Reaping the benefits of Social Security reform

Posted in: Universal Credit, Welfare and social security

In this piece, Professor Jane Millar sets out three priority areas for a comprehensive review and a new vision for social security in the UK. Jane Millar is Emeritus Professor of Social Policy in the Institute for Policy Research (IPR) at the University of Bath. This blog was originally published by the Academy of Social Sciences via their Election 24 Hub

Social security benefits have been cut significantly in the austerity years. Means-testing has moved centre stage. Conditionality rules and sanctions are built into the system. So are benefit deductions. We need a new vision and a clear plan.

This should include principles to guide policy and delivery. Ruth Lister summarises these as including universality, adequacy, dignity, respect, non-discrimination, and gender equality.

We also need to recognise what social security cannot do. Beveridge’s social security plan assumed there would be family allowances, high levels of employment, and accessible universal health services. We still need these. And more – fair wages and employment conditions, good quality and affordable housing (including basic amenities), universal and free childcare provision. This would reduce the demands on social security.

Three priority areas

Immediate action is needed on several fronts. My list focuses on non-pensioners, see the recent IFS discussion of pension reforms.

1. Benefits for families with children

There are 4.2 million children living in poverty in 2021/22 (equivalent household income below 60% of the median, after housing costs).

Parents seek to protect their children from poverty, often at the expense of their own health and wellbeing. But childhood poverty has both immediate and longer-term consequences. Children in poverty go without the basics of adequate food, clothing, homes, and heating. They miss out on everyday activities such as play, outings, sports and clubs, and school trips.  Over the longer-term there are impacts on health and life expectancy, on educational experience and attainment, and on job opportunities and wages.

Tackling child poverty requires a wide-ranging approach across many areas of government, national and local. But more money to families with children is an essential element in any child poverty strategy.

Child Benefit is the best way to do this. It provides a non-means-tested and regular payment. The current rates (2023/24) are £24.00 per week for the eldest or only child and £15.90 for other children. Child Poverty Action Group recommend an increase of £20 per child per week.

The Higher Income Child Benefit Charge claws back some of the benefit from families where the highest earner has an income above £50,000. It adds significant administrative burden to families and HMRC and creates very high marginal tax rates. The charge should be abolished so that Child Benefit can return to being a simple and universal financial contribution to the costs of raising children for all families.

Also in line for immediate abolition are the benefit cap and the two-child limit. Both restrict the amount of benefit that families can receive. This hits large families particularly hard and recent research concludes that these measures “reduce family income, increase hardship and place a strain on familial relationships and mental health”. Abolition would bring relief to many of the poorest and most hard pressed families.

2. Rebuild social insurance

Protection against interruption of earnings is a fundamental purpose of social security. Unemployment and sickness insurance benefits protect living standards, enable (re)training and skills development, allow for recuperation and rehabilitation, and improve job match when re-entering work. Social insurance benefits provide individual support, not means-tested and so not dependent on family circumstances.

There is growing support for reviving these benefits, to expand individual financial protection and to support labour market dynamics. The Fabian Society proposals would initially pay 50% of previous earnings for six months for unemployment and 80% for 12 months for sickness. They also propose similar insurance schemes for carers, for maternity and adoption, for parental leave, and for self-employment. The Resolution Foundation scheme focuses on unemployment benefit and proposes payments at 65% of previous wages, up to a cap set by median earnings, and for a fixed period of three months.

My preference would be for the longer time periods and wider coverage of the Fabian proposals. But either would be a start towards rebuilding social insurance as a main plank of social security.

3. Reform Universal Credit

Universal Credit takes up a lot of space. It is a mass means-tested scheme for millions of households. It is where DWP investment in IT and digitalisation has been focused. It is a benefit assessment and payment system, a work-first employment service, and a debt collection agency. It holds most of the policy attention.

The cost of living crisis and the extensive evidence of financial hardship has focused attention on the adequacy of Universal Credit. This has led to calls (from JRF/the Trussell Trust and from Daniel Edmiston and colleagues, among others) for immediate increases in Universal Credit rates. There are also calls (from Bright Blue and from IPPR) for an independent review of benefit levels and adequacy.

These are important measures. But it is not just the level of Universal Credit that causes difficulties and hardship for claimants, it also aspects of the design and implementation. The DWP rightly received much praise for the way it dealt with the huge influx of claims during Covid-19. The reasons for that success included the stripping away of anything not related to the assessment and payment of benefit. The system needs to be directed back to delivering that core purpose.

I draw my top issues for Universal Credit reform from areas that seem to cause the most problems:

This is already quite a long list but even so much is missing – carers and disability benefits for example. Carers UK proposes increased Carer’s Allowance with higher earnings disregards. Disability Rights UK supports replacing PIP (Personal Independence Payment) with a non-means-tested benefit to meet the additional costs of disability.

All this reinforces the need for a comprehensive review and a new vision for social security. In my view this should involve rebuilding universal and insurance benefits and reducing reliance on means testing.

All articles posted on this blog give the views of the author(s), and not the position of the IPR, nor of the University of Bath.

Posted in: Universal Credit, Welfare and social security


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