Fixing Universal Credit – where to start?

10 November 2017

A couple of weeks ago, on this blog, Tony Wilson argued that it was “time to pause UC…slow down and be prepared to change course”. He raised the issues of slow processing times for Universal Credit (UC), the fundamental issue of “on-time” payments of UC being at least six weeks after the initial point of claim and the significant in-work cuts made by George Osborne after the general election of 2015.

Right now, UC is higher in the public consciousness than ever before. With the expanded roll-out beginning earlier this month, votes in the House of Commons and organisational budget submissions highlighting many policy and practical issues, discussion of UC is everywhere. Recent reports by Citizens Advice, Disability Rights UK and the Low Income Tax Reform Group (among many, many others) tackle problems both broad and narrow in scope. It seems everyone but the Government thinks that UC should be paused, but if UC is to change direction, which direction should it take?

Significant problems have been identified with UC policy from the beginning and, with every expansion of the roll-out, evidence has come in from people struggling with the system. Most organisations publicly agree with the general principles of UC: simplifying the benefit system, consolidating means tested benefits and making work pay. But are the aims of the system worth anything if the practical application consistently undermines the intention? Should UC be paused or thrown out? To be frank, if UC changes direction, are any parts of it worth saving?

I think the answer to that last question is, yes, there are some improvements in UC over the old benefit system. I’ll discuss some of the issues that could be changed in a moment, but I want to be positive first. What about UC should form the basis of it going forward?

UC makes work pay immediately. Under the old Jobseeker’s Allowance (JSA) regime, claimants who start work for a few hours a week see very little benefit from this. On UC anyone starting work is immediately better off by at least 37p for every £1 of net earnings. These financial incentives are much better for encouraging people into small hours jobs.

UC ensures better take up of in-work support. One of the problems with the current benefit system is the poor take up of working tax credit (WTC). Tax credits are a generous benefit system with excellent work incentives, especially for lone parents and disabled people, but many people don’t know they can claim. People on UC who move into work do not have to sign off and make a new claim to tax credits. Their benefit is simply reassessed on their earnings, guaranteeing take up of in-work support.

UC provides support from dedicated work coaches. In the old days of JSA, the Jobcentre was a place to justify yourself once a fortnight. Now, with large investment in work coaches, Jobcentres are all about helping you to get a job. I don’t want to get into the sanctions regime that enforces compliance with these measures, but allying the physical presence of the work coach with the online interaction claimants are required to keep up, means there is substantial support available for helping claimants in to work.

One point of claim. The Universal Credit claim is complex and the requirement to make the claim online is an issue, thankfully mitigated a little by the recent removal of charges for the helpline. But having to make just one claim for the combined living and housing costs of a whole family is much less of an administrative burden than claiming multiple benefits from several sources.

Increased support for childcare costs. UC increases the rate at which the benefits system subsidises costs for childcare and expands the number of people who qualify for this support. More part-time workers and jobseekers will receive help with childcare than under the old tax credit system.

UC has a potentially good foundation in these basics. When devising a new direction for UC though, some fundamental strands of UC policy should must be changed.

Weekly payments (to landlords). The much talked about minimum six week wait for the first UC payment has a number of causes but is principally because UC is worked out monthly in arrears. The issue with having all benefits rolled together means claimants receive no money until the month is up. Under the old system, claimants would likely receive their income support first, followed by their housing benefit, then their tax credits – all of them sooner than UC could possibly be paid. Making the benefit a weekly one would eliminate this arbitrary administrative delay. At the same time, paying the housing element of UC direct to landlords would remove another major headache.

Make work pay more. UC is good at getting people into work, but the old benefit system is substantially more generous for many people working longer hours. This is easily fixed by increasing the amount of money people can keep from their earnings without it affecting their benefits. This would cost money but only in bringing the policy up to the same levels of spending as the old system.

Make UC more complex for those in complex circumstances. The old benefit system is complex and UC aims to make it simpler. But, some people’s circumstances are complex and the system needs to reflect that. Disabled adults, for example, have a wide variety of different elements added to their existing benefits to reflect their needs. UC has only one element that can be added. Some disabled people will find themselves better off under UC but many others, especially couples, will lose out purely through a desire for simplicity.

This is just a starting point for fixing UC. Yes, there are some good selling points, especially in getting people into work. But the problems of monthly payments and inadequate levels of support for those in complex circumstances requires a major rethink in order to make UC fit for purpose. Attention is on UC now. Ministers must listen and act.

Author – Dan Rust Director of Turquoise Training and Consultancy, specialists in benefits, welfare reform and financial assessments for care