A General Election looms on the horizon. Predictably, opposing political parties are busy demonstrating their upgraded social credentials to an undecided electorate. On September 28 2019, Labour Party leader Jeremy Corbyn addressed a rally in north-east London. He announced plans to scrap Universal Credit, as well as to abolish the cap or freeze on benefits along with the two-child benefit limit. Shortly thereafter, in early November 2019, the government announced an end to the benefits freeze imposed in April 2015 by Chancellor George Osborne as part of wide-ranging austerity measures. This means that there will be a 1.7 per cent increase in Universal Credit and other benefits payments, in line with inflation, from April 2020.
The Labour Party has consistently opposed and spoken out against Universal Credit. To understand the various pros and cons, it is worth reviewing the background to this system. Iain Duncan Smith, widely regarded as “the architect of Universal Credit,” founded a London-based independent think tank, the Centre for Social Justice, in 2004. As Chairman, he sponsored a CSJ report, Dynamic Benefits, in 2009, in which the concept of a Universal Credit system was introduced. He went on to address the annual conference of the Conservative Party in Birmingham on this topic in October 2010. A policy paper entitled ‘ Universal Credit: welfare that works’ was published in November 2010. The plan was to introduce Universal Credit in stages, starting in April 2013 in a number of pilot areas.
Universal Credit was introduced on the back of a perceived need to replace the existing unwieldy system of working-age benefits, administered by several government departments, with a single seamless system administered by a single department-the Department of Work and Pensions. Low-paid workers would be encouraged to stay in work with the aid of supplementary benefits, thereby avoiding being caught in a welfare trap which made it more lucrative to be unemployed and on benefits rather than in employment . The unemployed would simultaneously be taken out of the poverty trap. Jobcentres would be transformed into places staffed by work coaches, helping people to identify work opportunities, rather than by staff employed mainly to police the benefits system. Back-to-work programmes would be developed to provide viable options for those seeking jobs, especially the long-term unemployed.
Universal credit replaced the six so-called legacy benefits: Child Tax Credit, Housing Benefit, Income Support, Income-based Jobseeker’s Allowance, Income-related Employment and Support Allowance, and Working Tax Credit). It is a means-tested benefit for people of working age, between 18 years and the State Pension Age, although some 16 and 17 year olds are also potentially eligible. People who are either out of work or on low incomes are supported through Universal Credit with their basic living expenses and housing costs.
Applications for Universal Credit are made online. There is a five-week waiting period, consisting of a one-month assessment period and a further week for payment to be made into a bank, building society or credit union account. It is possible to apply for an advance to cover bills and expenses while waiting for the first payment. Payments are made on the same date once a month, and consist of a standard allowance and additional payments to cover looking after children, private childcare costs, disability or a health condition, caring for a severely disabled person, housing costs, along with other forms of discretionary financial support.
However, a simplistic solution to a complex problem, and an ambitious timescale for implementation, led to escalating costs and invited criticism from the National Audit Office of “weak management, control and poor governance.” The problem was subject to IT glitches from the very onset. By April 2013, £303 million had been disbursed to four IT suppliers contracted to design the Universal Credit systems. Roll-out was delayed and the project fell years behind schedule as the IT issues were being addressed. The need for online application disadvantaged those without ready access to a computer and those not computer-literate. The five-week wait for the first payment led to financial hardship and increased debt for many. Furthermore, it was alleged that some working families, previously on Tax Credits, could find themselves worse off under Universal Credit.
Universal Credit also does not bring together all existing benefits. It may need to be supplemented with additional benefits, including Council Tax Reductions, Personal Independence Payments, Disability Living Allowances for disabled children, and contribution-based Jobseeker’s and Employment and Support Allowances.
The British welfare system is undoubtedly in need of fundamental reform. In this context, no one can take issue with equitable means-testing procedures nor with the desire for a simplified benefits system, one less prone to both error and fraud. However, from the perspective of those most needy and thereby the most vulnerable, the Universal Credit system has yet to deliver on what superficially appears to be an improvement on pre-existing benefits and Tax Credit systems.
Ashis Banerjee