Universal Credit in Crisis: How you are paying the price for Universal Credit's failures

Local taxpayers are paying the price for Universal Credit’s failures, JPIMedia Investigations can reveal.

By Michael Holmes
Wednesday, 29th May 2019, 8:53 am
Updated Wednesday, 29th May 2019, 9:53 am
Labour MP Lisa Nandy
Labour MP Lisa Nandy

Tens of thousands of people claiming the controversial benefit are now behind on their council tax payments, owing millions to already under-strain local authority coffers.

The £13.5 billion system was meant to save the taxpayer money by simplifying the welfare system and getting people into work.

But following a barrage of delays and hitches, Universal Credit has been branded a false economy.

Labour MP Lisa Nandy

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READ MORE:: Problem benefit is still pushing tens of thousands into destitution ...

Last year, the National Audit Office said it was “not value for money” and accused the Government of failing to take into account the knock-on costs to councils, housing associations, food banks, and advice services.

Critics say Universal Credit is plunging thousands of families into destitution and forcing them to choose between paying the rent or the bills.


Universal Credit in Crisis

And councils have lost out on £130 million in unpaid council tax from struggling claimants in the past year alone, our investigation shows.

Most local authorities in Britain said they did not record whether someone in council tax arrears is on Universal Credit, including Preston, Blackpool, and Fylde.

But data obtained from 74 councils shows they were owed £26 million last year, an average of £348,000 each.

In Wigan, 3,166 claimants are in arrears, owing a total of almost £2.2 million and an average of almost £700 each.

Coun Terry Halliwell

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The town’s Labour MP Lisa Nandy said she is “deeply concerned” Universal Credit is “pushing thousands of people into debt”, while council leader Coun David Molyneux said he is “aware that the Government’s welfare reforms have impacted residents and Universal Credit has been a contributing factor to people falling into arrears”.

Before Wigan became one of the first places to get Universal Credit, which replaces six individual benefits, the then-Works and Pensions Secretary Iain Duncan Smith said it would “improve the lives of millions of claimants by incentivising work and making work pay”.

But the roll-out, which is set to continue in July when people on the old style benefits in Harrogate will start to be shifted onto Universal Credit, has been dogged by negative headlines and concerns.

Universal Credit in Crisis


Despite that, the Department for Work and Pensions (DWP), the Government division responsible for Universal Credit, has insisted it is a “force for good, providing support to more than 1.8 million people”.

It added: “Universal Credit gives people control over their finances and helps them into work. Council tax collection is an issue for the local council.”

Those who are moved onto Universal Credit face a five-week wait for their first payment, which Wigan’s housing and welfare boss, Labour councillor Terry Halliwell, said was “crippling” and “devastating”, and a “major factor” in people falling behind on their council tax.

He also said there had been a rise in food and fuel poverty, with children throughout the town suffering as a result.

Coun Halliwell said: “When we were piloting Universal Credit we told ministers of the potential problems they would expect to be faced with, but in some cases they simply didn’t listen to all of our concerns and, as far as I’m aware, they did not act upon them.

“I would say that the roll-out has been lumpy at best and the continuous delays in implementing it is a testament to the problems associated with it, and I personally think it desperately, desperately needs reform.


“That five-week wait is crippling; the insistence of making and managing a claim online can be difficult for lots of people; some of the sanctions are counter-productive for minor infringements. I could go on in respect to all the other issues.

“The way it has been managed hasn’t been very good.”

The DWP offers new claimants an advance loan payment during the five-week wait, but it has to be repaid within 12 months, and The Trussell Trust, which runs food banks up and down the country, said that means people are left “between a rock and a hard place: no money now, or not enough money later?”

The £2.2m unpaid council tax is a fraction of the £160m government funding cuts faced by Wigan Council since 2010, but Coun Halliwell said: “The arrears due to Universal Credit are being felt by all councils, not least by ourselves, and at the moment we are having to deal with them in the best way we can, and we can only do that by working with those people who are affected by Universal Credit.”

When asked if the arrears have had any impact on the council or its services, Coun Halliwell, who said the authority tries to collect a “very small payment” from those who owe, said: “I wouldn’t say as yet. We are trying to manage that situation carefully; absorb some of what is going on; work with those people affected by Universal Credit by trying to get back that money that is owed to us through the different arrangements, and all that is dependent on individual circumstances.”


Ms Nandy, who has been Wigan’s MP since 2010, said: “As far back as 2014, when Wigan was one of the pathfinder areas for Universal Credit, we were raising concerns with ministers that people who had never previously been in debt were now starting to fall into arrears. Five years later, the problems we identified in 2014 are still hitting people hard.”

She said the council has “rightly” chosen not to “force people into destitution or threaten them with court action while the Universal Credit system remains in chaos”.

“That decision is the right one, but it comes at a cost,” she said.

“Ministers should not be moving people into a system that isn’t working. Recent decisions - from the closure of bank branches and the crown Post Office, to restricted library opening times, which many people use to access computers - have made this worse.

“They simply refuse to see the collective impact of their actions.”

Ms Nandy continued: “In recent years, I’ve dealt with hundreds of cases of people left struggling, destitute, or stripped of their dignity after being sanctioned for being a few minutes late or attending family funerals.

“Waiting times remain a huge problem and often incorrect income is used to make the assessment.

“For example, one constituent had his benefit stopped because he was paid in advance before Christmas and it was wrongly assumed his income had gone up.

“Self-employed people face particular problems. The system is slow, complex, and stressful. It is not fit for purpose.”

The DWP said: “Council tax collection is an issue for local authorities, and council tax reduction schemes are available for people with low incomes.

“Universal Credit gives people control over their finances and provides a safety net for those who are unemployed or in low-paid work.”


Councils across the country are struggling to reclaim some of the millions of pounds owed to them in rent arrears by Universal Credit claimants as they are no longer in control of the process, experts have warned.

Local authorities, who administered housing benefit payments before UK Government welfare reforms, previously had the power to negotiate directly with tenants who had fallen behind with their rent.

But that ability was removed by the introduction of Universal Credit which sees claimants given a lump sum payment instead of several individual benefits.

Now local authorities must complete a “laborious” process with the DWP which could eventually lead to an individual’s benefits cut to pay some of the arrears back.JPIMedia Investigations spoke to staff across local authorities, Government quangos and Citizens Advice on the issue.

“If arrears keep increasing it will put a lot of pressure on the finances of local authorities and housing associations,” said Rob Gowans of Citizens Advice. “We don’t know how long-term they will be able to manage this.”

As rent arrears are debt they are in theory recoverable. But in reality, many councils and housing associations are already struggling to recoup them.

The DWP has told that costs associated with Universal Credit will come down in the long-term as administration improves and recipients get used to the system.

But even local authorities which were among the first to adopt Universal Credit have not seen arrears drop back down to pre-2012 levels.

Instead councils are investing substantial amounts to mitigate the impact. In Glasgow, Scotland’s largest local authority, that meant an additional £2m being spent each year to employ more specialists staff such as housing officers and support staff.

One local authority expert said: “Councils are no longer in control of the process of getting their debts back. “It’s another pressure. It’s increased costs and made revenues less secure. And all at a time councils are already struggling.”

Nearly a quarter of callers with Universal Credit queries felt that helpline staff did not understand their queries.


Just under one in five people also claimed they were given incorrect information by Department for Work and Pensions (DWP) call handlers.

The figures emerged earlier this year in the DWP’s own claimant service and experience survey.

The findings suggested that DWP call handlers understood less about Universal Credit than they did all nine other benefits highlighted in the survey.

When it came to providing correct information to callers, Universal Credit also finished bottom.

Just 76 per cent callers felt they received accurate information, while 19 per cent complained of receiving incorrect details.

A recent report by the Child Poverty Action Group said helpline staff often struggled to explain how Universal Credit payments had been calculated.

The report notes: “DWP staff on the UC helpline do not always have access to a full calculation of awards.

“So if a claimant seeks help to understand her or his claim she or he may not be able to get a full explanation.”