arch and the NFA of 33 stock retaining councils and Arms-Length Management Organisations also found that the arrears rates of tenants receiving UC was significantly higher than for those receiving their benefits in the ‘traditional’ way.

However, none of these findings are unexpected as they are consistent with those of the evaluation of the ‘trial’ designed to test UC: the Direct Payment Demonstration Projects (DPDPs). Crucially, in light of the apparent surprise shown by Ministers when yet more bad news about UC surfaces,  it is important to note that the study, which myself and Dr Kesia Reeve directed, was funded by DWP. The DPDPs explored the impact of the two central tenets of UC: direct payment and the payment of housing benefit four weekly, which is broadly in line with monthly payments under UC.

    • Most tenants encountered difficulties under DP and only eight per cent of those who were still on DP at the end of the programme managed to pay all of their rent in full over its duration.
    • Many tenants found DP stressful and a source of anxiety. A telephone survey of under-payers found that, when asked why they wanted to leave the DPDP programme, 34 per cent of respondents reported that it was ‘too stressful’. A number of tenants who were interviewed in-depth highlighted how stressful they found DP, particularly when transitioning from landlord payment. ‘It [DP] did make me worry and panic … cos obviously I’m ringing them [landlord] saying: ‘this is what I’ve been paid, is it right?” And they’re: “well if that’s what’s been paid”. And I’m: “no I want to make sure it’s right. I don’t want you sending me a letter saying you owe us £15 from last week 13 from the week before”. And then it all mounts up and you’ve got loads of rent arrears and I don’t want that.’
    • DP in the trial had a significant negative effect on landlords’ arrears and a total of £1.9m of rent owed was not paid over the 18 month period, which was equivalent to 2.3 per cent of their annual rent roll. Overall, tenants who went onto DP paid 95.5 per cent of all the rent owed, compared with the comparative sample who paid 99.1 per cent of rent owed (a difference of 3.6 percentage points).
    • Landlords reported that managing DP was much more resource intensive than the ‘traditional’, landlord payment, where (for tenants on full HB) benefit payments were paid directly to them. For example, one landlord noted that it had to devote three times more resource than ‘normal’ to secure a payment under DP: ‘So on average we’re putting three times the work in to get the same debit that we used to have before’. Landlords identified a number of areas where the delivery and management of DP had resulted in the use of additional resource and increased costs, with staff time identified as being the largest one.

These findings, along with others, then, suggest that the problems currently being encountered by UC were entirely predictable and to be expected. However, we will have to wait and see if these problems become more acute as it is rolled-out to a broader, and more representative, client base.

Paul Hickman is Professor of Social Policy and Housing at Sheffield Hallam University. He can be contacted at: p.g.hickman@shu.ac.uk