Making it Work: the Future of Universal Credit

Posted in: Welfare and social security

Dr Rita Griffiths is Research Programme Lead for the IPR.

What will the future hold for universal credit (UC) in 2017? Its rollout to date has largely been restricted to single applicants, many of whom have no housing costs because they are still living at home. Next year, UC will be increasingly extended to couples and families with children whose needs and circumstances will be considerably more complex, thus presenting the policy – and the households receiving it – with many more challenges to negotiate.

This expansion will begin to test more rigorously the extent to which UC’s much-lauded real-time information system is genuinely fit for purpose. Some predict this will be the policy’s ultimate downfall – the system will collapse under the weight of administrative complexity, unable to cope with fluctuations in earnings and the messiness of people’s lives and changing circumstances. This may well be UC’s destiny. A not dissimilar fate awaited the first incarnation of tax credits, working families tax credit. Introduced in 1999, it underwent radical reform barely three years after implementation due in large part to the inability of the system to respond flexibly and fast enough to people’s changing circumstances.

However, another no less significant design flaw lies waiting in the wings: the removal of the administrative distinction between being in and out of work. Unlike the current tax credit system, entitlement to UC for working people begins with just a single hour of work. By linking means-tested financial help to earnings rather than hours worked, this design feature is intended to smooth the fluctuations in income arising from movements into and out of employment, with the aim of reducing financial uncertainty and risk when people make the transition from benefits to work – an admirable goal. The system has also been deliberately designed to ensure that unemployed people and those working only a small number of hours will always be incentivised to work more – a similarly laudable objective (though justifiably not without its critics, given the risk of simply oiling the wheels of an increasingly casualised labour force).

Merging in-work and out-of-work benefits into a seamless, unified system may seem like an elegant policy but the problem is that the trade-off needed to achieve it involves extending the reach of Universal Credit further and deeper into the working population than any other social security system or earnings top-up scheme has ever ventured – anywhere in the world. An estimated three million low-income working households – the very hard working and ‘just about managing’ families that Theresa May’s government is meant to be helping, and who would formerly have remained outside the system of behavioural conditionality – will be drawn into its unyielding embrace.

With entitlement to UC comes a new raft of mandatory obligations. Work conditionality will be extended to low-paid working adults and their partners for the first time. Those whose earnings fail to reach the minimum earnings threshold – equivalent to 35 hours’ work at the national minimum wage for single adults and both members of a couple with children over the age of 11 – will be required to attend mandatory Jobcentre Plus meetings where they must demonstrate they are actively seeking to find more hours, better-paid work, or a second job. Only designated carers of children under the age of one will be exempt from this. Fines and sanctions for non-compliance accompany these rules. For couples, the hours of work, earnings and compliance of one partner will crucially affect the conditionality requirements imposed on the other.

While, therefore, it is legitimate to challenge claims of ‘simplification’, promoting ‘independence’ and ‘making work pay’ as hubris, we should not be lulled into thinking UC is simply old wine in new bottles. Make no mistake: in-work conditionality really is new and different. Crucially, it turns on its head the policy intent of working tax credit, designed as remuneration and a reward for work rather than a state benefit. Paid directly into the wage packet via the employer, the aim was precisely to avoid state interference in family life and to distance the payment from the stigma attached to claiming out-of-work benefits. No one yet knows how the requirement to attend mandatory jobcentre meetings, work longer hours or get a second job will be greeted by people who are already working, or the female partners of low-earning men who would prefer to stay home to look after their children. Randomised control trials currently underway are shrouded in secrecy, and with good reason if media reports of a working mother sanctioned for going on holiday are to be believed.

Only time will tell, but my prediction for 2017 is that without a radical rethink, current proposals for in-work conditionality may well prove to be Universal Credit’s undoing.

This article originally appeared in edition 23.3 of Juncture, IPPR’s quarterly journal of politics and ideas.

Posted in: Welfare and social security

Responses

  • (we won't publish this)

Write a response

  • Universal Credit is based on lies and falsehoods, e.g., all applicants will have one month of wages, paid in arrears to them from their last employer, sufficient to cover living expenses and rent until their first UC payment in five weeks to several months: under exceptional circumstances those not in such a happy situation, and many won't be, they may be eligible for an "advance" in the form of a loan, which has to be paid back later, quite possibly via deductions from future Universal Credit entitlements themselves.

    So the most desperate, vulnerable and poorest Universal Credit applicants will be plunged into rent arrears and/or debt because of the pernicious design of Universal Credit itself.

    Nice.

    As for in-work conditionality, could anything be more incredulous? Many of those affected will be working variable hours, not knowing from one week to the next when they will be working or for how long. Under circumstances like these how could they possibly take on another job with some other employer, not knowing when they would be available and on what days? And suppose some person is working two or more jobs and had their hours extended by one employer, causing a clash with hours worked in other jobs? Which employer should the worker choose to please when to work more hours with one employer they have to work less for another?

    Another flaw with in-work conditionality is that is takes no account of travel necessary to move from one work location to another, nor of the costs involved. On Universal Credit 65% of any earnings below the threshold are deducted from entitlements, e.g., if you work for three hours on the minimum wage you only keep £6.48 of your earnings, and so if you need to take a train or a bus from one job to another and only work short hours not only won't you be much better off you could actually be worse off!

    Universal Credit is riddled with holes and probably never will be fit for purpose. It was a good idea which has ended up ruined by the introduction of ever increasing complexity, preposterous conditionality and a draconian sanction regime. Best the government bite the bullet, scrap it, learn lessons from the farrago and try to do better next time.

    In practice, as far as the poorest are concerned, the effect of Universal Credit has been cancerous.

  • All very true, Universal Credit represents a significant change in the benefits system, and the way it functions.
    I don't think however that it likely to be scrapped anytime soon as the article suggests. This is as much an ideological change as anything else, directed against 'lifestyle benefits'. The difficulties and problems of the system were well-known beforehand, and despite considerable suffering, including deaths & suicide were pushed through anyway by government.

    • UC is designed not to pay out if at all possible. 7 "waiting days" at the start of a claim. Waiting for what? Claim will not start until you are paid from last job, so if a week in hand that's 2 weeks with no money owed from UC. If you get paid in the monthly assessment period it is easy to wipe out the allowance altogether, so again no money. JSA is far superior, BUT costs the DWP far more money as it pays out instantly for every week not worked regardless of how much you earn in those weeks. That is all UC is about, saving money, making YOU pay for your own benefit, making it so hard to claim that you would rather have a job.

  • They already know it's going to fail but the intention is to save the government money in pay-outs. Unfortunately many people will simply go into crime big time, cannabis farms, robberies, frauds, you name it .. some are already. The police aren't that interested in proper crime and pass it off as "civil" where they can and simply make it hard to report or by not doing anything it just affects your insurance negatively so you don't report it. Then the police tell everyone "crime is going down"
    Not just that I expect that mental hospitals and prisons will fill up and some of the job centre workers will be attacked and possibly even murdered.

    Surprised to be honest that they haven't been yet!

  • I have had nothing but trouble with universal credit. I have a long term health condition but somehow failed my ESA assessment and was told to apply for universal credit. I was told to provide a sicknote at my first interview which I did. My 'work coach' said it didn't stand for anything and told me the DWP would tell me what I had to do. I was told I needed to get a job at 35 hours a week with no consideration that I have been long term sick for over 30 years!! i went on and found a job 12 hours a week. By the second shift I was having major problems with my back and have now been placed on the sick by my GP. ( I shouldn't have been there in the first place) I have since found out I was placed in the wrong category which has now been corrected but can't give up the job because they will apply sanctions to my benefits and told to wait for the company to get rid of me. I'm not allowed to take another job that's less hours or pay even though it may be more suitable for my condition. I have never felt so frustrated in my entire life. What a mess. Nobody on the helpline can give you a straight answer, majority of them are rude or ignorant, treating everyone as a second class citizen. It is causing a lot of stress and anxiety for many people.