Social Security and Welfare Reform

Is Universal Credit worth saving?

  • Published: Sep 05, 2013
  • Author: Tom MacInnes
  • Category: Social Security and Welfare Reform

The National Audit Office (NAO) report ‘Universal Credit: Early Progress’ published today was as damning as is possible for such a report. It criticised the governance, planning and oversight of the whole project, whose initial timetable has slipped alarmingly and final delivery date of next Autumn looks exceptionally optimistic. The programme has had five managers since mid-2012, and the entire thing was placed on hold in early 2013 for a period because DWP hadn’t responded to previous problems. Despite the Secretary of State’s defence of the programme in parliament today, it is clear that Universal Credit (UC) is in big trouble. Is it worth saving?  

UC looked a good system on paper. When NPI were asked by the Centre for Social Justice to comment in 2008 on what was then called ‘Dynamic Benefits’, we were quite positive about it. The benefits seem clear enough – a simpler system that makes work pay. Who wouldn’t want these things? But as Dynamic Benefits became Universal Credit, both of these claims became less true.

Replacing six benefits with one is not as simple as it seems. If it were, DWP would not have needed to order special software just to calculate the benefits people were entitled to. Paying the housing element to the claimant is less simple than paying it to the landlord, however morally improving the discipline of monthly budgeting may be. And what UC simplifies, the bedroom tax and localisation of council tax support make complicated again. Simplification is far from a common theme in social security policy.

UC does indeed make work pay for those who are not currently in work by removing some of the very high marginal tax rates that those entering work face under the present system. But, following changes to the taper (the rate at which UC is withdrawn as earnings rise) this improvement is much less than originally envisaged. Moreover, while incentives improve for come, they get worse for others. Notably, incentives for a second adult to move into work are weaker under UC than under the tax credit system. So the idea of “making work pay” is actually rather a narrow one.

In fact, for most people the previous system did make work pay, but only if one looks at the strict comparison of wages and benefits. When things such as childcare and transport are taken into account, work becomes less advantageous. There’s nothing in UC to address that.

The very critical report from the NAO should be seen in this context. At what point are these gains claimed for UC outweighed by the losses? UC is currently in its pilot phase, and some of the data coming out of these pilots, particularly regarding the housing benefit aspects, is pretty worrying.

It would be wrong, though, to assume that scrapping UC would mean that nothing in the benefits system has changed. There were interesting comments from the programme director Howard Shiplee in advance of the NAO’s report.  He said:

“Too many people think Universal Credit is just about IT. That’s a big mistake. This is about changing the way we do business – and changing people’s behaviour by ensuring there is always an incentive to be in work. So while the enhanced IT option – which will help us deliver this change — is being finalised, we will press ahead with rolling out the cultural elements of Universal Credit to support this transformation.”

It’s easy to dismiss this as excuse making but the final sentence is important. The “cultural elements” include the new sanctions regime and the increased conditionality on people in work to look for more work. Whether or not these deserve to be called a “culture” is a separate question but these changes are a big deal. We’ve blogged previously on the huge increase in JSA sanctions even before the new regime came in. Imposing a similar system on people who are already in work but deemed not to be working enough is indeed a big shift (for more, see this report by the Resolution Foundation).

UC was oversold as a silver bullet to tackle poverty/worklessness/ benefit dependency, call it what you want. But the benefit system has only ever been one part of the problem, and reducing efforts to tackle such issues to a piece of software was always going to fall short. The “cultural changes” aren’t much help either. It’s obvious why the secretary of state would want to save UC – it’s his brainchild, he’s staked his job on it. But the rest of us aren’t duty bound to agree. Now is the right time to think about scrapping it altogether.     

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