Advance Payments – Kicking the can down the street

This week, the final episode of the BBC2’s “Universal Credit: Inside the Welfare State” aired. Amid mounting criticism, DWP opened the door to BBC cameras. Among the various topics on the final episode, the problems associated with advance payments took centre stage.

The final episode took place in Bolton, which has unusually high levels of unemployment for people aged between 17 and 24. Around 500 people move onto Universal Credit every month.

Moving onto Universal Credit can be problematic for new claimants due to the five week wait between applying and receiving the first payment. Universal Credit is also paid in arrears, meaning it can be very hard for people to effectively budget or plan ahead. They are offered an advance payment which must be paid back, deducted from their monthly UC payments.

Universal Credit is designed to help people who are out of work, long-term sick or on low-paid, short-term or zero-hour contracts. However, the five week wait and offer of an Advance Payment is causing a string of other problems. UC also varies for those who have changing work hours making it impossible for them to understand how much they will have from one month to the next.

Claimant Jenny, who is 20 and has been unemployed for nine months following a serious assault, took a zero-hour contract job at a new restaurant, but her £6.30 an hour wages and meagre benefits left her struggling to pay rent for her £60-a-week flat.

Jenny was forced to apply for a £250 advance on her Universal Credit, essentially a loan which will be deducted from future payments over the next 12 months. Although Universal Credit tops up her salary, her benefits reduce by 63p for every pound she earns. Following a bad fall, Jenny then had to take 10 days off work, and with no pay she had to take another UC advance.

Jenny is clearly ambitious and desperate to find a full-time job, having previously been a hairdresser, but as a vulnerable young woman it was hard to watch the spiraling situation that she found herself in.

In another case, mum-of-one Paula recently moved in with her partner, the change of circumstances means Paula has to move onto Universal Credit from Job Seekers Allowance and Housing Benefit. She took the maximum advance payment, which at first she was thrilled about. However, when her first UC payment arrived the reality hit.

Along with deductions for rent, previous debts and the Advance Payment, Paula’s UC payment was cut from £1118 to just £532 per month, leaving her just £17 per day to live off. She later said it was the worst decision she had made. It is clear Advance Payments are too tempting for vulnerable people who struggle to manage their finances in the first place. It’s just kicking ‘the can’ down the street. It doesn’t go away, it just pushes it further away, leaving people in debt for even longer.

We know there are situations where Universal Credit works, but it isn’t effectively taking into account individual circumstances and so it is leaving people constantly chasing their tails, pushing them into further debt and unable to manage their own finances.

From watching the series, its clear to me that this is not the faceless system that ministers thought it could be. An online system is all well and good, but claimants need that human assistance and support. They need advice, and someone to really explain the realities of an Advance Payment, or an assessment to see if they will be able to feasibly live when the deductions kick in.

DWP can’t put the brakes on Universal Credit now, but changes have to be made to the five week wait and Advance Payments before rolling UC out further and allowing the problems to snowball throughout the country.

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