Universal Credit and the welfare system: How do the parties compare?

Posted in: Democracy and voter preference, Economics, Political ideologies, Public services, UK politics

Rita Griffiths is a Research Fellow in the Institute for Policy Research (IPR) at the University of Bath. She is currently working on the ESRC-funded research project, ‘Couples balancing work, money and care: exploring the shifting landscape under Universal Credit’.

The Green Party

Let’s start with the Greens, the only party to put forward a radical agenda for the welfare system. Their big policy idea is to introduce a Universal Basic Income (UBI) worth £89 per adult week. Families with an income of under £50,000 per year will receive an additional supplement of £70 per week for each of their first two children and a further £50 per week for each additional child. Families with an income of over £50,000 per year will receive smaller additional supplements per child, with the amount decreasing further the more a family earns. If implemented, the Green Party’s proposals would dramatically transform the existing social security system, plugging gaps in the safety net (for unpaid carers, for example), enabling each partner in a married or cohabiting couple to receive an independent income and reducing the harmful effects of a punitive and bureaucratic conditionality regime.

The amount proposed for UBI is more generous than existing means-tested benefit standard allowances (for old style JSA, ESA and Universal Credit). However, it falls significantly short of replacing the full range of disability benefits and payments towards housing costs and childcare subsidies. While making the scheme look more affordable, the retention of means-testing compromises aspirations for simplification and a radical replacement of the existing system with a truly universal and unconditional alternative. Even as they stand, their proposals would come at a significant fiscal cost. Carbon taxes will be directed to fund the basic income, and the manifesto also commits to reforming the tax system by cracking down on evasion and legal loopholes exploited by the wealthy. But the need for higher payroll taxes, as demonstrated by microsimulation models of similar schemes, is likely to generate significant political opposition even among those on the left.

The Liberal Democrat Party

Whether or not you agree with a UBI, the policy is at least forward-looking and seeks explicitly to engage with the changing nature of work. Liberal Democrat proposals for social security, by contrast, seem weirdly old-fashioned. A right to food enshrined in law feels positively Dickensian, conjuring up state-sponsored soup kitchens Oliver Twist- style. Reinvigorating the employment support functions and resources of Jobcentre Plus largely mirrors Labour Party proposals which themselves hark back to the more kindly, people-centred employment support programmes of the Blair and Brown era. Separating benefits administration from employment support would be a nostalgic return to the 1990’s when the Benefits Agency and Employment Service were established as independent executive agencies of the Department for Social Security and Department of Education and Employment. Implementing such a policy would be incredibly costly and the proposal seems rushed and ill-thought through.

Their proposals for reforming the more egregious aspects of previous Coalition and Conservative government’s welfare reform policies are more considered, if somewhat disingenuous given the Lib Dems role in voting these through when in government. Like Labour, they are pledging to end the benefit freeze, bedroom tax and two child limit. Universal Credit reforms include reducing the wait from five weeks to five days and making the benefit ‘more supportive of the self-employed’ though without revealing whether this means more money or more advice. Their big proposal is to introduce a second earner allowance in couples with children, something many organisations, including the Resolution Foundation, have been advocating for some time, but which no other party has responded positively to.

The Labour Party

Aside from its pledge to end austerity, the Labour Party’s big policy idea is to ‘scrap Universal Credit,’ but the manifesto fails to say what would replace it. Their cautious proviso that ‘major policy change can’t be delivered overnight’ is prudent, but there is little evidence of the earlier promised ‘root and branch review of the entire social security system.’ In its place is a rather vague commitment to ‘an alternative system that treats people with dignity and respect’ and guarantees ‘a minimum standard of living.’ Proposals for a UBI seem to have been put on a back burner, although a series of trials would test the feasibility of a UBI, with Liverpool identified as a possible location for the pilot.

Pledging to stop the roll out of Universal Credit, the main focus is an emergency package of reforms designed to mitigate some of the worst features of the government’s harsh and austerity-driven welfare reform programme. Proposals include ending the benefit freeze, benefit cap, two child limit, bedroom tax and sanctions regime. The Local Housing Allowance would be increased and work capability and disability assessments currently contracted out to the private sector would be brought in-house. These changes, if enacted, will help to increase household incomes and reduce poverty, but they are not specific to Universal Credit. Ending the five-week wait by introducing an interim payment and paying upfront childcare costs are, so too is the offer of telephone, face-to- face and outreach support for people claiming Universal Credit. Other proposals relate to the Universal Credit payment regime including the introduction of fortnightly payments, and splitting the award to couples. 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. Universal Credit claimants in Scotland can already choose to receive the payment monthly or twice-monthly and to have rent paid direct to their landlord, but after consulting widely, the Scottish government has yet to be convinced that splitting the payment between the members of a couple is the right thing to do. It is also unclear how a split or separate payment to couples sits alongside paying the child element to the primary carer in couples with children, another of Labour’s proposals.

Interviews we recently conducted with Universal Credit claimants as part of a longitudinal ESRC-funded research project (Couples balancing work, money and care) indicated that in couples with children, splitting the payment was something of a red herring given online and mobile apps which allowed them to pool and manage their finances regardless of which partner received the payment. Couples without dependent children generally had a greater appetite for an equal splitting of Universal Credit, but once the rent and important bills had been paid, often there was little left to split. Some Scottish claimants who switched from monthly to twice monthly payments reverted back after finding that two benefit payments in a month interfered with rent and direct debit payments. Overall, though many claimants did find a single monthly payment harder to budget, the issue was more about the low amount of benefit received as the frequency of the payment; after paying the rent and deductions for advance loan repayments and historical debts, some found they regularly ran out of money before the end of the month.

In many respects, the reforms advocated by Labour are not dissimilar to those of the Lib Dems, both of which represent a catch-up with the Scottish National Party whose social security system underpinned by ‘dignity, fairness and respect,’ has been rolling out for a number of years. Actual proposals for Universal Credit fall a long way short of scrapping it and fail to get to grips with the automated and algorithmic nature of the benefit. This gets to the heart of dilemma facing the Labour Party. Scrapping Universal Credit and starting again, as the Coalition government were forced to do in 2013, would require a fundamental redesign of the system architecture - a massively costly and complex exercise. The risk is that doing so could mean millions of low-income people will face further insecurity, uncertainty and stress.

The Conservative Party

Continuing to roll out Universal Credit is the uninspiring ‘centrepiece’ of the Conservative Party’s proposals for social security. While offering to “do more to make sure that Universal Credit works for the most vulnerable … while making sure it pays to work more hours”, no specific policy proposals are put forward. But if Therese Coffey’s voting record on welfare reform and recent spat with members of the Work and Pensions Committee is anything to go by (she said her constituents would give Universal Credit 9.9 out of 10), the fifth Secretary of State for Work and Pensions in the past three years looks set to be significantly more hard-line than any of her predecessors.

So what’s missing?

Noticeably absent in these manifestos is any mention of Child Benefit. Introduced by Barbara Castle in 1975 as a universal payment for each child in a family (though now means-tested for families earning more than £50,000 per annum), it is an incredibly simple and cost-effective way of helping families with children, with a take up rate consistently higher than any other social security benefit. Paid to the main carer, Child Benefit not only provides many women with one of the few independent sources of income available in the social security system (another being the state pension), but is one of the most efficient and effective ways of ensuring that benefits intended for children actually reach them. The weekly rate of £20.70 for the eldest child and £13.70 for each additional child has been frozen since 2010. A large uprate is long overdue.

With exception of the green’s UBI proposal, a policy not without its many critics, there appears to be little on offer in any of the main political party’s manifestos that we’ve not heard before. A more fundamental reform of social security would be to redesign it along the lines of the tax system. The UK system remains doggedly wedded to outdated notions of breadwinning men and stay at home wives, anachronistically obliging one partner in a married or cohabiting couple to be financially dependent on the other. Separate and independent treatment of men and women regardless of their marital status or living arrangements, on the other hand, together with the underlying principle of women’s financial independence, has been embodied in UK fiscal rules since 1990. Why not extend the same principle to social security? Now that would be radical.


This blog is part of the IPR 'General Election 2019' blog series. Visit the IPR blog to read more. 

Posted in: Democracy and voter preference, Economics, Political ideologies, Public services, UK politics


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