A new joint report from StepChange Debt Charity and the Trussell Trust shows that Advance Payments – the loans people can apply for while they wait at least five weeks for Universal Credit – push people into hardship and therefore are not the solution to the wait.
A quarter of all Universal Credit claimants had payments reduced by above 20% to pay back a debt, including Advance Payments. Four in ten were paying over 10%.
The report found that these reductions are hugely significant for people on low incomes, especially when their benefit payments are designed to provide only a minimum amount to live on. A deduction of just 5% would push nearly half of StepChange clients on benefits into a negative budget situation, meaning they wouldn’t have enough money to cover essential costs.
Previous research among StepChange clients who had money taken from benefits to repay debt showed 71% saying it caused them hardship and a quarter had cut back on food spending.
Because repayments for advances don’t consider people’s ability to afford them, they will inevitably have a similar impact.
Reductions to benefit payments can force people to need a food bank’s help – the largest and fastest-growing reason for referral to a food bank in the Trussell Trust’s network last year was benefits not covering the cost of living.
Universal Credit aims to get people into work, but Advance Payment debts make it more difficult. 6 in 10 people said worrying about debt made them feel less confident about getting a promotion at work, while 15% say their debt worries led to changes in attendance such as arriving late or taking more time off.
The charities are urging the government to remove the need for bridging loans by ending the five week wait
The new joint report Hardship Now or Hardship Later? is available @ www.trusselltrust.org