Universal Credit. Can we fix it? Should we fix it?

Posted in: Business and the labour market, UK politics, Universal Credit, Welfare and social security

Professor Jane Millar is a member of the Institute for Policy Research (IPR) Leadership Team, in addition to her role as Professor of Social Policy at the University of Bath.

The Work and Pensions Select Committee has just opened a new phase of their ongoing enquiry into the roll out of Universal Credit. The Committee has identified a list of ‘priorities’ for ‘next steps to fix Universal Credit’. Five main areas are identified: self-employment; free school meals and passported benefits; work incentives, including both the work allowance and the taper rate; the locally delivered Universal Support system; and support for childcare costs in Universal Credit. The list does not tackle some of the most challenging changes such as the monthly assessment and the impact of a single monthly payment (see Dr Rita Griffith’s discussion here). Nevertheless these are some major areas at the heart of Universal Credit, not just issues at the margins.

This follows hot on the heels of the Resolution Foundation's ‘remedy’ report, which sets out 16 recommendations under four main headings: implementation (7 recommendations); generosity of support (1 recommendation); financial incentives to enter work (3 recommendations); and financial incentives to progress (5 recommendations). Again these are major areas. From Policy in Practice, the ‘options to improve’ cover 11 areas, including some of the more technical detail, such as the waiting period; backdating; changes in circumstances; self-employed earnings; deductions and recoveries; Discretionary Housing Payments; treatment of tenants in the private rented sector; temporary accommodation; job search and claim management; rapid reclaim; and local advocacy and support. And this is not the end; there are many other people and organisations with ideas about how to fix Universal Credit. Gingerbread, for example, identifies seven areas particularly related to the needs and circumstances of lone parents.

There is, of course, quite a lot of overlap in the proposals. Everyone has argued in favour of reducing the waiting days and a change on this was announced in the 2017 Budget (paragraph 7.3). And, to be fair, some of the other proposed changes may well have applied to the legacy benefits as well. But still, that’s a lot of fixing. The various lists of priorities are extensive and cover many aspects of the design and the delivery. One might be forgiven for thinking that something that needs quite so much fixing is, perhaps, not really fit for purpose in the first place.

There is also another important question. Not just can we fix it, but should we fix it? What’s the ultimate gain that will be worth all this time and money, and hardship for claimants along the way? The answer from the government is that yes it’s worth it because Universal Credit will ensure that work always pays and will achieve three important goals: it will make people out of work search harder for jobs; it will increase the number of people in employment; and it will improve employment retention and progression.

But there is very little solid evidence so far to judge these claims. The most recent DWP employment impact analysis update (September 2017) uses carefully designed methodology to compare matched groups of Universal Credit and Jobseeker’s Allowance claimants in selected labour market areas. This does indeed show that the Universal Credit claimants were ‘three percentage points more likely to be in work six months after their claim had started... UC claimants are four percentage points more likely to have been in work at some point within the first six months of making their claim’. The report states that this is a ‘sizeable impact for a policy of this nature’; but others might not agree with this judgement, and there is no discussion of the costs of achieving this. And – most crucially – this conclusion about the positive labour market effects is ‘limited to single unemployed claimants without children’ compared with others on one particular benefit. We know nothing yet about the labour market outcomes for other groups of claimants, such as lone parents, couples with and without children, and disabled people. These groups will make up the vast majority of the Universal Credit population.

The main headline figure from the government is that Universal Credit will mean an extra 250,000 people in work. The Bishop of Durham asked the Secretary of State to publish the evidence supporting this statement. The written parliamentary answer does not quite answer the question as posed, but does identify and quantify those features of Universal Credit which, it is argued, will increase employment. Three estimates are given. First, about 150,000 people will move into work due to the impact of increased financial incentives. Second, about 50,000 people will move into work as a consequence of being brought into the extended conditionality regime. And finally, another 60,000 will move into work due to the effects of the ‘smoother’ transition into work achieved by the single system of working-age benefits.

These estimates are for Universal Credit in ‘steady state’, which presumably means once the roll out is completed. They are based on analysis from the DWP Policy Simulation Model, and on evidence from research and evaluation evidence of previous ‘similar’ reforms. It is not easy, from the information given, to judge the robustness of these estimates; and, again, we don’t have anything to tell us the costs of achieving these. They also depend, of course, on the financial incentives not being further eroded by benefits cuts and freezes, on the operation of the conditionality regime, and on the delivery of the ‘smooth transition’ for all claimants.

And what of in-work progression? In many ways this is the top prize. If Universal Credit can help low-paid workers improve their wages, and their jobs more generally, this would be an important outcome that could really improve incomes and lives. But we should be cautious about whether this is likely to happen. The Social Security Advisory Committee (SSAC) has just (November 2017) published a report on in-work progression and Universal Credit. This points out that ‘there is very little evidence as to what can be done to advance earnings progression – either in the UK or in other countries’ – and that the DWP Randomised Control Trial, which is the main source of evidence so far, ‘has mostly involved single childless people who have progressed from unemployment into low paid work’. Again, we know very little yet about the other groups. The report argues that we need a much better understanding of the circumstances of those currently in low-paid work and further development and specification of the role of the work coaches, their skills and the tools available to them. Mike Brewer and Jonathan Cribb have recently re-examined the impact of two policy measures for lone parents aimed at employment retention in the early to mid-2000s (the ‘in work credit’ and the ‘Employment Retention and Advancement demonstration project’). They conclude that these did have a positive impact over a period of about four years, especially on full-time, rather than part-time, employment retention. They stress the importance of both financial incentives and personal advice. But, like SSAC, they conclude that we simply do not yet know enough about how to support people to progress in work. There is a big policy and research agenda here, and ensuring that all Universal Credit recipients receive the best possible advice and support will be a major challenge.

So, there is a lot of fixing to do, and several leaps of faith that, fixes all in place, Universal Credit is the best – most efficient and most effective – way to achieve the stated policy goals.


Posted in: Business and the labour market, UK politics, Universal Credit, Welfare and social security


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