‘Failed benefit experiment pushes people into problem debt’

Phil Andrew, chief executive at StepChange. Pic: StepChange Debt Charity (Image: Archant)

That is one view expressed after debt advice charity StepChange estimated it saw the highest average rent arrears of £1,944 among its clients living in Tower Hamlets compared to the other London boroughs.

Sam Crosby from Aldgate based charity Toynbee Hall, which advises people in the red, said: “Having a debt that threatens your home is incredibly stressful.

“For me, what needs to end is the universal credit experiment. It’s a failed experiment.”

The government rolled out universal credit in Tower Hamlets from February last year. It replaces six other benefits with a single monthly payment for people out of work or on low incomes.

But Mr Crosby said debt was built into the new benefit. Applicants had to wait six weeks before their first payment tipping them over into debt or seeing debts worsen, he said.

“Everyone who applies for it immediately puts themselves into six week rent arrears because of admin processes. It’s a vicious circle,” he said.

And Toynbee Hall has seen a shift in the kind of problems people seek help with from most wanting advice on credit card debt to more falling behind with rent, council tax or fuel bills.

StepChange boss Phil Andrew blamed higher housing costs for pushing residents into debt.

He called for more resources for advice and fairer debt collection so people facing financial trouble could make repayments they could afford.

Mr Crosby added that people were reluctant to engage with debt recovery when threatened with bailiffs knocking on their doors or the prospect of court appearances.

He recommended people seek advice from qualified professionals at the earliest opportunity.

“If you let something fester and grow, it makes it more difficult to get out of debt,” he said.

A spokesman from the Department for Work and Pensions said universal credit helped people into work faster and figures showed it satisfied most claimants. Councils had also received £200m to give claimants advice.

He said a seven day waiting period was scrapped and advance payments were available with extra housing support on offer.