Six week waiting period for universal credit leads to loans

A report from Work and Pensions Select Committee shows that the 6 week waiting period for Universal Credit is creating a financial hardship for families on a low income. The October 2018 report shows that this delay is causing more people to take on short term advance loans, turn to food banks or they turn to alternative sorts of funding, such as loan sharks or payday lenders.

Not only does it take up six weeks for the first Universal Payment to start, but there is also an application period before that and that timeframe can last up to four months in some instances. During this timeframe many people who are jobless or in poverty have no money coming in. This is causing families to turn to food banks, fall into debt by taking on loans, and is causing other forms of acute financial difficulty.

Labour and conservatives both say 6 weeks is too long

A powerful part of the 2018 Work and Pensions Select Committee report is that it is cross party. This means that many members of both Labour as well as Conservatives both support its findings. This is not common in any government, much less the UK Parliament.

Back when the universal Credit scheme was created, the reason for the 6 week delay was to mimic how long it takes for a family to receive their first pay cheque. The aim was to help the family learn how to budget, and live on other savings or resources. The government did realize this could cause hardships, so they did create an advance loan scheme, but this is not an ideal solution according to the Committee.

What has been learned since then is that almost all of the Universal Credit claimants have very little, or zero savings to turn too. In fact, only 15 percent of claimants have any savings to their name. Many come from households in which there is no other wage earner. Many others do not know how to budget if/when they take out a loan. Between these factors, and others, the applicant has no other ways to pay the bills during the waiting period.

One solution proposed by conservative’s member of Parliament is to shorten the waiting period to 4 weeks. This will be closer to mimicking how people get paid from a job, which is monthly. Labour would favor even reducing the window of time even more, to as short as 2 weeks, or eliminating the waiting period as much as possible. On the other hand, the Work and Pensions Select Committee report says the delay should be shorted to as little as 1.5 weeks.

People impacted by delays

The problem is expected to get even worse as Universal Credit continue to roll out. While only about 10 percent of families are benefits are now on Universal Credit it is expected that by 2022 the scheme will have competed its roll out to 100% of people on benefits.

This means that over the next 5 years, millions of more families could fall into hardship unless the Universal Credit benefit scheme 6 week waiting period is changed. There could be more people falling into debt going homeless or facing hunger, and all of this would be bad for the UK.