Universal credit – designed for desired outcomes, not real life on a low incomeon 23 October 2017
By Fran Bennett
As an increasing number of people now know, universal credit is a new benefit replacing six existing means-tested benefits and tax credits gradually being rolled out across the UK. It is not in fact universal, but a mega means-tested benefit. In the main model, it consists of one undifferentiated payment once a month to one bank account per household - rather than, as now, several benefits and tax credits (with different names indicating their functions) paid at different intervals, often in the case of couples to different individuals in the household. Universal credit is not a credit, either, as it is paid monthly in arrears. Currently, major benefits are paid fortnightly in arrears, and tax credits four-weekly or weekly as desired.
There are currently over half a million recipients of universal credit but by 2021/22, when fully implemented, there will be over seven million. Universal credit is a benefit for people of working age and their families. This is partly because its main purpose is to increase the numbers in paid work, and the numbers who, once they have a job, progress until they become independent of means-tested help. Iain Duncan Smith - who championed universal credit, first via his think tank the Centre for Social Justice, and then as Secretary of State – espoused a ‘dynamic’ new way to assess potential gainers and losers; this included assumptions about increased employment. He described the behavioural change induced as potentially transformative.
In particular, universal credit was designed to make all kinds of work pay, including ‘mini jobs’. And as your earnings rose, your benefit would be reduced smoothly, so the impact would be clear. Many people (though not all) would lose less benefit as their earnings increased. But in return, you would have to show you were trying to work more hours or increase your pay rate – a new idea called in work conditionality, which appears to be untried elsewhere.
The other declared aim of universal credit was simplification. All the information about different aspects of your life would be dealt with at once. Changes of circumstances would only have to be reported to one authority, not several. And all your benefits would be paid in one lump sum, at the end of each month. Whenever changes occurred, such as your rent going up or down, they would be treated as if they applied for the whole month – whether this meant more money than you actually needed to reflect the change, or less.
It may be clear already that there could be several flaws in such a system, in terms of the fit (or lack of fit) with the everyday lives and realities of the ‘just about managing’ – people trying to get by on low incomes. But the issue that has recently led to a growing number of stories of debt and desperation is the wait for payment at the beginning of a universal credit claim. And it was this issue that dominated the debate during the appearance of the Secretary of State for Work and Pensions, David Gauke MP, and the civil servant responsible for universal credit, Neil Couling, in front of the Work and Pensions Select Committee, chaired by Frank Field MP last week.The session was preceded by a tetchy statement from Field because the government had not provided data requested by the Select Committee. This information was eventually provided shortly before the hearing.
As Field stated after the hearing, it seemed that the wait of six weeks (or more) for the first payment was a ‘baked-in’ feature of the new system. As he also said, universal credit is meant to mimic work, but he knew no one who waited six weeks for their pay. The Secretary of State explained the elements that caused the wait. First, for those not moving on to universal credit from legacy benefits, there are seven waiting days when there is no entitlement to benefit. This was increased recently from three waiting days. The three waiting days only applied to the main benefits for people out of work. However. But because universal credit bundles everything together the longer wait now also applies to the elements for housing costs and for children. This is the element that may be abolished if the pressure on government becomes too much to withstand. Secondly, there may be unresolved issues, such as verification of identity, or a ‘claimant commitment’ not having been signed. The claimant commitment is an undertaking to be available for work for a certain number of hours, and to search for work (or additional work or earnings), with sanctions potentially incurred if this is not done. It is a daunting document.
Thirdly, however, and most importantly, universal credit is a monthly benefit. This means there is no daily or weekly rate. There can be no definitive assessment until a month has passed (and then it takes a week to process the payment). Indeed, only 12 dates in the year matter for universal credit claimants. It is their situation on those particular days that counts for the amount of benefit. The only exception is information on earnings which, because of the new ‘real time information’ system employers now operate, gets passed directly to HMRC and can then help in determining the claim. During the passage of the relevant legislation, it was pointed out that for those on low incomes, whose circumstances change frequently, monthly assessment would mean they were often trying to manage on incomes that had an arbitrary relationship with their situation, depending on when their date of assessment happened to fall.
As David Gauke and Neil Couling noted in their evidence last week, there are some ways to mitigate the effects of monthly payment in arrears. At the start, advance payments may be given, to tide people over; but these are discretionary, only available in severe hardship, and usually repayable within six months. Civil servants have recently been issued with new guidance but, rather than changing the payment conditions, this only prompts them to be proactive. Personal budgeting support may be offered, usually delivered by local authorities or advice agencies. And if all else fails, alternative payment arrangements can be arranged, meaning payment twice rather than once a month. But this means waiting for half the payment for longer, rather than receiving half in advance.
Monthly assessment is at the heart of universal credit, as explained at the Select Committee hearing. This is apparently meant to imitate the world of work. A former minister also claimed that monthly payment would enable claimants to take advantage of cheaper deals and direct debits to avoid the ‘poverty premium’ which makes services more expensive for those with hardly any money. Depending on your perspective, this is either ensuring that those on low incomes are no longer left behind the majority world, or wishful thinking, or perhaps ideology. But – unlike Ruth Patrick’s participatory work with claimants about their ideas for the future it is certainly not an example of shaping the social security system around the needs or priorities of people living in poverty themselves
Fran Bennett is Senior Research and Teaching Fellow, Department of Social Policy and Intervention, University of Oxford, working on poverty, social security and gender issues. She is the co-author of the article ‘Universal credit: assumptions, contradictions and virtual reality’ (with Jane Millar published in Social Policy and Society earlier this year, in addition to other publications, some authored with Sirin Sung. She is also an active member of the Women’s Budget Group, in which capacity she briefed on gender issues in universal credit, especially during its parliamentary stages.
Image: Tax Credits CC BY-NC-ND