Ministers urged to overhaul 'fundamentally flawed' universal credit as tenants accrue millions in debt

The government has been urged to halt the roll-out of universal credit as new figures show tenants receiving the flagship benefit are in £24m worth of rent arrears collectively.

Housing federations across the UK are warning that the flagship benefit system is “fundamentally flawed” after research revealed nearly three-quarters (73 per cent) of tenants on universal credit are in debt, compared with less than a third (29 per cent) of all other tenants.

The National Housing Federation, the Scottish Federation of Housing Associations, Community Housing Cymru and the Northern Irish Federation of Housing Associations, who compiled the findings, called on ministers to urgently overhaul the policy before it is rolled out to all parts of the country this year.

Surveys of 118 housing associations in England, Wales and Scotland reveal that their universal credit tenants are in £24m of rent arrears, which they said was “only a snapshot” of what was happening to social housing tenants across the country.

More than half (51 per cent) of housing associations in England had reported an increase in food bank vouchers issued to people struggling to pay for food, while nearly two-thirds (59 per cent) reported an increase in demand for welfare advice needed to help tenants stay in their homes.

The amount of accumulated debt is highest in England because universal credit was rolled out there first and has far more people on the new benefit, with 155,669 households in the country’s social rented sector reliant on universal credit to help pay their rent, compared with 5,339 and 24,368 in Wales and Scotland respectively.

It comes after the work and pensions secretary Esther McVey was rebuked by the government’s spending watchdog for misrepresenting their critical report on the roll-out of universal credit with a series of inaccurate claims to MPs.

The National Audit Office (NAO) took the highly unusual step after Ms McVey dismissed the catalogue of failings outlined by auditors last month in their report into the government’s flagship welfare programme.

Universal credit is merging six existing benefits into one and is being introduced gradually across the UK. To date it has been rolled out to around 10 per cent of potential claimants in the UK, amounting to approximately 920,000 people.

The number of people in receipt of universal credit is set to double this year and it is estimated that around 6.7 million working age people will be registered by 2023.

The “two-child policy” has been blamed for pushing families into poverty because families will no longer receive child tax credits to cover the cost of feeding and clothing more than two children.

So too has the overall benefit cap, which is applied regardless of how high a families’ rent is or the number of children they need to support.

David Orr, chief executive of the NHF, said: “Today’s findings show that the government urgently needs to fix the fundamental flaws in universal credit.

“There are some very simple changes they need to make, like ensuring payments are made on time and allowing housing associations to easily negotiate on behalf of vulnerable tenants, so tenants get their money when they need it. If people aren’t receiving money on time, of course they’re being pushed into debt. People depend on these vital payments.”

He said the government must also make “bold decisions” such as amending the two-child policy, saying: “Families across Great Britain with more than two children are finding themselves with the same amount of money whilst trying to provide the basics for more children.

“Although the government has made some positive changes to universal credit that will make a difference to families, serious challenges remain and they urgently need to be sorted out.”

Sally Thomas, chief executive of the Scottish Federation of Housing Associations, meanwhile said: “Housing associations are doing everything they can to support tenants through the system but huge challenges remain.”

But a government spokesperson said rent arrears were “complicated” and could not be attributed to a single cause.

“Our research shows that many people join universal credit with pre-existing arrears, but the proportion of people with arrears falls by a third after four months in universal credit,” a DWP spokesperson said.

“The best way to help people pay their rent and to improve their lives is to support them into work and Universal Credit is helping people move into work faster and stay in work longer than the old system.

“The majority of claimants are comfortable managing their money but we are increasing support to help people who need it to stay on top of their payments. Up to 100 per cent benefit advances and direct rent payments to landlords can be provided. We also recently removed the 7-day waiting period from new claims and will be paying people’s Housing Benefit for two weeks while they wait for their first full Universal Credit payment.”