The Labour Government is being urged to consider further reforms to the Universal Credit regime as it is “difficult to believe that claimants could be worse-off” under new proposal.
Universal Credit claimants are having to week week for their first payments thanks to a Department for Work and Pensions (DWP) rule, experts warn.
Nearly half of new Universal Credit claimants are failing to take up interest-free loans during the five-week wait for their initial payment, according to the Institute for Fiscal Studies (IFS).
The IFS report into the Labour Government’s review of the benefit highlighted that 44 per cent of those applying for the benefit do not request an advance, despite these loans carrying no interest charges.
Universal Credit ‘difficulties’ for millions left waiting for payments under DWP rule
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GETTYResearch indicates some claimants remain unaware the option exists, while others avoid it due to concerns about taking on debt, sometimes resorting to interest-bearing credit or falling behind on other bills instead.
In its recent “Universal Credit review”, the IFS stated it is “difficult to believe that 44 per cent of new claimants would be worse off by taking an advance”.
It added: “The ‘five-week wait’ for the first UC payment can create difficulties for new claimants without savings. The system of ‘advances’ (zero-interest loans) seeks to mitigate this.”
The think tank urged the Government to ensure claimants receive adequate information about advances and suggested monitoring the uptake figure as a measure of improvement.
Universal Credit is the primary out-of-work benefit administered by the DWP
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GETTYUniversal Credit payments will be impacted by changes to the benefit system
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PAThis warning comes as Labour ministers introduce reforms to the benefits system this week, with the DWP introducing a reduced health element for new Universal Credit applicants.
Those diagnosed with the most serious lifelong health conditions and individuals approaching end of life remain entitled to the higher payment.
The changes aim to address what the Labour Government describes as perverse incentives within the current welfare framework.
Close to four million households claiming the standard rate of Universal Credit will benefit from an increase worth approximately £295 in cash terms this year.For a single person aged 25 or over, this represents around £110 above inflation.
Minister for Social Security and Disability Sir Stephen Timms said: “The welfare system we inherited has for too long locked disabled people and people with long term conditions out of work.”
He added: “Laws coming into force today will change that, reducing projected expenditure on Universal Credit by almost £1billion.”
Sir Stephen Timms has outlined why the Government has introduced reforms
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PAClaimants with limited capability for work or work-related activity will now see a new notification appearing on their Universal Credit account from today.
This alert provides details about available support and allows individuals to request contact from advisers. Those who opt in will be connected with a Pathways to Work adviser offering personalised appointments.
The advisers can refer people to various programmes including Connect to Work, WorkWell, and local Trailblazer schemes.
More than 65,000 people with limited capability for work and work-related activity have already engaged with voluntary employment support since March 2025, exceeding the Government’s target.