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Keeping it simple: getting the Universal Credit back on track

17 September 2012

Universal Credit, a giant effort to weave together all the fraying strands of welfare policy, is now unravelling fast.

It all seemed so simple and intuitive when the idea was floated. Pay people more when in work than when on benefits, roll the myriad of benefits and tax credits into a single benefit, reduce the colossal claims process for individuals; and unearth some administrative efficiencies to boot. So intuitive, in fact, that the Opposition supported the underlying principles of the Universal Credit.

Recent debate suggests that achieving this simplicity is proving ferociously complex. However, new Social Market Foundation research with low income families has found that while the Universal Credit is in grave danger of backfiring, additional policy reforms could get it back on track. Some cause for hope, therefore, as Iain Duncan Smith prepares to be interrogated in the committee rooms today.

The Government’s overarching ambitions are right: to help people into work; to promote personal responsibility; and to increase the financial resilience of those on benefits.

In particular, aspects of the new ‘simpler’ system are to be welcomed. Families broadly supported changes that would make accessing benefits simpler and were in favour of receiving money in a single payment rather than multiple lots. Fewer forms would mean less hassle and less concern about taking on a short-term job. All good.

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However, elsewhere, simplicity has coupled with rigidity to create a situation where one year from now many of the eight million households claiming Universal Credit will be left high and dry. Most significantly, our research showed strong antipathy towards the idea that all claimants should have to receive monthly payments as standard, and to manage their housing benefit money. Many were fearful that they would run out of money, be pushed into debt and rent arrears, or even be evicted. Such concerns are not marginal: DWP’s own survey data suggests four in ten could be negatively affected by the shift to a monthly payment. Meanwhile, the new ‘fixed’ monthly assessment could consign someone losing their job to a month without any income at all.

Therefore, there is a strong prospect of the Universal Credit running directly counter to the Government’s aims and undermining the financial resilience of households. This is in nobody’s interest, least of all Mr Duncan Smith’s.

So, what should be done?

First, SMF’s research shows that a number of assumptions that lie behind the scheme need to be revisited: that all claimants need a prod to look after their money, when many don’t; that all households will respond positively to the payment changes, when many won’t; and that all those in work are paid their earnings monthly, when many aren’t.

Second, the Government should keep things simple, but move away from treating every household the same and away from central control. Where there are exceptional cases, the Government currently intends to identify each household from the centre. But evidence of previous such policies suggests that this risks picking up vulnerable people long after they have fallen into trouble or simply missing many who need help entirely. We need a more proactive approach.

To square this circle, SMF’s report has proposed a new budgeting tool that would sit alongside Universal Credit. Those who feared the implications of the standard monthly lump payment could opt into a budgeting tool. This would allow them to decide how frequently they receive their payments and whether any should be directed to third parties such as a landlord or childcare provider. Households could also divert cash off at source to a savings account to help them through their next problem.

Overnight, this won’t make the computer work, but it would instil confidence that the Government can design a benefits system that works with the pattern of people’s lives, and that helps people to help themselves, rather than leaving them to sink or swim.

Nigel Keohane is deputy director of the Social Market Foundation.

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Show comments
  • Monkey_Bach

    Shouldn’t the man overhauling the entire benefit system have several university degrees, a few A levels, or at least an O level in mathematics? Iain Duncan Smith has none of these things, as far as I know, is a fantacist, liar, and the worst leader the Conservative Party ever suffered. Such a hopeless case is absolutely inadequate as far as the herculean task of comprehensive welfare reform goes. With so hopeless a captain the ship was always doomed to end up on the rocks.

  • dalai guevara

    I just cannot see a valid reason why that 16h hurdle for low income/ part-timers has not been removed. What is it with the hypocrisy? What is wrong with you people, give incentive and things will move.

  • K

    I refer to my comments posted under

  • Arthur

    If people are getting money from the State without working for it, maybe they should be prepared to modify the pattern of their lives a little, in return. If being given an unnecessary prod is irritating, deal with it, it’s part of the price of free money. If they don’t respond positively to the changes, tough. If they are paid weekly but get benefits monthly, then the budgeting tool seems useful.

  • pauldanon

    The Government can’t both “keep things simple” and “move away from treating every household the same”. If you treat households as unique, it’s not simple. Is all that’s really being asked for here fortnightly payments? Maybe that can be done.

  • james102

    We really need to reflect on the attitude survey published
    today in the Telegraph. (Nat Cen funded by government and charities tracking
    opinion over seven general elections and three recessions)

    Support for the benefit system is at its lowest level for 20
    years.62% believed unemployment benefits are too high.

    Britain is said to be a more individualistic society
    something I think is inevitable in a multicultural environment.

    As I have written before Andrew Neather et al were wrong, multiculturalism
    will not damage the right but the left.

    The survey shows support for IDS’s attempts to overhaul the

  • UlyssesReturns

    As so often with you riders on the backs of us taxpayers your own words condemn you. You state “many of the eight million households claiming Universal Credit will be left high and dry” without pausing to examine the sheer madness of a situation where so many of the population are supported by so few – eight million is an almost unbelievably high number of welfare recipients. You further compound the madness by implying these people are so stupid and feckless that they cannot manage their affairs on a monthly basis and are likely to end up not paying their housing benefit paid rent. You may have a point as a large percentage of welfare recipients I see seem to be quite happy sitting on their fat arses alternating between eating fast food from MacDonalds and KFC, drinking cheap supermarket lagers and puffing on incredibly expensive fags whilst surfing the web on their i-Phones and watching Sky Sports on their 50 inch LED TVs. I will not accept any more comments from those who wish to preserve a status quo that has brought this country to its knees and threatens to bury us in the weight of welfare, health and public service wage and pension costs. Your words are meaningless and conflicted while you are paid to represent a vested interest dedicated to preserve an out-of-control welfare-addicted social dystopia foisted on us by Brown and his fellow travellers. If you want to fight the much needed IDS reforms then look to what is happening in Greece and Spain to see where the status quo will lead.

    • telemachus

      As posted yesterday
      IDS does not have a good track record of success and like all idealogues rams a policy home before it is fully thought through.
      Take the example of council tax benefit reform
      Let us suppose a factory closes and suddenly a lot more people claim council tax benefit, everyone else in the district will have their council tax benefit cut to accommodate the new claimants. Since the majority of the non-pensioner poor are in work, this hits the working poor hardest, adding to disincentives to work, when every extra pound they earn can see 95p in benefit lost.
      This blows away Iain Duncan Smith’s repeated promises that his universal credit, will smooth out all tapers and ensure everyone is always better off working. The government even defended this cut with the assertion that it would incentivise local authorities to find work for their denizens, so as to get them off council tax benefit. Yet the Institute of Fiscal Studies has shown
      the effect to be the opposite: it takes away incentives to work, with too steep
      a loss of the benefits for those moving into jobs.
      Profligate Greeks have little to do with the UK situation

      • Charlie the Chump

        And your sad grumblings, as usual, have little to do with sense or reality.

  • LB

    Far simpler to get rid of it completely.

    1. You have to save. ie. Your NI contributions go into a fund in your name
    2. When you need the money for welfare or for retirement, you get to draw it down.
    3. Only when the money is gone do the rest of us get forced to help.
    4. There should be a cap on how much help someone who isn’t disabled gets from the rest of us.

    If we look at what people like you have done.

    We’ve had people in Westminster on over 170K a year of benefits – Tax free.- until there was a reduction in housing benefit

    Housing benefit – 104,000
    Child Tax Credit – 13,337.04
    Income Support – 5,539.67
    Council tax – 2,157.83
    Child Benefit – 3,863.91
    Free Schooling – 6000 * 5 = 30000
    Free Health Care – 1800 * 7

    Total 172,000

    That’s why you shouldn’t be allowed any where near other people’s money. You’re in favour of systems that give people lottery money payouts, at the expense of poor people on min wages paying 3K a year in tax.

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