Low-income working families are losing hundreds of pounds each year – and being wrongly denied free healthcare entitlements – because of flaws in the way universal credit is designed, campaigners say.

The Child Poverty Action Group (CPAG ) said arbitrary rules built in to the way universal credit is calculated leave some families unable to predict how much they will be paid each month, leaving households in debt and unable to budget.

It can lead to claimants being wrongly benefit-capped – a penalty designed to “incentivise” jobless or low-earning households by severely limiting their benefits – because the system fails to spot they are working and earning enough.



Quick Guide What is universal credit and what are the problems? Show What is universal credit? Universal credit (UC) is the supposed flagship reform of the benefits system, rolling together six benefits into one, online-only system. The theoretical aim, for which there was general support across the political spectrum, was to simplify the system and increase the incentives for people to move off benefits into work. About 2 million people are currently in receipt of UC. More than 6 million will be on the benefit by the time it is fully rolled out. How long has it been around? The project was legislated for in 2011 under the auspices of its most vocal champion, Conservative MP Iain Duncan Smith. The plan was to roll it out by 2017. However, a series of management failures, expensive IT blunders and design faults mean it is now seven years behind schedule, and rollout will not be complete until 2024. The government admitted that the delay was caused in part by claimants being too scared to sign up to the new benefit. What is the biggest problem? The original design set out a minimum 42-day wait for a first payment to claimants when they moved to UC (in practice this is often up to 60 days). After sustained pressure, the government announced in the autumn 2017 budget that the wait would be reduced to 35 days from February 2018. This will partially mitigate the impact on many claimants of having no income for six weeks. The wait has led to rent arrears and evictions, hunger (food banks in UC areas report notable increases in referrals), use of expensive credit and mental distress. Ministers have expanded the availability of hardship loans (now repayable over a year) to help new claimants while they wait for payment. Housing benefit will now continue for an extra two weeks after the start of a UC claim. However, critics say the five-week wait is still too long and want it reduced to two or three weeks. Are there other problems? Plenty. Multibillion-pound cuts to work allowances imposed by the former chancellor George Osborne mean UC is far less generous than originally envisaged. According to the Resolution Foundation thinktank, about 2.5m low-income working households will be more than £1,000 a year worse off when they move to UC, reducing work incentives.

Landlords are worried that the level of rent arrears accrued by tenants on UC could lead to a rise in evictions. It's also not very user-friendly: claimants complain the system is complex, unreliable and difficult to manage, particularly if you have no internet access.

And there is concern that UC cannot deliver key promises: a critical study found it does not deliver savings, cannot prove it gets more people into work, and has plunged vulnerable claimants into hardship.

In other instances, the problem means claimants doing the same job and earning identical salaries can end up being paid different amounts of universal credit simply because their respective claims begin on different days of the month.

The complication, which occurs when pay dates fall close to the start of universal credit assessment periods, can result in claimants who are parents or disabled losing up to £258 of work allowance each month, CPAG has estimated.

The charity has called for universal credit to be halted in order to fix the problem before the benefit is extended to over two million people – including many families who are currently in receipt of working tax credits – from July 2019.

It says erratic payments have left families stressed and in hardship: “Claimants are often left flummoxed by how much – or how little – universal credit they will receive from one month to the next,” said the CPAG chief executive, Alison Garnham.

The problem typically affects claimants whose wages are paid on or close to the first day of their universal credit monthly assessment period, which is used to calculate how much a claimant is entitled to be paid each month.

Alison Garnham of the Child Poverty Action Group: ‘Claimants are often left flummoxed by how much – or how little – they will receive from one month to the next.’ Photograph: David Levene/The Guardian

If a claimant is paid wages a day or two earlier – because their normal payday would fall on a weekend or bank holiday, for example – the system records them as having had two pay cheques in one assessment period and none in the following one.

As a result, universal credit considers them to be earning more than they actually do in the first period, so automatically blocks “passported” entitlements such as free prescriptions – and in the second period considers them to be earning nothing, so makes them subject to benefit-cap penalties.

Claimants whose assessment period start date and payday are at the end of a month are especially prone to losing out, as this is when most bank holidays fall, says CPAG. A worker paid on the last day of each month in 2018 could expect three assessment periods with two paydays and three with no paydays.

It cites the case of a working couple with two children who since claiming universal credit last year have seen monthly payments fluctuate from between £1,185 to zero because of pay date and assessment period clashes. They have found it impossible to budget and are now in rent arrears for the first time in their lives.

“In reality, the current monthly assessment system is a huge oversimplification which does not reflect the reality of people’s lives and work,” says CPAG.



Although claimants often ask the Department for Works and Pensions (DWP) to change their assessment period dates to eliminate the problem, they are routinely told that nothing can be done – in one case a claimant was told that this was simply “the nature of the beast”.



The DWP has been much criticised for failing to act on evidence of problems in the benefit system, although last month the work and pensions secretary, Esther McVey, promised the DWP will be more responsive when glitches in universal credit were identified.

CPAG said campaigners had warned the government about flaws in the monthly assessment period and payment cycle back in 2012 when universal credit was at the design stage but were ignored.