It is true, that if implemented successfully, Universal Credit will benefit many families, and here at the National Housing Federation we fully support the aims to simplify the benefit system and make work pay. But the risks of getting it wrong are huge.
Ultimately, there is a real possibility of homelessness but at best, families face financial hardship and debt. The knock-on effect of increased rent arrears is landlords experiencing a tighter squeeze on their resources, which in turn threatens their ability to build much needed new, affordable homes.
We are worried that families already struggling to make ends meet could be put under further pressure when they move onto Universal Credit. Many households face a stark shift from budgeting their income over one or two weeks, to managing a monthly payment, made in arrears. According to our Ipsos MORI survey of working age social housing tenants affected by welfare reform, two-thirds of tenants aren’t confident they could make this transition, leaving them at risk of running out of money before the end of each month.
The design of the new system assumes almost everyone will apply and make all changes online. Our evidence shows 40 per cent of affected tenants don’t have access to the internet and almost a third (30 per cent) say they would not be confident making a benefit application online.
On top of this, social tenants will lose the option of choosing to have their housing costs paid direct to their landlord, with many having to manage their rent payments for the first time. We welcome financial independence, but giving people responsibility is about giving them choices so they can decide for what works best for them. Why won’t government let tenants choose how to manage their finances when the overwhelming majority of tenants would prefer payments to be made to the landlord? A perfectly sensible choice, which gives peace of mind that their home is secure.
Our research demonstrates that people aren’t ready for such significant upheaval and many are likely to struggle during the transition to the new system. To combat this, there needs to be adequate provision and funding for support services to help people manage the change; people in need of support need to be identified early, before they hit crisis point; and effective safeguards, including an efficient switchback to payments to the landlord, are needed for when things go wrong.
It is clear that a smooth transition to Universal Credit can’t be achieved without the help, engagement and expertise of housing associations. Our members, housing associations across England, are already doing all they can to support their residents through the changes – providing help to access employment and training, to develop online skills and budgeting support. But housing associations are hampered by not knowing when Universal Credit is going to affect them and their tenants – the lack of a clear timetable makes it impossible to plan for and deliver the support and resources that are going to be needed.
Apparently there could be as many as 7 million claimants moving to Universal Credit over the next few years. That is a huge undertaking. Every one of these claimants will depend on the transition being smooth and efficient. I can find no one who is fully confident that will be the case. If we are to avoid soaring arrears, acute hardship and people being left without food then no corners can be cut. Getting this wrong is just not an option.
David Orr is chief executive of the National Housing Federation