Universal Credit Claims Increase Almost Ten Times During the UK Lockdown

In a range of extra support offered to workers and businesses affected by coronavirus, the government of the United Kingdom relaxed eligibility criteria on the Universal Credit Claim to support people struggling to earn their wages during coronavirus outbreak.

Department for Work and Pensions (DWP) explained that people can now claim for the benefit more easily and would also be able to access up to a month’s advance up front without needing to attend a jobcentre. It is intended to help claimants receive claim benefits that could financially support them in general living cost through this period of coronavirus crisis.

But it seems that this measure has caused a massive spike in the number of Universal Credit claims. The reports are coming in that nearly a million people applied for universal credit in a scramble to help welfare that explains the magnitude of the employment crisis created by the shutdown of the UK. Despite government’s job support programs providing 80 per cent of wages to workers and self-employed people who are unable to work, it has been reported that around 950,000 people have applied for Universal Credit between March 16 and 31 for their main income support. It is in comparison to the normal scenario wherein any given two-week cycle, there are usually about 100,000 applicants for the benefit.

Applications started pouring in as soon as Boris Johnson told the nation to avoid non-essential communication with others and end all unnecessary travel during this period of lockdown of the country.

What exactly is Universal Credit?

Universal Credit is a benefit payment mechanism for citizens of the United Kingdom who are in or out of jobs and require extra support for the purpose of ordinary living expenses. This replaces some of the benefits and tax incentives that includes Housing Benefit, Child Tax Credit, Income Support, Working Tax Credit, Income-based Jobseeker’s Allowance as well as Income-related Employment and Support Allowance.

It is assumed that no-one faces a situation where they are better off earning compensation than they would be working. Many were faced with a "cliff edge" dilemma under the old system, where low-income workers would lose a major chunk of their benefits in one go as soon as they began working more than 16 hours. Under the current scheme, benefits are decreased at a steady pace as wages and profits rise-a person will lose GBX 63 under benefits for every £ 1 that a person receives after tax.

A sudden spike in the number of claimants in this period of crisis

In the last recession, caused by the 2008 financial crisis, the spike in applications dwarfed the effects on the revenue system. Applicants for jobseeker's allowance, then the largest welfare plank, increased from 46,000 in February 2008 to 82,000 a year later, a 78 per cent rise.

Coronavirus has caused an increase from 60,000 to 371,000 claims a week, which is a jump of more than 500 percent. Applicants include laid-off workers because they cannot be furloughed, and certain self-employed individuals who would not be eligible for a separate compensation scheme providing 80 percent of the average earnings for the past three years, up to a cap of £ 2,500 a month over the following three months. It refers only to those who make profits below £ 50,000. The director of the Resolution Foundation thinktank, Torsten Bell, has stated that the size of claims means that the Department of Work and Pensions can add to their ever-growing list of the hard-working civil servants and be thankful for that. Far more important could be their role in processing these claims and bringing cash to families.

The DWP said it had transferred more than 10,000 workers to manage claims and continues to hire more. Officials have called online applicants to try to speed through applications, claiming they make tens of thousands of phone calls a day. The workforce at the DWP has been decreased by almost 40 per cent since 2012.

People struggling to complete claim processes under lockdown

Workers seeking to apply for universal credit after being laid off during COVID-19 crisis stated that the completion of claims look almost next to impossible. On 25 March 2020, Therese Coffey, Secretary of the Department for Work and Pensions confirmed to media that 477,000 new benefits claimants had been enrolled in a period of just nine days.

Benefits experts have warned, however, that only a handful of them can succeed as the services are overburdened and it's almost difficult to speak to someone at the DWP at the moment. Claimants have faced five-week delays to process compensation in normal times. The fear is that unless the rules are changed the program could collapse. Also, people with decent saving had to struggle as the government did not allow anybody with the saving of above £ 16,000 to register for Universal Credit.

The administration was majorly criticised for the length of time it was taking for making some applicants wait for their applications to be processed. According to the media report, one of the applicants was told by the department that they are number 111,322 in the queue waiting for the DWP to list, while another was reportedly one of at least 145,000 waiting as of 25 March 2020.

Unemployment in the country seems to be the main reason behind the spike

The underlying unemployment in the country is being reported as the primary reason behind the number of claims increasing at a massive rate. And after the lockdown driven by coronavirus spread, this situation of unemployment in the country has got worsen. The phenomenon seems to be mirrored through other Western economies, with Norway's unemployment rate over the past two weeks more than quadrupling, and Israel's unemployment dramatically rising to nearly 20 per cent. Despite the global distress, the United States of America managed to report a drop in the country’s unemployment from 3.6 per cent in January to 3.5 per cent in the Month of February. It could be mainly due to the US administration not going ahead with a complete lockdown of the country. However, still it is being estimated that around 3.4 million Americans will be filing new unemployment insurance claims, according to the Institute for Economic Policy.

While the plunge in global financial markets has already illustrated the pandemic-triggered economic effect, the latest claims benefit figures are giving the better evidence of the coronavirus effects on Britain’s workforce to date. On 17 March 2020, the Office for National Statistics (ONS) reported that the three month unemployment rate in the country increased from 3.8 per cent in October to December 2019 to 3.9 per cent in November 2019 to January 2020.

Other measures taken by the government

To provide wage relief to the citizens of the country, especially considering the rising unemployment, the government, in close coordination with the Bank of England has also announced two other programmes. These include, Employment and Support Allowance (ESA) and the Statutory Sick Pay (SSP).

Employees can apply for the Employment and Support Allowance (ESA) as part of the ESA if they have a disability or health condition which affects how much they can function. ESA can provide people with funds to help with ordinary living costs if during this time anyone is unable to work and help them get back to work if they are eager and able to. If a person is unable to function while being self-isolated due to coronavirus (COVID-19), they are eligible for SSP for every day till they remain isolation. People are expected to be able to self-isolate for a minimum duration of 4 days. If their illness is not associated with coronavirus (COVID-19), they should be enrolled for SSP and have been off work sick for 4 days or more in a row (including non-working days) to claim the SSP incentives.

Disclaimer

The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. The above article is NOT a solicitation or recommendation to buy, sell or hold the stock of the company (or companies) under discussion. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site.