Universal credit extension delayed over fears new benefit is pushing people into poverty and homelessness

Instead of 3 million people transferring to the new system, MPs will be asked to approve a trial scheme switching just 10,000

Plans to extend universal credit to another 3 million claimants have been shelved because of fears the new benefit is pushing people into poverty and homelessness.

Amber Rudd, the new work and pensions secretary, has bowed to pressure to delay the next stage of the flagship programme, after a cross-party revolt.

Instead of a transfer of 3 million people to the new system, she will only seek approval from MPs for a trial scheme switching just 10,000.

Only after the pilot has been assessed will MPs be asked to approve the full roll-out, an announcement expected in a speech this week.

The decision has been welcomed by Frank Field, the chairman of the Work and Pensions Select Committee, which has repeatedly warned that universal credit is pushing people into destitution.

“The government seems finally to have woken up to the human catastrophe that was waiting to happen under its ill-formed plans for moving people onto universal credit,” he said.

And Paul Farmer, of the mental health charity Mind, said: “Pushing ahead with these plans would be catastrophic for people who are too unwell to navigate the complex process of making a new claim.

“We don’t know what this pilot will look like, but we hope this signals that the government is finally listening – giving people who receive support from the benefits system the security they need to live full and independent lives.”

The delay comes despite the chancellor’s decision, in October’s budget, to pump £1.7bn into higher payments that will ease the pain for 200,000 workers.

Significantly, the concession means universal credit – which merges six working benefits into a single payment – will now cost more than the benefits system it replaces.

However, around 3 million people will still be worse off on universal credit, according to an analysis by the respected Resolution Foundation think tank.

Furthermore, around 100,000 households, including the poorest, will also receive less for their childcare costs, Mr Field’s committee reported.

And families are waiting months for help with childcare bills because claimants are required to pay upfront, then claim back the cost – plunging them into debt.

Explaining the delay, a Whitehall source told The Observer that Ms Rudd wanted “universal credit to receive a fresh parliamentary mandate and be personally sure the system is working in the interests of every claimant”.

“Amber has taken a no-holds-barred approach. So, she will move 10,000 claimants, and carefully monitor this, before returning to parliament to report on her findings and seek that fresh mandate for the full roll-out,” the source said.

The Department for Work and Pensions is insisting the roll-out of universal credit can still be completed by 2023 as planned.

Since returning to the cabinet in November, Ms Rudd has signalled that she accepts changes to universal credit are needed, to ensure claimants do not have to wait weeks for their money – and to ease the impact of the system on women.

However, the concession is unlikely to appease Labour, which has demanded a complete overhaul and hinted it would scrap universal credit altogether.