Universal Credit: Benefit claimants are £3,000 a year worse off, MPs say ‘The UC application page needs to come with a health warning’

Claimants on Universal Credit are worse off on average £3,000 a year, compared with the legacy benefits system, MPs have said.

Many people saw their income drop when they moved to Universal Credit, which replaces six benefits into one monthly payment and is being rolled out across the country, the Work and Pensions Select Committee said in a new report.

Claimants found themselves “trapped” on Universal Credit and had no way of going back to their former benefits award. In a damning statement, chair of the committee Frank Field said the Universal Credit application page needed to come with a “health warning”.

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According to the report, most claimants face an average loss of £59 a week. For families with a disabled child it is £30 a week, while claimants with disabilities are worse off £70 a month.

The ‘lobster pot’

The committee said the Department for Work and Pensions (DWP) had promised claimants they would not be out of pocket on Universal Credit if they moved through a process known as “managed migration” – which protects benefits awards – if their circumstances have not changed.

However, it accused officials of doing nothing to stop people being transferred prematurely, even if they lost out as a result. In the DWP, the process is called the “lobster pot” because claimants on Universal Credit have no way back to their previous benefits.

“Given how difficult it is to work out when a move to UC is required, it is little wonder that some claimants find themselves trapped in the department’s chillingly-named ‘lobster pot’, either by their own mistake or by following incorrect advice from the department’s own staff or other organisations,” the committee said.

“By the department’s own admission, this can leave claimants, in some cases, with substantial losses in income, unable to return to legacy benefits.

“While it is welcome that the department has said it will compensate claimants who move to UC following incorrect advice from its staff, this commitment does not go far enough.”

Compensation

Calls were made for Universal Credit claimants who had found themselves worse off to receive compensation.

“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?” asked Mr Field.

“The UC application page needs to come with a health warning, and anyone who gets inadvertently caught in DWP’s lobster pot should be compensated.”

‘Worrying’

Charities helping people affected by Universal Credit said the findings in the committee’s report were “worrying” but “unsurprising”.

“Sadly this is one of the many issues that we have heard from people that we support through our Benefits Calculator and Helpline; simply put it is not working under its current design,” said David Samson, welfare benefits specialist at Turn2us.

“The loss of income from moving across is unfair and is considerably worse for those with a family or a disability. We strongly recommend that the DWP pays closer attention to the impact Universal Credit is having on those who are being left worse off – especially as this is seemingly affecting the most vulnerable.”

“It is worrying but unsurprising to hear that many claimants are expected to experience a significant drop in income as they move across to Universal Credit,” Mr Samson told i.

‘Cruel effect’

The “cruel effect” of the DWP’s policy for bereaved claimants was also criticised by the committee of MPs. Claimants are immediately required to transfer to Universal Credit after the death of a partner.

“It is inconceivable that, at a time of considerable grief and distress, the department expects claimants who have just lost their partner to immediately claim UC and grapple with a process which by all accounts is often extremely complicated,” said the committee.

“We urge the department to show these people some compassion.”

The DWP 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.”

Additional reporting by PA