Originally conceived in 2010 with plans for a full roll-out by May 2015, the system of Universal Credit (UC) is now not expected to be fully implemented until 2020.
It has been something that I have been aware of for quite a while now (and not for good reasons) and given that it may an issue I encounter in my job next year, I thought it would be helpful to write a little guide for the as yet uninitiated.
What is Universal Credit?
UC wraps six different benefits into a single monthly payment, replacing:
- Income Support (eligibility: those working less than 16 hours a week)
- Jobseeker’s Allowance (eligibility: unemployed, can work)
- Employment and Support Allowance (eligibility: unemployed, cannot work)
- Housing Benefit (eligibility: means-tested rent support)
- Child Tax Credit (eligibility: those caring for a child under 16)
- Working Tax Credit (eligibility: low-waged employment for over 16 hours a week)
At the point of full roll-out there are expected to be 8 million people using the system (over 10% of the population).
Why was it introduced?
There are a lot of good principles behind Universal Credit even if the system is not working to deliver on them.
Simplicity. Under the previous system, there are two different sets of benefits which apply depending on whether a person does or does not have a job (i.e. income support vs. working tax credit). Theoretically, the single payment of Universal credit, which can be calculated using real-time information about wages, prevents the disruption of losing support for a period of time as a claim for one sort of benefit shuts down and a new one begins.
Ensuring that “work pays”. In some cases under the old system, people could lose money from their benefit at a rate of 90 pence for ever pound earned after tax (i.e. the monetary incentive for starting work was almost non-existent). Theoretically under Universal Credit, people should lose money from their benefit at a rate of about 65 pence of every pound they earn after tax.
(See pgs 5-7 of the Child Poverty Action Group guide to Universal Credit for a quick overview of how the system fails on both these measures)
What are the problems?
The following is all taken from 2018 report from the independent watchdog, the National Audit Office (source):
- Only 10% (815,000) of the expected eventual number of claimants are on the system, 8 years after UC began
- 25% of claimants are being paid late, of those, 20% – usually the more needy and complicated cases – are waiting five months or more to be paid
- UC currently costs £699 per claim – four times as much as the government intends to spend when the system is fully developed
- The Department for Work and Pensions has spent a total of £1.9bn on administering the programme so far, including £837m on IT software that has been abandoned
- So many changes had been made to job centres and working practices that there is “no alternative but to continue”
The five week wait
The original design set out a minimum 6 week wait for a first payment to claimants when they moved to UC (in practice this was often up to 8 weeks). The thought behind this was that claimants would have their previous month’s salary or redundancy package to live off during this time.
This ignores the fact that, a) over half of claimants are paid weekly, b) claimants are not always making a claim after having lost a job either because they are already in work (i.e. entitled to working tax credit in the old system) or they were not in work under the old system and are making the transition to UC (i.e. claimants of ESA/JSA), c) many claimants have no form of savings to fall back on.
After sustained pressure, the government announced in the autumn 2017 budget that the wait would be reduced to 5 weeks from February 2018.
However, a 5 week wait without income is enough to get claimants into rent arrears (in some cases people have been evicted during the wait time), hunger (food banks in UC areas report 30% increases in referrals, source), and cycles of overdraft charges and debt. This is not to mention the impact on your well-being and health to be waiting on a decision about money that you are entitled to – in some cases literally because of your health (ESA).
Ministers have now expanded the availability of hardship loans (now repayable over a year) to help new claimants while they wait for payment, and housing benefit will now continue for an extra two weeks after the start of a UC claim. However, aside from the practical issues of misinformation and confusion on the ground level about these new systems and their availability – surely we should be questioning why on earth loans have been deemed an acceptable solution?
Enabling abusive relationships
Under UC, claims are assessed on a household basis, and it is, by default, also paid on a household basis to a single bank account.
On the most basic level, this means that if one partner of a couple is in work, there is little incentive for the other partner to work (there is only one earnings disregard per household, so if the other partner starts work, their earnings will immediately affect the amount of universal credit the couple receive). Consequently, households are effectively encouraged into the model of having one ‘main earner’ and one ‘main carer’ of any dependants. In the present situation of expensive/inadequate childcare provision, and a lack of flexible or parent-friendly jobs, and strong gendered norms – UC looks like a pretty good bet on inadvertently widening the gender income gap.
This is a departure from the steps taken in 2003 when the child tax credit, which was paid directly to the main carers of children (usually women), in order to ensure that carers had some degree of financial independence within a household.
This takes us on to a more scary situation made possible by UC. You are living with a partner who has control of the bank account in which the monthly payments of UC are paid. You have no access to any money, and cannot do anything if the money is used inappropriately. To make matters worse, whereas under the old system housing benefit was paid direct to the landlord, the housing element in UC is now part of the monthly payment – so situations of financial abuse include the threat of homelessness.
This is a simplistic, and more extreme, example – there are lots of other instances of financial abuse facilitated by UC – the following example is taken from a New Statesman article:
A cohabiting couple with a baby approached the charity for advice about Universal Credit. Both were in work, but his hours and income were irregular, while she was working part-time and receiving tax credits. When the family was moved on to universal credit, those tax credits were stopped for the six-week assessment period – so far, so typical.
During those six weeks, though, the couple’s circumstances changed. He received a Christmas bonus, which meant they were no longer eligible for benefits. But while Universal Credit saw the bonus as shared household income, the man did not: as far as he was concerned, this was his money, and his partner was entitled to none of it. Struggling to manage on what she made from a few hours’ work a week, she was forced back into full-time employment while looking after the baby.
The principal recourse for claimants in abusive situations is that they can apply for a split payment between two members of the household. But imagine for a second actually being in a situation of abuse and a) having the capacity to negotiate an exceptional status within the UC system b) succeeding and your partner being fine with what you have done. Additionally, in the case where there are two benefit claimants in a household, they have to present together: i.e. you may have to ask for your split payment in front of your abusive partner.
Furthermore, under Universal Credit, when a couple separates, one person must inform the DWP, and then make a new claim – which will take a minimum of five weeks to process. For a woman with no money, and possibly children to look after, that’s time she doesn’t have, and a very compelling reason to stay in an abusive situation.
So there are a few different parts of UC which act to enable situations of abuse:
- It puts control of the household income in the hands of one individual (why if it would be unacceptable for an employer to pay your salary to your partner is it acceptable for the government to pay your income supplement to them?)
- It assesses entitlements as a household, so the income of your partner affects your own levels of financial support
- It imposes lengthy assessment periods on people in crisis conditions, which encourages people to stay in abusive situations
Some other considerations
- Workers on low incomes (in addition to those who are unemployed) will be made to look for extra hours as a condition for receiving the benefit. If they are earning less than the equivalent of the minimum wage at 35 hours a week, they will be placed in one of two “labour market regimes”, and will be sanctioned if they are not deemed to be complying with these conditions (source)
- 2.1 million low-income families will lose an average of £1,600 a year when they move on to UC (source, also see work by the Resolution Foundation)
- Access to the new scheme is online, regardless of the fact that many benefit recipients lack both computer skills and equipment.
Things you can do
- Sign a Labour Party petition – ask Theresa May to make fixing the UC system a priority here, also consider signing Contact’s petition here
- Get more informed – for lighter reading see the Guardian or the Independent’s online section on Universal Credit (here and here) and Citizen’s Advice, for a more in-depth, comprehensive report I would recommend the Child Poverty Action Group report available here, and for the keen among you, the report from the National Audit Office is here