Universal Credit is a new benefits system where you can receive money in advance. Quick Loans Express explains all you need to know about universal credit and how benefiting from the benefit will save you from taking a payday loan.

In this article, we’ll be looking at the issue of Universal Credit, and you’ll be able to read about:

Story Highlights:

  • The Chancellor of the Exchequer’s BBC interview about Universal Credit – whether its design is right; problems with waiting for payments; budgeting difficulties for its recipients
  • Advance payments for Universal Credit – their availability; who’s eligible; numbers applying & speed of payment
  • Repayments of Universal Credit advances
  • Reactions to news of easier access to Universal Credit advance payments
  • Conclusion

Some think that Universal Credit is the most controversial piece of legislation since the Poll Tax of the 1980s. We’ll be using the Chancellor of the Exchequer’s interview on the BBC as a spring-board for the issues raised about this welfare reform and the question of advance payments for its recipients. What are the pros and cons of taking out an advance payment? Secondly, how do these payments compare to same day loans?

Interview with the Chancellor of the Exchequer

In an interview with Dan Walker of BBC Breakfast to discuss October’s Conservative Party conference, the Chancellor of the Exchequer outraged Universal Credit claimants, debt advisory services and MPs of all parties by his comments about Universal Credit. When asked if he was happy about the way the new benefits system was working, he said,

“I think the design of Universal Credit is right. We recognise that there is a challenge around the waiting time, and the sort of cash flow management people have during that waiting time…”

Let’s analyse his first comment before we look at his recommendations for Universal Credit claimants.

“The Design of Universal Credit is Right”

Universal Credit is slowly being rolled-out across the UK to replace 6 different means-tested benefits. Authorities intended to introduce Universal Credit in order to simplify benefit claims under one single system to streamline bureaucratic red tape. However, its roll-out is constantly delayed by problems with management, IT difficulties and administrative challenges. It’s already 8 years behind schedule.

“A Challenge around the Waiting Time”

Universal Credit aims to pay claimants within 6 weeks (including an arbitrary one-week waiting period). However, research by Citizens Advice has found that 39% of Universal Credit claimants wait for longer. The word ‘challenge’ is perhaps an understatement.

“A Challenge with Cash Flow Management”

Many Universal Credit recipients are in low-income employment. They often receive wages on a weekly basis. Other claimants are transferring from pre-existing benefits. Many are paid on a weekly or fortnightly basis. This means that recipients don’t have the cash to see them through this waiting period. Inevitably, this leads to rent arrears (with the threat of evictions), referrals to food banks to have enough to eat and not having enough to pay their other priority debts. We estimate that 57% of claimants borrow, using UK short term online loans to tide them over until they receive their first payment.

Short Term Loan Advances

The Chancellor continued by saying that the then Work & Pensions Secretary, David Gauke, told job centres to “point people…to the loan arrangements that are available to them”.

The Availability of ‘Loan Arrangements’ for Universal Credit Recipients

Strictly speaking, universal credit crisis loans for people on Universal Credit aren’t a loan. Instead, they’re an advance on the money which they will get. The way that people get this new benefit means that recipients’ state payments correlate to the amount of hours they’ve worked in the preceding month.

Are You Eligible?

Unlike payday loans, universal credit advance loan payments are interest-free. They are available to anyone who can show they’re in ‘financial need’. This compares favourably with previous benefits when claimants had to prove to the DWP that they were in financial distress, This caused ‘serious risk to their health and safety’.

For Universal Applicant this ‘financial need’ could be because they’ve transferred from a weekly/fortnightly benefit. They have had to wait so long for their first Universal Credit payment because of the chronic delays. Alternatively, they could be struggling because they left their previous job with only a week’s wages and not a month’s. The amount that they’re eligible to receive is 40% or 50% of their monthly standard allowance depending on their circumstances. They estimate this according to how much they could comfortably afford to repay.

According to DWP figures, half of those affected have applied for an advance. However, there are worries that people in need still have to wait for their advance.

Addressing this concern at the Tory Party Conference, David Gauke said,

“Claimants… will receive this advance within 5 working days. And if someone is in immediate need, then we fast-track the payment, meaning they will receive it on the same day.”

For most people in need having to wait 5 days for a quick payday loans online payment seems a long time compared to how lenders can pay loans so much faster – in hours rather than days.

Repayments of Universal Credit Advances

When challenged by the BBC presenter that with an advance, recipients would be left in subsequent months with less money to pay for the things they needed, the Chancellor couldn’t think of a coherent response and could only stutter “It..It can be spread over time.”

His response shows an appalling lack of knowledge about how the recipients repay advance repayments. In the case of Universal Credit, lenders deduct advances automatically from their benefit payments over a maximum of 6 or 12 months depending on their circumstances. (Although claimants can defer payments by 3 months in exceptional circumstances.) This compares favourably to payday loans which a person must usually repay in a much shorter time-frame.

The amount deducted every month is 15% of the standard allowance for unemployed claimants, and 25% for those who are in work. Another advantage over payday loans is that repayment only begins once they’ve received regular benefit payments so that borrowers won’t get a penalty for late repayments.

What Do Debt Advisory Charities Say?

Debt advisory charities, food banks and other consumer organisations welcomed the announcement. It would be easier for Universal Credit recipients to receive advance payments. However, they all expressed their general dissatisfaction with all aspects of this new benefit and that its roll-out should not happen until the Chancellor address these problems. Also, they said that the 7-day waiting period before claims start should not continue. Claims should be speeded up, and there should be more flexible repayment terms.

Debbie Abrahams, the Labour Shadow Secretary for Work & Pensions said in response to this measure,

“It is an insult to those pushed into debt and rent arrears by this Government’s punitive 6-week waiting policy. That the Work & Pensions Secretary is suggesting they get another loan to make ends meet.”

Undermining the government’s plans even further is the fact that 12 of their backbencher MPs, led by Heidi Allen, have added their voices to the calls for the implementation of Universal Credit to be put on pause. Despite this opposition from its own party, David Gauke made it clear that the roll-out would continue as planned.


The comments made by Philip Hammond show you what can happen when ministers make off-the-cuff remarks about matters that don’t come under their jurisdiction. To regain control of the interview all he could do was repeat the government’s party line. That Universal Credit would give people an incentive to work and smooth the transition from benefits to work without them receiving penalties. Although this is undoubtedly true, this doesn’t address the key reasons why people are dissatisfied with Universal Credit. Glibly recommending that recipients get a loan shows a lack of understanding about what the people he’s supposed to be representing are going through.

Bryson Oakes
Bryson is the leading engine of the Quick Loans Express blog. He has worked in the financial industry for 15 years and is the go to man for all money-related tricks and tips. When he is not spreading the latest financial news, Bryson can be found playing cricket with his mates or running in the park with his dog.

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