Dr Kate Summers is a Fellow in Qualitative Methodology in the Department of Methodology at The London School of Economics and Political Science (LSE). David Young is a PhD Candidate in the Institute for Policy Research (IPR) at the University of Bath.
"At its heart, Universal Credit is very simple", Iain Duncan Smith, Work and Pensions Secretary, 2010.
2019 started with another announcement that Universal Credit (UC) is being reset and rethought. While some of the changes being introduced are welcome, piecemeal policymaking draws our attention away from the bigger picture. We want to return to one of the principles underpinning UC: simplicity. In his short introduction to Universal Credit in 2010, Iain Duncan Smith made it clear that simplifying the “complexity of the existing benefit system” is a central tenet of welfare reform. Complexity will be “cut through” and the system will be “streamlined”.
Currently, however, claims of simplicity can only be sustained if UC is considered at a superficial level: one monthly payment per household, delivered by the Department for Work and Pensions, with a single taper rate, and with the amount calculated and adjusted monthly. But if we consider the system in any detail and from a claimant perspective, claims of simplicity fall away.
Administering a single payment that must account for multiple circumstances and contingencies shifts complexity behind the scenes. UC brings together six different means-tested benefits for people of working age, each with its own rules, entitlements and administration. As a new ‘all-in-one’ benefit, UC must encompass this complexity. Even when just looking at means-tested social security benefits, there are many reasons why people claim: unemployment, sickness, low-pay, childcare responsibilities, housing needs; within these broad contingencies are many other interacting reasons. By having an all-in-one working-age benefit that accounts for many contingencies, administrative complexity is inevitably shifted from front-stage to back-stage.
Claimant simplicity and the importance of short-termism
What about the claimant experience of simplicity within a changing policy environment? We draw on evidence from two empirical studies to examine one element in particular: the single monthly payment under Universal Credit. Monthly payment is based partly on the evidence that three quarters of people in the UK are paid their work income monthly, making the move from benefits to work purportedly easier by aligning social security payments with ‘the world of work’. However, when looking at those earning less than £10,000 a year, around half of workers are paid more often than monthly, raising questions about how successfully Universal Credit fits with the reality of the lives of low-income claimants. There is also evidence of longstanding budgeting processes developed by those on a low income that centre around the regular receipt of different sources of income for whom monthly payments pose significant challenges.
In the first research by Kate Summers, 43 claimants in receipt of the ‘legacy’ outgoing payments were interviewed. People spoke about how they organised their money, and the majority were oriented around short-term (days and weeks) timescales that were bolstered by the ‘pay days’ of the legacy benefits (these overlap and span from weekly, to two weekly, to four weekly). Three main notions underpinned this short-termism: 1) the ability to establish some degree of security by managing and planning in the short-term; 2) conversely that short-termism was essential as a matter of survival when, as one participant put it, “you’re budgeting pennies”; 3) meaning that inevitably money is experienced highly transiently and “just goes”. Only seven of the 43 participants talked about managing their money on slightly longer term timescales (weeks and months). However, these participants tended to be in work, they were paid monthly and had opted to receive their tax credits four-weekly.
The second, ongoing research by David Young involved 15 households claiming UC and legacy benefits over a three-month period. Seven of those households adopted weekly budgeting periods, four adopted two-weekly budgeting periods and four adopted monthly budgeting periods. The most common reason for short-termism was a sense of control in the face of unstable and inadequate income. The most common reason for monthly budgeting was experience of a monthly income and regular monthly bills.
The importance of dividing and earmarking money
It is not just the shift from predominantly shorter-term means-tested benefit payments to a monthly payment, but also the shift from multiple payments to a single payment under UC that matters. There has been growing recognition that people divide up and ‘earmark’ their money for specific purposes, going against assumptions of standard economic theory. Kate’s research found that participants engaged in complex earmarking practices to separate out money, in order to allocate and protect different amounts for different purposes. The ‘pay days’ of different benefit payments acted as crucial organisational markers. Within the timings of these ‘pay days’ participants tended to broadly distinguish and separate money for ‘family’ or ‘living’ costs from ‘bill’ money. They used various tools to enforce this distinction, including separating, stashing, and storing cash, as well as keeping and moving money in between bank accounts.
Within David’s work, pay dates were also crucial to those who constructed informal saving and borrowing arrangements with friends and family according to different pay days. David’s work also highlighted how claimants drew distinctions between the different administrative elements of UC, which included their ‘standard allowance’, housing costs, childcare costs, and disability related costs. Despite being paid in one lump, claimants sought to section out their money. This distinction had practical meaning in the lives of participants claiming Universal Credit such as participant G who said:
"I’m going to keep having to borrow money to pay the rents because Universal Credit are not paying the rent properly." (Participant G)
Despite Housing Benefit being amalgamated into Universal Credit, claimants still distinguished, and prioritised receiving the correct entitlement for housing costs. Arguably, claimants now face further complication as they must check the amount, and top up what is missing or what they are not entitled to.
The evidence shows that social security recipients have developed effective tools and processes to make ends meet while in receipt of meagre means-tested payments: the monthly payment design of UC pushes against many of these strategies. Moreover the earmarking tools and short-term orientations are sometimes seen as deficiencies to be fixed with money management education and training. Instead they should be recognised for what they are: astute responses to managing on a very low income.
Within the current ‘re-think’ period, there remains a powerful consensus that Universal Credit is, or at least can be, simple. While certain administrative simplification still has the potential to improve a system widely seen as too complex, this must be considered alongside claimant experience. Claims of simplicity can often mean that complexity does not go away but is shifted out of sight, backstage. We argue that with Universal Credit, the complexity of managing to make ends meet on a very low-income cound end up being shifted onto those that can least afford it: the claimants themselves.
This post was originally published via LSE British Politics and Policy on 4 February 2019.