Scots who find themselves taking on loans as they await their first Universal Credit (UC) payments should be given six extra months to pay back those advances.
That’s the view of the Resolution Foundation, a thinktank organisation, which has been looking closely at financial circumstances among the many thousands of people who have recently become unemployed.
Claims for UC increased dramatically as the coronavirus hit and the UK went into lockdown, which for a lot of people has meant taking on advance payments as loans that they use to survive financially until they receive their first regular payment after a five-week wait.
The feeling at the Resolution Foundation is that people should be given the option to repay those loans after a period of six months rather than after they first start receiving UC payments as is currently the case.
A majority of new UC claimants didn’t take on advancement loans in recent weeks because they had enough money to get by anyway but two in five say they didn’t apply for those payments because they were fearful of getting into debt they might have trouble paying back.
The Resolution Foundation has praised the government’s UC system for its capacity to cope with the huge influx of claims it received recently but has also called for certain reforms to provide support to struggling families as the impact of the coronavirus crisis continues to be felt.
According to the thinktank, the government should be making permanent the £20 increase in UC payments, prioritising couples and families with children, and giving people six extra months to pay back any advancement loans they take on.
“Universal Credit has been on the frontline in fighting the UK’s economic shock. More claims have been processed in the first four weeks of the coronavirus crisis than in the first nine months of the financial crisis,” noted Karl Handscomb senior economist at the Resolution Foundation.
“Universal Credit has been a success of the crisis so far – but government should act now so it can repeat those successes in the months and years ahead.”
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