Universal credit claimants 'turning to loan sharks because of payment delays'

Universal credit claimants are being forced to turn to pay day lenders and loan sharks by delays in payments, peers have warned.

Labour and the Liberal Democrats urged ministers at Lords question time to drop a seven-day waiting rule for new claimants.

But Work and Pensions minister Lord Henley defended the current rules, saying claimants could apply for advance payments if they were in need.

For the Opposition, Baroness Sherlock said the Government introduced a rule in 2013 which meant new benefit claimants were not entitled to any money for the first seven days.

"The problem is that when universal credit came in, because it is paid monthly in arrears, it means you get no money at all for six weeks."

For families with little savings or in debt, social landlords were saying tenants were getting into "big arrears, turning to pay day lenders and even loan sharks," she said.

Lady Sherlock urged ministers to look again at the issue and take action before anyone else was "pushed into debt".

Lord Henley said the payment structure was a "fundamental part of the design" of universal credit, reducing welfare dependency by "mirroring the world of work".

He assured peers safeguards were in place to help the minority of claimants in genuine need to transition to the benefit.

"Claimants can apply for an advance immediately if they are in need and can receive up to 50% of their deemed award soon afterwards."

The Bishop of Oxford, the Rt Rev Steven Croft, said many of those using food banks cited delays in accessing welfare payments as the reason for doing so.

Labour's Lord McKenzie of Luton said the administration of universal credit was part of the problem and blamed a "fractious relationship" between the Treasury and the Department for Work and Pensions.

Lord Henley replied: "We've all on occasions had moments where we have doubts about what goes on in the Treasury but I won't go into that now."

Liberal Democrat Baroness Bakewell of Hardington Mandeville said many families were experiencing delays of up to 12 weeks in the payment of universal credit, forcing them to use food banks and borrow from loan sharks.

Lord Henley said the Liberal Democrats had supported the legislation setting out the rules in the search for something that mirrored the world of work but insisted safeguards had been built in.

Labour former work and pensions minister Baroness Hollis of Heigham urged ministers to get rid of the seven-day waiting period to prevent people "spiralling into deep debt".

Lord Henley said the "slow roll-out" of universal credit was deliberate so ministers could learn from experience.

He did not accept the point raised but ministers could take this into account as the roll-out continued.