Section 2: Economic inequality in Gateshead
Working with partners: Citizens Advice Gateshead Impact of claiming Universal Credit.
In November 2019 Citizens Advice Gateshead, Tyne and Wear Research and Campaigns Cluster Group published a paper examining the barriers in claiming Universal Credit and the effect on Claimants' finances during the five week wait for their first Universal Credit payment. (Impact of claiming Universal Credit. 2019 (opens new window))
The report showed that many people who are on Universal Credit struggle to manage their money or cover essential costs, particularly during the five week wait for their first payment. Whether making a new claim for Universal Credit or migrating from 'legacy' benefits, the trigger for making a claim is often a disruptive change of circumstances, such as losing a job or breaking up with a partner. Therefore, getting the support and timescales correct between making an application for Universal Credit and the claimant receiving their first payment is crucial to the success of Universal Credit and reducing the financial impact upon claimants.
The report reflected the experience of claimants in Gateshead for whom it was reported, in evidence to the All-Party Parliamentary Group (APPG) on: The Economics of Universal credit (Feb 2020) (APPG on: The Economics of Universal credit (Feb 2020)) that:
'The five weeks wait for the first payment encourages borrowing and helps create and perpetuate a cycle of debt. People have to borrow just to get by during that period, and then their ongoing payments are lower to repay what they borrowed, which means they can't budget properly to cover the costs of their outgoings, so they are incentivised to borrow more. On top of that, direct deductions from people's UC can often leave them with next to nothing to live on'.
An example is a client who was left with £94 to last a month after deductions, the equivalent of £3 per day. Furthermore, paying the housing element, which is essentially a subsidy for landlords, direct to claimants instead of their landlord is suboptimal. If someone who has no money receives their housing element and they have to choose between paying their rent with it, or buying food, or putting their gas or electric on, or buying essentials for their children, they are forced to make an impossible choice.
Since April 2019 Citizens Advice Gateshead have supported 3,416 people with Universal Credit issues.
- The majority of clients attended seeking help with their initial claim (73%), most of whom came to simply make sure they're in dealing with priority debts, such as rent, council tax and utility arrears.
- one in four of those seeking help with their initial claim, 527 people, were struggling to manage their claim due to limited digital literacy.
- A significant proportion of the clients attending our drop-in service needed our help dealing with deductions and sanctions to their payments (11.9%, 407 people), and many of those needed further help from us through financial crisis, such as food bank access and advice in dealing with priority debts, such as rent, council tax and utility arrears
Citizens Advice Gateshead state that 'in our experience UC can be a good system for many, but it is still causing problems for a significant number of claimants, and we feel this needs to be addressed'.
In 2019/20 Citizens Advice Gateshead provided support to 57,901 clients across a range of issues. Their clients come from all age groups and family circumstance but share the same challenges: problems with benefits, debt and universal credit.
