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Surge in food bank referrals following welfare reforms
Food bank referrals have surged by up to 179% in a London borough where the government’s full-service Universal Credit has been piloted.
Pecan, a foodbank which operates in Southwark, has said it has seen a 179% increase in referrals among families with children and a 94% increase in overall referrals between 2016 and 2017, which they said is mainly due to welfare reform and Universal Credit.
The figures were published to coincide with a report by thinktank the Smith Institute analysing the impact Universal Credit has had in two London boroughs – Southwark and Croydon. It was jointly commissioned by Southwark Council, Croydon Council and Peabody.
A survey of housing associations by Inside Housing recently revealed that landlords are handing out food parcels to tenants on Universal Credit and helping them pay gas and electricity bills.
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Southwark Council’s local welfare fund said there has been a 34% increase in the number of food parcels issued in the first three months of 2017 compared to 2016.
The Smith Institute report found delayed Universal Credit payments have “put many into debt and rent arrears, causing considerable stress to individuals”.
It found that those taking part in the study had “almost universally experienced financial hardship as a result of transitioning onto UC [Universal Credit], notably as a result of the significant delays to payment”.
The report’s authors interviewed 36 people on Universal Credit and analysed the rent accounts of 775 tenants.
Anecdotal evidence also revealed people waiting for their first Universal Credit payment are reluctant to take advance payment loans from the government.
One claimant said he knew he could get an advance payment “but I didn’t want to take it because I don’t like owing people money”.
The report said most tenants were “extremely resistant to falling into debt and so were wary of the government’s advance payment system because they would have to repay the money through their Universal Credit payments going forward”.
The government has repeatedly said anyone waiting for their first payment who is struggling with arrears can get an advance payment.
The report revealed arrears grew by £89,000, or an increase of £115 per claimant, when a person moved onto Universal Credit. The thinktank also found that tenants who moved onto alternative payment arrangements, where the housing part of Universal Credit can be paid directly to their landlord or payments can be made more often, saw their arrears “rapidly fall”.
Southwark Council recently submitted evidence to parliament that showed the average council rent account in the borough is £8 in credit, but for Universal Credit claimants their accounts are £1,178 in arrears on average. The council has already seen a £5.8m debt for arrears for those on Universal Credit.
Fiona Colley, cabinet member for finance, modernisation and performance at Southwark Council, said: “This report’s stark evidence is why we need to lead this debate; I implore the government to listen to how this is affecting the poorest and most vulnerable people in our borough, and the potential effects reverberating nationally. Universal Credit, in its current form, has the potential to be catastrophic, not just for residents at an individual level, but for councils’ HRA [Housing Revenue Account] budgets for housing.”
Alison Butler, deputy leader and cabinet member for homes, regeneration and planning at Croydon Council, said: “This report underlines the major flaws in Universal Credit, which is placing more and more Croydon and Southwark families in rent arrears and at risk of losing their home. The government needs to fix this policy now or risk devastating thousands more people, not only in Croydon but nationwide.”
A Department for Work and Pensions spokesman said: “This research into a small group of claimants was carried out over a year ago, now the vast majority of claimants receive their first Universal Credit on time and in full."
“The best way to help people pay their rent and to improve their lives is to support them into work and under Universal Credit, people are moving into work faster and staying in work longer than the old system. We also know that over time people adjust to managing monthly payments, and reduce their arrears. The majority of people are comfortable managing their money upfront but budgeting advice, benefit advances and direct rent payments to landlords can be provided for those who need it.”
