Buried beneath the chaos of Brexit is one of the most important developments of the Welfare state to come along in the last few decades. Universal Credit (UC) was supposed to be a simplification of a bloated, complex and confusing system, designed to create a streamlined process to enable those receiving the credit to be free of repetitive bureaucratic claptrap and errors.
It had the potential to save the state some money and help get people into work. Yet the implementation of the project has been in disarray, a prime example of how not to roll out a system that is intended to make life easier. The result? Disillusion, desperation and a real fracture in society.
Universal Credit is, simply put, a single monthly payment for people both in and not in work. It combines six benefits payments; Income support, housing support, child tax credits, Jobseekers allowance (income-based), Employment and support allowance (income-related) and the Working tax credit. The payment has certain parameters but largely consists of a standard allowance plus extras depending on the household circumstances.
These circumstances take into account how much a household is earning before UC is reduced or withdrawn. Even if people work over 16 hours a week, UC would recognise this and gradually reduce the payments instead of immediately halting benefit payments. Recipients are, in many ways, treated like employees at a company. They receive a single payment a month, like a salary. The first payment comes five weeks after they start on UC. While the idea sounds straightforward enough, it is the implementation of the system that has failed with almost a distinct lack of realism in how society works.
Let us start with the conditions under which universal credit is paid. The standard built-in delay is 42 days but this is only if the whole process goes as planned. Transitioning to this kind of payment schedule has the danger of leaving recipients without money to cover their bills or buy food. There are accounts of administrative hopelessness and mistakes, leaving applicants without money and building up debt while waiting for a phone call or confirmation email that never comes, only to find that the whole process has to begin again.
Recommendations for taking out loans or backdating claims, which seem more likely to take the applicant back to square one, only exasperate the situation and lead to more debt. Even suggestions to reduce the waiting time to 35 days offers little in the way of relief. As a result, many are in arrears to rent and risk eviction. More and more landlords are refusing to take on UC claimants as they are seen as a risk. This situation has also led to a rise in the number of payday loan applications. Reports have also come in from the Trussell Trust that there has been a significant increase in the use of food banks in areas where UC is being rolled out.
Once the money has been received, the next set of problems begin. Research has shown that those on low income lack the skills necessary to budget over an extended period; school education does not cover how to balance a household budget, and teaching such skills locally is not well financed or easily available. The Resolution Foundation, an independent think tank, claims that over 2 million low-income households will be over £1000 worse-off over a year. With Brexit and the threat of a no-deal looming, the danger is that being £1000 worse-off a year could translate into an even bigger value and problem.
There are incentives to get one person into work, but they are weak for getting two members of the same household into work. People can receive UC and earn money on top of that but that affects the UC itself. Each household has an allowance, and anything received through UC above that allowance is reduced at a rate of 63p for every £1, essentially taxing people 63% of their benefits depending on the allowance limit. This is the highest rate of reclaiming payment in the country, and it is being used against the poorest in the country.
So what does the future hold for UC? It has become a behemoth, and the consequences of scrapping it could end up plunging more households into desperation and costing the taxpayer vast amounts of money to bring back previous systems. Politically, the intention was to present the Conservative government as champions of the working class, the party who care about the people. Increasingly, as UC begins to stagnate, the government seems to have hung a millstone around its neck. Leaving the UC system should not be an option; there has been so much invested and to waste so much money would lead to a public outcry.
The question has to be whether anyone was actually surprised by the outcome. Right from the beginning, questions were being raised about the scale of ambition, the time-scale and the cost. Naturally, all of these things altered over time. The problem extends further though; a government that seems less and less concerned about how its citizens are coping with poverty, opposition to the system has been somewhat muted and late in the day and all the while, the people who really need this system to work, are receiving very little support.
The Government’s pledge to put £3 billion aside to help resolve this situation comes too late for those already without any money or now living on the streets. So why continue with it? Because it is a system that has the potential to work, if only those in control would be willing to take a step back and reconsider the implications for rolling it out as it stands. A pause is needed to re-evaluate the situation and mend what needs fixing. Those in arrears must be given guarantees so that they are not made homeless; interest free loans must be made for those having to wait longer that the statuary waiting period; the waiting period must be reduced; and landlords must not be allowed to throw people out because they consider UC bad business, they too should get guarantees. Most of all, this should be at the forefront of Government consideration.
