Extra time on Universal Credit – but the problems are just beginning

23 November 2017

On page 160 of the Office for Budget Responsibility’s Economic and Fiscal Outlook is what is becoming a very familiar chart.  It shows the latest forecast for Universal Credit rollout and how these forecasts have changed over time.  The OBR has published this graph for the last few years and it never makes for happy reading (for government, at least).  Yesterday was no different – with full rollout pushed back yet another year, to 2023.

A bit like eliminating the deficit, with each passing year the successful roll-out of Universal Credit gets a bit further away.  (But unlike eliminating the deficit, there must now be a good chance that the government will get there at some point in the next decade).

These further delays to Universal Credit rollout didn’t get any coverage yesterday.  Most commentators focused on the small but welcome news that claimants will in future only have to wait five weeks before they receive their UC payment, rather than the six weeks for most claimants currently; and that many more claimants will get access to advance payments to help them manage in the meantime.

We welcomed this announcement too, but as I said yesterday this really was the least that the government could have done.  The now-five week wait means that even if these changes applied from today (rather than next year, as planned) Christmas would have been and gone for a new claimant before they received an award, with those claiming tomorrow already too late to get paid before Christmas Day.  And that’s assuming that they are not one of the one in four people who aren’t paid ‘on time’.  The news on improvements to advance payments is more welcome, but in our research we are already picking up big problems in access to, and the application of, the current advances system – so much more detail is needed on how this will work in practice.

Perhaps the biggest irony in yesterday’s figures, though, is that by far the best news for prospective claimants of UC is the delays to its rollout that are set out above.  This is because the consequence of the OBR’s new forecasts is that there’ll be around £300 million a year more in families’ pockets than there would have been if the previous timetable was met.  By contrast, the one week reduction in waiting times makes claimants better off by just under £200 million a year.  So in the long run, the government’s continued delays to UC are better news for family finances than yesterday’s policy change.  And this belies an inescapable truth for the government: introducing Universal Credit makes households worse off than they would have been without it.  Yesterday’s announcement does virtually nothing to address this.

(For those really interested in UC forecasting, the OBR takes five-and-half pages to explain its changes to UC alone – concluding, in its understated way, that “The modelling is very complicated, which reflects both the complexity of the policy change but also the fact that the modelling is used for both forecasting and operational purposes.”  As many claimants are finding, this has to be the most complicated simplification that any government has ever embarked on.  The revisions don’t stop at UC either – with the OBR among other things revising up the costs of disability benefits by a further £2 billion a year.  Who knew that welfare reform could be so difficult.)

But back to UC.  To reiterate, Universal Credit is a savings measure overall – relative to the current system, it transfers money away from low income households so that the money can be used to reduce the deficit or meet other tax and spending priorities.  And UC is just one part of a much larger package of cuts – the scale of which are enormous.  As the Resolution Foundation point out in their (excellent) briefing this morning, “the key tax and benefit changes announced in this Budget, and the previous two fiscal events are dwarfed by the scale of the impact of polices put in train back in the Summer Budget of 2015, the impact of which will amount to over £14 billion a year of cuts to welfare in the coming years, alongside the continued income tax giveaways.”

Most of those £14 billion a year cuts in entitlements will fall on working households.  About half of the cuts is accounted for by the continued cash freeze of most benefit payments and the huge cuts to support for working families in Universal Credit.  One consequence of these changes is that more children in working households will grow up in poverty.  Another is that for many families it will barely pay to work – a situation that is made worse by the complete failure of the 30 hour free childcare policy (the failed rollout of which, according to the OBR, will save the government on average £300 million a year over the next five years – money that was effectively pocketed by the Treasury yesterday).

As time passes, as the cuts go deeper and as more people find themselves on UC, it will be increasingly hard for MPs to explain and defend these reforms.  So yesterday’s news – further delays to UC rollout coupled with the one-week reduction in waiting times – will have bought the Chancellor more time.  They will also save him some difficult headlines this morning.  But in reality the problems are likely just beginning.  As we wrote last month, there is a lot more that the government will still need to do.