Universal Credit claimants struggle to keep on top of mounting debts

Lucy Harley-McKeown
·2-min read
Britain's Chancellor of the Exchequer Rishi Sunak speaks on Spending Review 2020 and the Office for Budget Responsibility's latest economic and fiscal forecast at the House of Commons in London, Britain November 25, 2020. ?UK Parliament/Jessica Taylor/Handout via REUTERS  THIS IMAGE HAS BEEN SUPPLIED BY A THIRD PARTY. MANDATORY CREDIT. IMAGE MUST NOT BE ALTERED
Britain's Chancellor of the Exchequer Rishi Sunak speaks on Spending Review 2020 and the Office for Budget Responsibility's latest economic and fiscal forecast at the House of Commons in London. Photo: UK Parliament/Jessica Taylor/Handout via Reuters

Almost a third of people who began claiming Universal Credit (UC) following the start of the pandemic in the UK in 2020 have seen existing debt grow or have acquired new ones.

That’s according to a new Resolution Foundation (RF) report, which adds to evidence in support of maintaining or increasing levels of support for those on benefits.

The think tank study found that of almost 6 million people currently claiming the government help, around three in five made a new claim last year.

It also found that a third of new UC families had no savings at all before the crisis hit and that 6% of families newly claiming UC had savings above £16,000, which shouldn’t be possible given the capital rules in UC.

The surge in claims for UC when the pandemic first hit means that caseloads are now about twice as high as they were pre-pandemic, with over half of all single parents now in receipt of UC.

Chart: TRF
Chart: TRF

In the next four weeks, the government needs to decide whether to continue with the £20 ($27.50) a week increase to UC and the Working Tax Credit (WTC).

This benefit boost was introduced in April 2020 as the UK went into lockdown, shortly after the onset of the pandemic.

The plans set out in the government’s Spending Review in November 2020 were for the boost to expire at the end of March 2021. Doing so would mean the main rate of UC for a single adult would fall from £343 to £257 per month, the lowest real-terms level for our basic unemployment benefit since 1990-91.

It would also contribute, according to previous Resolution Foundation work, to a rise in relative child poverty of 400,000 in 2021-22.

READ MORE: UK government 'plans' to reform NHS could reduce the role of private firms

The think tank’s calls join a chorus of voices in the sector calling for more support for those on benefits.

The Centre for Policy Studies (CPS), a think tank recently called for a “coronavirus hardship payment.” It said changing the payment nomenclature could make it simpler to reduce and remove it as the pandemic wanes.

“The government has backed themselves into a corner with the £20 uplift in Universal Credit – it’s much harder to take something away once it’s in place,” the CPS said in its report.

“Replacing the uplift with a clearly defined temporary support mechanism, combined with other reforms, would offer the intended financial support while making it easier to prepare claimants for its eventual withdrawal.”

Watch: What UK government COVID-19 support is available?