Do Labour’s proposals for a Universal Credit shake-up shape up?

Posted in: Economics, Political ideologies, UK politics, Universal Credit, Welfare and social security

Dr Rita Griffiths is a Research Fellow in the Institute for Policy Research (IPR) at the University of Bath. Jane Millar is Professor of Social Policy in the IPR. With Marsha Wood (IPR), and Fran Bennett (University of Oxford), they are working on a three year, ESRC-funded, longitudinal research study exploring the impact of Universal Credit on couples with and without children (ES/R004811/1).

The Labour Party’s announcement on 27 September that it would ‘scrap’ Universal Credit needs careful unpicking. Statements made by Jeremy Corbyn and Margaret Greenwood propose to ‘immediately end the worst aspects of Universal Credit’. The intention to re-purpose and reinvigorate social security is also refreshing and bold. Proposals to reform delivery into a system that treats people with ‘dignity and respect’ are to be welcomed. Scotland is already providing something of a model for how to do this. And the proposals for a tailored package of employment support is a reminder of the more people-centred conditionality regime of previous Labour administrations.

Alongside these longer term aims to rebuild the social security system are a set of immediate ‘emergency’ measures. These include ending the benefit cap; the two child limit and bedroom tax; suspending the punitive sanctions regime; replacing the ‘Claimant Commitment’; uprating Employment and Support Allowance and Carer’s Allowance; and ending the outsourcing of the Work Capability Assessment. These are significant reforms, if enacted, with scope for increasing household incomes, reducing poverty and improving lives. They address some of the more egregious aspects of welfare policy enacted by the Coalition government and subsequent Conservative administrations, but are not specific to Universal Credit. Some of the rhetoric about scrapping Universal Credit clearly stems from Labour wanting to distance itself from a Conservative flagship policy. But in fact, the proposals which relate only to Universal Credit are relatively few, and in sum a far cry from scrapping the benefit, as noted by the IFS for example. And are these the right proposals for tackling the key problems with Universal Credit?

Ending the current five week wait by introducing an automatic interim payment would represent a significant Universal Credit reform, so too ending the ‘digital’ only application process, both of which would affect new claimants. However, further detail will be needed. It is unclear as to whether the interim payment is a repayable loan, as is the case for the current advance, or if the online Journal used for the on-going self-management of the claim would be scrapped or retained, for example. However, these proposals will undoubtedly be welcomed by front-line welfare organisations including the Trussell Trust, Citizens Advice and CPAG, all of whom have campaigned tirelessly for such changes.

The proposal to split payments to couples and introduce ‘fortnightly’ payments and rent payments direct to landlords, by default, may receive a more equivocal response. Universal Credit claimants in Scotland have been able to receive the payment monthly or twice-monthly (as opposed to fortnightly; a technical but not insignificant distinction) and to have their rent paid direct to their landlord for some time. In Northern Ireland, the default position is to pay Universal Credit twice monthly but claimants can switch to a monthly payment if they prefer. Couples can also request to have the payment split between them.

Interviews we recently conducted with Universal Credit claimants as part of a longitudinal ESRC-funded research project (Couples balancing work, money and care) show that those who switched from monthly to twice monthly payments sometimes switched back after finding that two benefit payments interfered with monthly rent and direct debit payments. Those who relied on Universal Credit as their only source of income did generally find a single monthly payment harder to budget, but often the issue was as much about the low amount of benefit received as the frequency of the payment; after deductions for rent, advance loan repayments and historical benefit over-payments, some were left with little or no money to live on.

After consulting widely and engaging with women’s organisations and academics, the Scottish government is still deliberating over different payment options for couples. Their caution reflects the complexity of the matters at stake and the recognition that splitting the Universal Credit payment to couples by default potentially raises as many issues as it seeks to resolve. It is also unclear how a split or separate payment to couples sits alongside also paying the child element to the lead carer; another of Labour’s proposals. In our study, rather than splitting the payment, couples with children typically expressed a preference for paying the whole of the Universal Credit award to the nominated lead carer, although the symbolic importance of ensuring that each member of couple received some share of the payment was not lost on them. Couples without dependent children in the household, who were mainly unemployed, generally had a greater appetite for an equal splitting of Universal Credit, but only after the rent had been paid.

Early findings from our research are also showing that while the financial hardship caused by the five week wait was the most pressing issue affecting claimants newly moved onto Universal Credit (either from legacy benefits or due to a change of circumstance), budgeting for unexpected, automated deductions from the Universal Credit award and coping with unpredictable, month-to-month fluctuations in the Universal Credit payment was harder still, particularly among working families. Indeed, about working claimants very little has been said. Also noticeably absent from Labour’s proposals are any measures for reforming the childcare element of Universal Credit. In our research, the potential for variability in means-tested financial help with childcare costs, which is assessed and paid monthly in arrears under Universal Credit, compared unfavourably with the simplicity and security of the previous tax credit system of childcare payments.

The most radical Labour Party proposal by far – to reduce the assessment period to one week - lies deep in the text. No details are provided for how such a technically challenging change would (or could) be operationalised, although there is a warning that ‘because this will require a rebuild of the DWP system, it may take time.’ Indeed it would, and this gets to the heart of dilemma facing the Labour Party. Any genuinely radical reform of Universal Credit - including changing the monthly assessment period – will necessitate a fundamental redesign of the system architecture; achievable but costly, technically complex and likely to take a long time to deliver. Understanding how any proposed policies will actually impact on the intended beneficiaries in a variety of employment and family circumstances, and over time, is thus absolutely key.

Labour will need to pay careful attention to relevant research, both in the UK and further afield (for example Australia, which has long-standing experience of operating a dynamic, means-tested benefit system, not unlike Universal Credit), to the street-level knowledge of the welfare rights and voluntary sector (who have been doing so much to help people navigate Universal Credit) and – most importantly – to the lived experiences of the people who are current and future recipients.

It is almost a decade since the White Paper announcing Universal Credit and it has yet to be rolled out to two thirds of potential recipients. Scrapping the whole thing and rebuilding could also be a long and complex process. It is imperative to get this right, or risk that millions of low-income people will face further insecurity, uncertainty and stress.

Posted in: Economics, Political ideologies, UK politics, Universal Credit, Welfare and social security


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