Testing times for Universal Credit

In 2010 the Coalition Government set out plans for a Universal Credit (UC) to replace existing means-tested benefits and tax credits for people of working age. UC would, it claimed, cut through the complexity of the existing benefit system; ensure that work always paid; make it easier for people to get the help they need, when they need it; reduce administration costs; and bear down on fraud and error.

Seven years later, a number of issues have emerged for claimants. Although some of them may be teething problems, there is some concern that others may reflect more fundamental aspects of UC policy.

A shaky start

The entire programme was “reset” in early 2013, and the roll-out timetable has been pushed back several times. In 2016, DWP began rolling out the “Full Service” – the final digital version of UC, available for all claimant groups – using a “test and learn” approach where feedback informs the ongoing development. Roll-out is currently limited to five jobcentres a month but is due to accelerate in the second half of 2017, so that by next February, 65 more jobcentres each month will be operating the Full Service. Under the latest plans, Full Service roll-out would be complete by September 2018, and the remaining benefit and tax credit claimants would transfer to UC between July 2019 and March 2022 (although the OBR assumes a further six-month delay).

Universal Credit roll-out schedule

Changes made to key elements of the UC system

UC rates have been frozen and controversial cuts have been made to the “work allowances” – the amounts claimants can earn before their UC award begins to taper away. For most families, the 2p in the pound reduction in the taper rate from April 2017 will do little to offset losses from other cuts. UC is now expected to be less generous overall than existing “legacy” benefits and tax credits. The IFS estimated that UC will save the Government around £5 billion a year in the long run, although the May Government still put the total economic benefits at £7 billion a year. Other analysis suggests that around 1 million more children could be in poverty as a result of policy changes, compared with UC as originally designed. Pressure groups have called for reforms to UC to restore the original policy intent – including reversing the work allowance cuts – but costs would be considerable.

The impact on claimants in Full Service areas

Emerging evidence points to a number of problems for claimants in Full Service areas, including:

  • financial hardship and distress caused by lengthy waits before the first payment of UC is received, compounded by the 7-day “waiting period” for which no benefit is paid;
  • some, particularly vulnerable claimants, struggling to adapt to single, monthly payments in arrears;
  • inflexible rules governing Alternative Payment Arrangements such as direct payment of rent to landlords;
  • increases in rent arrears, with serious consequences not only for claimants but also for local authorities and housing providers, as a result of exposure to greater financial risk;
  • homeless claimants unable to get help with the full costs of emergency temporary accommodation.
  • issues with registering and processing claims – e.g. online claims being rejected or “disappearing”, awards not including the housing element due to problems verifying rent payments;
  • a lack of support from jobcentres for claimants without ready access
    to a computer or with limited digital skills/capabilities;
  • lengthy, repeated and expensive calls to the UC helpline to resolve problems;
  • increasing demands on support and advice services from local authorities, housing associations and charities as a result of having
    to assist UC claimants;
  • insufficient funding from the DWP for local authorities and partner organisations providing “Universal Support”, such as budgeting advice;
  • third parties facing difficulties resolving claimants’ problems due to the DWP’s insistence that the claimant must give explicit consent for an adviser to act on their behalf.

The Trussell Trust reports that food banks in Full Service areas have seen an increase in referrals of nearly 17% – more than double the national average.

Full steam ahead for the Full Service?

In March, the Chair of the Work and Pensions Committee, Frank Field, claimed the Government had its “head in the sand” over emerging problems with Universal Credit. In light of the “near unanimous set of concerns” voiced by stakeholders in evidence to the Committee’s inquiry into UC and the planned acceleration of Full Service roll-out, he wrote to Ministers again on 27 April stating that the practical operation of UC should be an urgent priority for the DWP. The Scottish Government has gone further, calling for a complete and immediate halt to the roll-out of the Full Service in Scotland to resolve problems with its implementation.

This article is part of Key Issues 2017 – a series of briefings on the topics that will take centre stage in UK and international politics in the new Parliament. More Key Issues posts will be published on this blog throughout June, subscribe via the homepage to get instant alerts. You can also read more Commons Library research on benefits policy

Picture credit: money by Thomas’s PicsCreative Commons Attribution 2.0 Generic (CC by 2.0)

“Universal credit may be coming, but it is clear that it is hamstrung by severe funding, policy design and practical problems. Its revolutionary promises have long faded. We now face the very real prospect of a large, single – and flawed – means test bearing down on working-age families. We are running out of time to avert a crash landing.”

Alison Garnham, Child Poverty Action Group Chief Executive, April 2017

“We will not call a halt to the [Full Service] roll-out, because it would be unfair and wrong to deprive people in Scotland or elsewhere of the advantages that the universal credit system brings. We continue to work on improving processes and accelerating delivery…”

Damian Hinds, Minister for Employment, 27 March 2017