The case for Universal Credit is disintegrating

The rollout of universal credit, hailed by its chief architect Iain Duncan Smith as “the biggest change since Beveridge introduced the welfare system” and dogged by delays and IT problems, is now finally gathering pace. But alarms about its shortcomings are getting louder, too. The Budget on Wednesday provides the government with a chance to address these head-on.

The core idea behind Universal Credit was to replace a web of different payment systems, overseen by different agencies, with a single monthly means-tested benefit. This would be simpler for claimants, who would no longer have to make new claims if they moved into or out of work, and would eliminate the complicated set of thresholds and withdrawal rates which had left some people facing cliff-edges in support and poor work incentives. Universal credit payments are based on real-time earnings information, and thus supposed to be responsive to the fluid realities of people’s lives.

The other big selling point of universal credit was its promise to lift 900,000 people—including 350,000 children—out of poverty. This promise has, however, been shattered by a series of heavy cuts to the scheme, and most people will now be worse off under universal credit than under the system it replaces. New analysis by the Child Poverty Action Group and IPPR think tank found that once universal credit is fully implemented, there will be up to a million more children in poverty than if the original design had been maintained. The four-year freeze in the allowances and elements that make up universal credit awards, despite rising inflation, plays a big part in this. A good first step to avert increases in poverty would be to reconsider last year’s cuts to work allowances, which limit how much people can earn before they start to lose universal credit. A commitment to uprating in line with inflation would provide longer term security.

But even before the cuts, there were warnings of a dark side to universal credit. It embodies a shift towards the American model of social security provision, with intensified conditionality requirements and harsh penalties for failures, justified using mythical (and damaging) narratives about cultures of worklessness and “recalcitrant people” who need to be taught responsibility lest they “infect” others. Payments can be suspended for up to three years if claimants fail to meet the requirements in their “claimant commitment” (a pseudo-contract between the claimant and the state).

This is particularly worrying given that the government’s own evaluation found that almost half of claimants felt the requirements placed on them were unachievable, and more than 60 per cent felt that their personal circumstances had not been properly taken into account. A huge amount of discretion is given to jobcentre work coaches to set these requirements. This is supposed to permit personalisation, but the cost is a loss of accountability and consistency. There used to be clear rules, for example, about what could be required of people caring for young children. Now these are reduced to guidelines, and challenging requirements is hard.

Another aspect of the cultural shift is the move to single payments, made monthly in arrears, rather than fortnightly or weekly, which is supposed to mirror the world of work. This means a long wait of six weeks for a first payment, and greater difficulty for claimants in eking out an increasingly inadequate lump sum over the course of a month, however brilliant their budgeting skills.

As universal credit rolls out, CPAG and others are monitoring its impacts closely. The transition is proving painful. Cases abound of bureaucratic confusion, of people being passed back and forth from one benefit team another, with no clarity on what they should be applying for, and of incorrect awards being made, leaving people with inadequate or no income for weeks or months. On top of this, automatic deductions for households with outstanding debts are leaving some people on an appallingly low income. Housing associations are reporting increasing arrears and evictions facing universal credit claimants, and private landlords are said to be increasingly unwilling to let homes to people on universal credit.

It is also emerging that the supposedly highly responsive system is in fact incredibly rigid. Money is being denied for months because people have ticked a box wrongly on their application—easy to do, especially if you’re filling in a long, online-only form on your phone because you don’t have a computer—when these errors ought to be identified and fixed quickly. And the real-time information system for calculating awards follows a strict monthly cash accounting approach which does not always reflect the reality of how people earn money, creating “heads we win, tails you lose” situations for claimants. Receive backpay for a previous job while being assessed for universal credit—which is supposed to respond to your current income—and you’ll lose out. Receive two pay packets in one month because your Christmas pay has been brought forward, or because you’re paid fortnightly rather than monthly, and you’ll lose out. The difference won’t be made up in other months because there is a monthly limit to how much universal credit can be paid.

These problems are already generating alarm and extra work among advice workers, local authorities, housing associations and others, but they may well be just the tip of the iceberg. New and complicated rules about the treatment of self-employed earnings, new work requirements on single parents with pre-school children, a harsher benefit cap for out-of-work claimants, the ramping up of conditionality for claimants who are already in work, and a two-child limit for each claim are on their way.

Universal credit may be coming, but it is clear that it is in danger of being crippled by severe funding, design and implementation problems. This week’s Budget should be a clear statement of intent that a fair system of universal credit remains a priority for the treasury and the prime minister.

 

Read the briefing "Broken promises: What has happened to support for low-income working families under universal credit"