DWP accused of failing to help those who unnecessarily signed up for the benefit

Benefit claimants are being left thousands of pounds a year out of pocket because jobcentre staff are failing to inform them that they will be worse off if they move prematurely to universal credit, MPs have said.

The Commons work and pensions committee accused the Department for Work and Pensions (DWP) of failing to inform, protect or compensate claimants who stand to lose up to £400 a month after voluntarily and unnecessarily signing up to universal credit.

When claimants discover that they are worse off, the DWP routinely refuses to allow them to move back on to legacy benefits – a lock known internally as the “lobster pot” – even when they complain that they were incorrectly advised to claim by department officials.

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The committee cites the case of a man with anxiety disorder who heard a radio advert for universal credit and assumed he had to make a claim immediately. He and his wife ended up irreversibly £400 a month worse off. “At no stage was he informed that it was not actually necessary for him to make the claim,” the report says.

MPs said universal credit should come with a health warning because it was so difficult for claimants to work out whether it was in their interest to move on to it, and officials took so little care to advise them properly or correct mistakes. All claimants inadvertently left out of pocket should be compensated, they said.

The committee said it had little confidence that all DWP and jobcentre staff had a comprehensive understanding of what moving to universal credit meant for different claimants, and cited evidence that officials were not adequately trained in the new system or properly understood the old system.

Its chair, Frank Field, said: “In the history of humankind, has there ever been an example of a government introducing a fundamental welfare reform and none of its employees being able to tell if it will leave people better or worse off?”

Currently, claimants who wait to be moved to universal credit under the managed transfer process taking place during the next three years will have their income protected, but those who move prematurely or as a result of changed circumstances will not.

Ministers originally promised that no claimant would be worse off in cash terms after moving to the new benefit. But the committee estimates about 3 million working families now stand to lose out under universal credit – compared with 2.4 million who will gain – making it critical they receive the correct advice.

Those that lose out will see a drop in income of an average £59 a week, or around £3,000 a year. Groups affected include families with a disabled child who stand to lose £30 a week, some disabled claimants who will lose £70 a month, and self-employed claimants who can lose up to £8,000 a year.

The trapping of claimants in the “lobster pot” of universal credit was just one of a number of serious flaws and unfairnesses highlighted by MPs in a wide ranging progress report on the troubled evolution of the online benefit project, which its director general calls “the biggest digital development in Western Europe.”

The committee remains deeply concerned that universal credit is far from fit for purpose and the DWP is moving too slowly to bring in design changes announced by ministers to address problems that have left claimants in debt, food insecurity and at risk of eviction.

A DWP spokesperson said: “Universal credit helps people into work faster than the old system and provides targeted support. Around one million disabled households will gain an average of £100 more a month, and changes to work allowances mean 2.4 million households will be up to £630 per year better off.”