Great Britain

Universal Credit advance loan leaves family with £17 a day to live on

MUM-of-one Paula says she's in debt "up to her eyeballs" partly due to a Universal Credit advance loan that left her family of three with £17 a day to live on.

The 34-year-old from Bolton had to visit food banks when she moved onto Universal Credit last year.

She told the BBC Two series Universal Credit: Inside the Welfare state, the last episode of which is being broadcast at 9pm tonight: "I've got myself into one big mess.

"I've lost control over everything. It's a viscous circle.

"I have to come to terms with the fact that I'm in debt up to my eyeballs and it's not going to go away."

Paula had previously been claiming £164 a fortnight - or £11.71 a day - for herself and daughter Lexi, under jobseeker's allowance (JSA) and child tax credit.

But when the pair moved in with Paula's partner of four years Aaron, 23, their change in circumstance meant all three had to move onto the controversial new system.

With no savings to get them through the up to five-week wait for their first Universal Credit payment, Paula and Aaron ended up taking out two advance loans worth £1,725.

The problem is that while "advance payments" can see families through this period, they are effectively repayable loans deducted from each monthly Universal Credit payment for the first year.

My stress levels have been through the roof. I've been really anxious.

Paula

The Sun has demanded the government reduce this waiting time to two weeks as part of our Make Universal Credit Work campaign.

In Paula's case, she was told her first Universal Credit payment should have been £1,118.53 for the month.

But deductions - including for the advance repayment - left her with just £532 - the equivalent of £17.16 a day.

Paula said: "I knew about the advance payments but I was under the impression I would only be paying about £110 back each month.

"It's a lot to take off somebody - for a family. It's ridiculous.

"My stress levels have been through the roof. I've been really anxious. I have that feeling in my throat where I'm being smothered.

"That's what we're supposed to live on and it's not enough."

The Sun wants to Make Universal Credit Work

UNIVERSAL Credit replaces six benefits with a single monthly payment.

One million people are already receiving it and by the time the system is fully rolled out in 2023, nearly 7 million will be on it.

But there are big problems with the flagship new system - it takes 5 weeks to get the first payment and it could leave some families worse off by thousands of pounds a year.

And while working families can claim back up to 85 per cent of their childcare costs, they must find the money to pay for childcare upfront - we’ve heard of families waiting up to 6 months for the money.

Working parents across the country told us they’ve been unable to take on more hours - or have even turned down better paid jobs or more hours because of the amount they get their benefits cut.

It’s time to Make Universal Credit work. We want the Government to:

  1. Get paid faster: The Government must slash the time Brits wait for their first Universal Credit payments from five to two weeks, helping stop 7 million from being pushed into debt.
  2. Keep more of what you earn:The work allowance should be increased and the taper rate should be slashed from from 63p to 50p, helping at least 4 million families.
  3. Don’t get punished for having a family: Parents should get the 85 per cent of the money they can claim for childcare upfront instead of being paid in arrears.

Together, these changes will help Make Universal Credit Work.

Join our Universal Credit Facebook group or email [email protected] to share your story. 

While Paula used the advance for bills, food, and her daughter's school uniform, she does admit using the money buy a new smartphone and clothes too.

"I wish they hadn't [offered so much money]," she said. "I've made a big mistake and it's one I'll never do again. If I had my way I'd come off this now.

"There's too much temptation there. Lesson learnt."

Paula's workplace coach at the Jobcentre, Carmel, tells the BBC it's "crazy" such large advance loans are being offered.

She said: "It happens all the time. Because if the advances are available and the customers are taking them then most customers are coming back to us with problems about paying back their advances.

"All Paula's got left to live off is £17.16 a day as a family of three. If I took that as a loan I'd struggle with those monthly repayments.

"It's crazy really that so much can be offered. But it has. Would she realistically, looking back now, have got that advance knowing what debt it's put her in? Probably not."

The documentary goes on to show a clip of former MP Heidi Allen grilling secretary of state for work and pensions Therese Coffey about the fact people wouldn't need these loans if the wait for cash wasn't so long.

She said: "People have no food in the cupboard. Not a penny in the bank. A four-week assessment period? To assess what? It doesn't need a four-week calculation to work out that they haven't got anything to live on."

The documentary also tells the story of 20-year-old sexual abuse survivor Jenny who struggles to budget on Universal Credit as she's on a zero hours contract.

She was also forced to take out two £220 advance payments to cover rent payments when she was off work sick - being on a zero hours contract she doesn't qualify for sick pay.

A Department for Work and Pensions spokesperson said: “Advances are available to help people access money quickly, and there are safeguards in place to ensure repayments are affordable and spread over a lengthy period of time."

We've reported how single-mum Nichola Salvato took out a payday loan to help pay for childcare while on Universal Credit.

If you're struggling, we've rounded up how those on Universal Credit can get help and what discounts they might be entitled to.

We also explain what a Universal Credit advance payment is, how to apply, and how to pay it back.

What are the Universal Credit changes October 2019 and how they will affect you?