Universal Credit is a social security benefit in the United Kingdom introduced in 2013 to replace six means-tested benefits and tax credits: income based Jobseeker's Allowance, Housing Benefit, Working Tax Credit, Child Tax Credit, income based Employment and Support Allowance and Income Support. It was announced by Work and Pensions Secretary Iain Duncan Smith at the Conservative Party annual conference in 2010 stated as designed to bring "fairness and simplicity" to the British system of social security. It was one of several wide-ranging welfare reforms introduced by the 2010-2015 Coalition Government in the Welfare Reform Act 2012.
The new benefit was introduced gradually to all Jobcentres, initially focusing on claimants whose circumstances are the least complex (single adults without housing costs). By February 2016, 364,000 people had made claims on Universal Credit, government research claiming these "[benefit] claimants find work quicker, stay in work longer and earn more than the Jobseekers' Allowance claimants".
Universal Credit has faced continuing criticism. Payments are made on a monthly basis, with a waiting period of at least six weeks before an initial payment is made, which can particularly affect claimants for housing benefits paid directly to them leading to arrears, as tenants may have to borrow to meet other living costs during this period. Critics have noted other issues, including problems with IT systems and project management. Roll-out of Universal Credit has been significantly delayed as implementation costs, initially forecast to be around £2 billion, were later raised to over £12 billion. At its introduction, all existing claims to "legacy" benefits (the six benefits Universal Credit is due to replace) were expected to transfer gradually to the new Credit by 2017. However, this timetable was later extended and, under current plans, is not due to be fully delivered until 2021.
In 2015, government announced significant reductions to the value of Universal Credit, ultimately expected to save £5.5 billion per year, by reducing the working income allowance and removing the family element and first child premium, and limiting the per-child element to the first two children. In May 2016, the think-tank the Resolution Foundation published evidence arguing that cuts to Universal Credit meant the reforms risked failing to achieve their original purpose of incentivising work. In November 2016, the government announced a reduction, from 65% to 63% of post-tax income, of the taper rate that controls the reduction of Universal Credit as income increases, with an eventual cost of £600 million per year.
Video Universal Credit
Background
The proposed Universal Credit was outlined by Work and Pensions Secretary Iain Duncan Smith at the Conservative Party annual conference in 2010. The initial aim was for it to be implemented fully over four years and two parliaments, and to merge the six main existing benefits (income-based Jobseeker's Allowance, income-related Employment and Support Allowance, Income Support, Working Tax Credit, Child Tax Credit and Housing Benefit) into a single monthly payment, as well as cut the considerable cost of administering six independent benefits, with their associated computer systems.
Unlike existing benefits like Income Support, which had a 100% withdrawal rate, Universal Credit was designed to gradually taper away - like tax credits and Housing Benefit - allowing claimants to take part-time work without losing their entitlement altogether. In theory, it makes claimants better off taking on work, as they keep at least a proportion of the money they earn. But reductions in funding and changes to withdrawal rates left commentators on either side of the debate to question whether it would actually make work pay. The Daily Telegraph claimed "part-time work may no longer pay", and "some people would be better off refusing" part-time work and in the Guardian Polly Toynbee wrote "Universal credit is simple: work more and get paid less". Finally, the "Minimum Income Floor" used when calculating Universal Credit for self-employed claimants may make it much less worthwhile for large parts of the population to work for themselves.
Maps Universal Credit
Relationship to other proposed welfare policies
Universal Credit has some similarities to Lady Williams' idea of a negative income tax, but it should not be confused with the universal basic income policy idea. There is some debate as to whether Universal Credit should be described as "universal", given it is both subject to income cut-offs and requires some claimants to be available for work.
Implementation
Universal Credit is part of a package of measures in the Welfare Reform Act 2012, which received Royal Assent on 9 March 2012. The Act delegates the its detailed workings to regulations, most of which were published as the Universal Credit Regulations 2013. Related regulations appeared in a range of other statutory instruments also.
The Department for Work and Pensions (DWP) announced in February 2012 that Universal Credit would be delivered by selected best-performing DWP and Tax Credit processing centres. Initially, the announcement made clear that local authorities (responsible for administering payment of Housing Benefit, a legacy benefit to be incorporated into the scheme) would not have a significant part in delivering Universal Credit. However, the Government subsequently recognised there may be a useful role for local authorities to play when helping people access services within Universal Credit.
Philip Langsdale, Chief Information Officer at DWP, who had been leading the programme, died in December 2012, and in previous months there had also been significant personnel changes. Project Director Hillary Reynolds resigned in March 2013 after just four months, leaving the new Chief Executive of Universal Credit to take on her role. Writing in 2013, Emma Norris of the Institute for Government argued the original timetable for implementation of Universal Credit was "hugely overambitious", with delays due to IT problems and senior civil servants responsible for the policy changing six times.
A staff survey, reported in The Guardian on 2 August 2013, quoted highly critical comments from Universal Credit implementation staff. On 31 October 2013, in another article said to be based on leaked documents, the paper reported that only 25,000 people - about 0.2% of all benefit recipients - were projected to transfer to the new programme by the time of the next general election in May 2015. In the event, over 100,000 people had made a claim for Universal Credit by May 2015.
A pilot in four local authority areas was due to precede national launch of the scheme for new claimants (excluding more complex cases such as families with children), in October 2013, with full implementation to be completed by 2017. Due to persistent computer system failures and delays in implementation, only one pilot, in Ashton-under-Lyne, went ahead by the expected date. The other three pilots went ahead later in the summer, and were met by staff protests.
The roll-out of Universal Credit in the Northwest of England was limited to new, single, healthy claimants, later extended to couples, then families, in the same area, reflecting the gradual maturing of different aspects of the computer system. Once the Northwest roll-out was largely complete, the government gradually extended Universal Credit to new single healthy claimants in the rest of the British mainland, nearly completing this roll-out as of 13 March 2016. It was expected that this would gradually be extended to couples and families outside the Northwest once the roll-out to UK mainland single claimants was completed. In Northern Ireland, implementation was held up by disputes over policy and funding between feuding parties in the Northern Ireland assembly; the roll-out of Universal Credit in Northern Ireland began in September 2017.
Pilots
The scheme was originally planned to begin in April 2013, in four local authorities - Tameside (containing Ashton-under-Lyne), Oldham, Wigan and Warrington, with payments being handled by the DWP Bolton Benefit Centre - but was later reduced to a single area (Ashton) with the others due to join in July. The pilot would initially cover only about 300 claims per month for the simplest cases of single people with no dependent children, and was to extend nationally for new claimants with the same circumstances by October, with a gradual transition to be complete by 2017. (One tester of the new system in April noted that the online forms took around 45 minutes to complete, and there was no save function.)
In March 2013 it was reported that final Universal Credit calculations would be made manually on spreadsheets during the pilot, with the IT system being limited to booking appointments and storing personal details. It was separately reported that no claimants turned up in person at the town hall on the first day of the scheme.
The Financial Times reported that the October national roll-out of Universal Credit would now begin in a single Jobcentre (or possibly a "cluster" of them) in each region and that in December 2012 Hilary Reynolds, who had recently been appointed programme director but had moved shortly thereafter, stated in a letter to local authorities: "For the majority of local authorities the impact of [Universal Credit] during the year 2013-14 will be limited."
On 3 December 2013 the DWP issued statistics showing that, between April and 30 September, only 2,150 people had been signed up to Universal Credit in the four pilot areas. The report confirmed that Universal Credit had been rolled out to Hammersmith in October, followed by Rugby and Inverness in November, and was to expand to Harrogate, Bath, and Shotton by spring 2014.
Current status
As of February 2016, 364,000 people had made claims for Universal Credit. Government research stated "Universal Credit claimants find work quicker, stay in work longer and earn more than the Jobseekers' Allowance claimants." Delays in payments were getting claimants into rent arrears and other debts, however. Claimants may wait up to thirteen weeks for their first payment. Tenants can get into rent arrears more frequently on Universal Credit rather than Housing Benefit and many risk eviction and homelessness as a result. Landlords may refuse potential tenants on the benefit and marriages have broken up under the strain of coping with these delays and managing on Universal Credit.
Policy
Universal Credit has four types of conditionality for claimants depending on their circumstances, ranging from being required to look for full-time work to not being required to find work at all (people in the unconditional group include the severely disabled and carers).
Payments are made once a month directly into a bank or building society account. Any help with rent granted as part of the overall benefit calculation is included in the monthly payment and claimants must then pay landlords themselves. It is possible in some circumstances to get an Alternative Payment Arrangement (APA), which allows payment of housing benefit direct to the landlord.
Universal Credit claimants are also entitled to Personal Budgeting Support (PBS), which is aimed to help them adapt to some of the changes it brings, such as monthly payment.
Costs
While the DWP had estimated administration costs for the roll-out of Universal Credit to be £2.2 billion, by August 2014 this estimate had risen to £12.8 billion over its "lifetime" and was later increased again to £15.8 billion. Much of the increased cost was linked with software problems and duplication of systems needed to pay out new and legacy benefits. The initial roll-out proceeded much more slowly than had been originally planned, and led to the early departure of several senior leadership figures.
Criticism
Universal Credit has been and is subject to many criticisms. Louise Casey fears recipients could become homeless and destitute. According to official figures 24% of new claimants wait over 6 weeks for full payment and many get behind with their rent. Twelve Tory MPs including Heidi Allen wish to delay the rollout delayed. Local Authorities and recipients of Universal Credit feared claimants will become homeless in large numbers.
Stephen Bush in The New Statesman maintained that the group currently in receipt of Universal Credit was unrepresentative, consisting mainly of men under 30 who were more likely to find work as they did not have to juggle work obligations with dependent needs. He also argued that men under 30 were also more likely to be living with parents so delays in payments affected them less. Bush believed that when Universal Credit is extended to older claimants and women with dependents, fewer would get back to work easily and there would be more hardship.
Johnny Mercer said, "Universal credit has the potential to help people out of poverty by removing the disincentives to move into work in the previous system and allowing them to reach their full potential. A modern compassionate Conservative government simply must get it right though. This government can make the system better by smoothing the path from welfare into work with a fresh investment in universal credit in this budget." Mercer backed calls to increase funding for Universal Credit by stopping a plan to cut income tax.
Reducing incomes
Many families with children will find their income falling. When fully operational, the Institute for Fiscal Studies estimates that 2.1 million families will lose while 1.8 million will gain. Single parents and families with three children will lose an average £200 a month according to the Child Poverty Action Group and the Institute for Public Policy Research. Alison Garnham of the CPAG urged ministers to reverse cuts to work allowances and get Universal Credit, "fit for families". Garnham said: "Universal credit was meant to improve incentives for taking a job while helping working families get better off. But cuts have shredded it. And families with kids will see the biggest income drops." Since 2013 Universal Credit has changed nine times, most changes making it less generous. This includes cuts in work allowances, a freeze in credit rates for four years and (from April 2017) the child credit being limited to two per family.
Self-employed claimants
Research by the Low Income Tax Reform Group suggests self-employed claimants could be over £2,000 year worse off than employed claimants on similar incomes. The problem applies with fluctuating income as Universal Credit assumes a fixed number of hours worked - the so called Minimum Income Floor - in its calculation. The government has been urged to change this to allow the self-employed to base claims on their average incomes.
Online applications
Professor John Seddon, an author and occupational psychologist, began a campaign in January 2011 for an alternative way to deliver Universal Credit, arguing it wasn't possible to deliver high-variety services through "cheaper" transaction channels, and would drive costs up. He wrote an open letter to Iain Duncan Smith and Lord Freud as part of a campaign to call halt to current plans and embark instead on a "systems approach". Seddon also launched a petition calling for Duncan Smith to: "rethink the centralised, IT-dominated service design for the delivery of Universal Credit".
Echoing these concerns, Ronnie Campbell, MP for Blyth Valley, sponsored an Early Day Motion on 13 June 2011 on the delivery of Universal Credit which was signed by thirty MPs: "That this House notes that since only fifteen per cent of people in deprived areas have used a Government website in the last year, the Department for Work and Pensions (DWP) may find that more Universal Credit customers than expected will turn to face-to-face and telephone help from their local authority, DWP helplines, Government-funded welfare organisations, councillors and their Hon. Member as they find that the automated system is not able to deal with their individual questions, particular concerns and unique set of circumstances".
Wait for payments and payment frequency
The Trades Union Congress has raised concerns about the delay - which is at least six weeks - between making a claim and receiving money. The Work and Pensions Select Committee said waiting six-weeks for the first payment caused "acute financial difficulty". Reducing the delay would make the policy more likely to succeed. Committee Chair, Frank Field said, "Such a long wait bears no relation to anyone's working life and the terrible hardship it has been proven to cause actually makes it more difficult for people to find work. It is not too late for the government to avert a Christmas disaster. They must act now." It is feared that people applying for Universal Credit after the 16th November 2017 will get nothing till after Christmas.
According to a report in The Guardian Thousands of claimants get into debt, get behind with their rent and risk eviction due to flaws in Universal Credit and landlords and politicians want the system overhauled.
Due to ongoing problems an official inquiry has been launched into Universal Credit. In October 2017, Prime Minister Theresa May said the six-week delay would continue, despite the concerns of many MPs including some in her own party. A study for Southark and Croydon councils found substantial increase in indebtedness and rent arrears among claimants on Universal Credit compared with claimants on the old system. Referrals to food banks increased, in one case by 97 per cent.
Direct payments to tenants
Direct payment of the housing component of Universal Credit (formerly Housing Benefit) to tenants has been the subject of controversy. Although Housing Benefit has long been paid to most private sector tenants directly, for social housing tenants it has historically been paid directly to their landlords. As a result, implementation of a social housing equivalent to the Local Housing Allowance policy, which has been present in the private sector without comment for over a decade, has widely been perceived as a tax on having extra bedrooms, rather than the tenant making up a shortfall in the rent arising from a standardisation of their level of benefit.
The Social Security Advisory Committee have argued that the policy of direct payments requires "close monitoring" so as to make sure Universal Credit does not further discourage landlords from renting to people on benefits.
Disincentive to save
The Institute for Fiscal Studies has argued that Universal Credit is a disincentive for people to save money.
Impact on the self-employed
The Resolution Foundation has warned that Universal Credit will have a detrimental effect on self-employed people, because the level of Universal Credit awarded does not fully take account of any dramatic changes in their income from month to month.
According to the Child Poverty Action Group, Universal Credit may affect the low-paid self-employed and anyone who makes a tax loss (spends more on tax-deductible expenses than they receive in taxable income) in a given tax year.
Impact on disabled people
Citizens Advice research argued that 450,000 disabled people and their families would be worse off under universal credit.
Impact on passported benefits
The Daily Mirror reported an example of a claimant who was moved over to Universal Credit from a "legacy benefit" and whose passported benefits, such as free school meals, were withdrawn in error.
Domestic abuse
The campaign group Women's Aid have argued that as Universal Credit benefits are paid as a single payment to the household, this could have negative consequences for victims of domestic abuse. The Guardian also argued the change disempowers women, preventing them from being financially independent. Women's Aid and the TUC jointly did research showing 52 per cent of victims living with their abuser claimed financial abuse prevented them from leaving. Under Universal Credit when a couple separates, one person must inform the DWP, and make a fresh claim, which takes at least five weeks to process. Someone without money, and possibly with children cannot manage such a wait. Katie Ghose said, "We're really concerned that the implications for women for whom financial abuse is an issue have not been fully thought through or appreciated by the government." Jess Phillips stated, "What we are doing is essentially eliminating the tiny bit of financial independence that at woman might have had." And, she added, the DWP keeps no data on whether Universal Credit goes to men or to women, therefore the magnitude of the problem cannot be measured.
Impact on families
In the report Pop Goes the Payslip the advice organisation Citizens Advice highlighted examples of people in work worse off under Universal Credit than under the 'legacy' benefits it replaces. Similarly, a report from 2012 by Save the Children highlights how "a single parent with two children, working full-time on or around the minimum wage, could be as much as £2,500 a year worse".
Work disincentives
A House of Commons Library briefing note raised the concern that changes to Universal Credit that were scheduled to take effect in April 2016 might make people reluctant to take more hours at work:
There is concern that families transferring to Universal Credit as part of the managed migration whose entitlement to UC is substantially lower than their existing benefits and tax credits might be reluctant to move into work or increase their hours if this would trigger a loss of transitional protection, thereby undermining the UC incentives structure.
The very long application and assessment hiatus also discourages UC recipients from moving off Universal Credit entirely, for more than six months, fearful having to undergo repeated and very long waiting periods, with no income, resulting because of redundancy and/or loss of temporary employment for legitimate reasons necessitating reapplication for Universal Credit from scratch.
Internal criticisms
A freedom of information request was made by Tony Collins and John Slater in 2012. They sought the publication of documents detailing envisioned problems, problems that arose with implementation, and a high-level review.
In March 2016, a third judicial case ordered the DWP to release the documents. The government's argument against releasing the documents was the possibility of a chilling effect for the DWP and other government departments.
IT problems
Universal Credit has been dogged by IT problems. A DWP whistleblower told Channel 4's Dispatches in 2014 that the computer system was "completely unworkable", "badly designed" and "out of date". A 2015 survey of Universal Credit staff found that 90% considered the IT system inadequate.
Telephone problems
Claimants on low income were forced to pay for long telephone calls. Citizen's Advice in England carried out a survey in summer 2017 which found an average waiting time of 39 minutes with claimants often needing to make repeated calls. Nearly a third of respondents said they made over 10 calls. The government was urged to make telephone calls over Universal Credit free for claimants and has done this.
See also
- Welfare Reform Act 2012
- Welfare Reform and Work Act 2016
Further reading
- Gillies, A., Krishna, H., Paterson, J., Shaw,J., Toal, A. and Willis, M. (2015) Universal Credit: What You Need To Know 3rd edition, 159 pages, Published by: Child Poverty Action Group ISBN 978-1-910715-05-5
Notes
References
External links
- Online benefits calculator - covers universal credit and all means tested benefits
- Universal Credit Calculator
- Universal Credit - welfare that works, Department for Work and Pensions (DWP)
- Universal Credit FAQs
- Universal Credit Toolkit FAQs
- Who is affected by Universal Credit
- Benefits in the Future
Source of article : Wikipedia
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