Tagged: Universal Credit

How to abolish universal credit

An inquiry in London is asking how Universal Credit can be replaced.  I’ve previously supported calls to ‘pause’ or stop its roll-out.  Unfortunately, with more than two million people enrolled, we’re well past the point where it can be stopped or cancelled in its present form. The most important change passed when UC moved past its previous focus on unemployed people and started to enrol other people with a wide range of needs.   Most people who are unemployed cease to be unemployed within a few months, but longer-term claimants are much more likely to be chronically sick or disabled.  They need stable, secure protections. Universal Credit is not good at providing them, because of the  fluctuations in the level of support provided, but the support cannot just be removed while a new system is sorted out.   Transfers from existing benefits can be stopped, but new enrolments can’t be – there have to be benefits available for sickness, unemployment, low earnings.

What can be done, then, to deal with this catastrophe?  Forget the easy, unified solutions; that’s how the mess was made in the first place.  The only practical approach is to start to dismantle the system by moving to new, compartmentalised benefits dealing with the principal contingencies.  Start with invalidity, or long term sickness: it needs to be removed from the principle of work-testing, because the whole point of the provision is that it is supposed to deal with people who it’s not reasonable to expect to work.  Most of the regulations introduced for ESA or UC  have been screamingly inappropriate.  Think about child care; it may be best to take it out of the benefit system altogether.  The changes to Pension Credit are new – couples where one person is still of working age can transfer back to the pension system with no loss.  Housing Benefits are still largely in place – they won’t be for long, and local authorities have been losing expert staff, but the long-heralded abolition of Housing Benefit for pensioners hasn’t happened yet, and that system could keep going.

I’m not going to go through every aspect of the benefit in the same way, but the principle should be clear.  Whenever  you have a complicated problem, the way to deal with it is not with a single, complicated answer.  To deal with an unmanageable  problem, break it up into slightly less complicated ones; break those up in turn into smaller ones, and keep going until there’s a group of problems that it’s actually possible to deal with.

This is, of course, the opposite of what Universal Credit was supposed to do.  The approach is made a little easier by the fact that Universal Credit is not, and never could have been, a unified system: it already has compartments for different aspects of the service (unemployment, employment, housing and so forth).  The system can’t be abolished overnight.  It has to be taken apart piece by piece.

Winners and losers from Universal Credit

In any benefit reform, there are likely to be winners and losers; unless there is a substantial increase in the budget, the gains for some can only be made because others are being paid less. A fascinating report from Mike Brewer and his colleagues at the Institute of Fiscal Studies looks at the difference between short- and long-term gains and losses from Universal Credit. The difference is important, because Universal Credit has in theory been designed to maintain contact with large numbers of people over extended periods of time.

What the IFS report finds includes

  • greater lossers for people on long-term low incomes,
  • losses for people with disabilities
  • short term losses for self-employed people with low earnings, that are less likely to last as their circumstances change, and
  • some large gains and losses in the short term, which are not always reflected in the long-term outcomes.

The report is concerned with entitlement, rather than the actual amounts of benefit received – the serious problems there have been in practical delivery, and the impact of conditionality and sanctions, are going to mean that many more people are worse off than they ought to be on paper. Short term losses matter, too. For people on very low incoimes, a short-term loss means, in practice, that people have periods of severe privation, often going without food and accumulating debts.

Universal Credit leaves more people destitute

Monthly assessments for Universal Credit aren’t working

The High Court judgment on Universal Credit payments has implications beyond the immediate issues.  It condemns the DWP for simply following through an automated process for income testing rather than considering the actual circumstances of the claimants – in this case, the early payment of monthly salary.

When the idea of making assessments in ‘real time’ was first mooted, in 2010, I was critical of the idea.  In the course of the last eight years – yes, it’s that long – I’ve posted a range of comments about the effect of assessing income on the basis of the current month.   I’ve just been reading through my old posts to make a list:

  • it deals with uncertain information
  • it requires the system to process information that it doesn’t have  access to
  • it deals with information from diffuse sources
  • it’s not applicable to the circumstances of self-employed people
  • it puts claimants into default when things go wrong
  • the system can’t cope with irregularities in the calendar, like bank holidays or Februaries
  • it provides an income that is fluctuating, unstable and unpredictable.

To this, we can now add another point: mechanical calculation yields arbitrary and unreasonable results.

Surely, people in favour of means-testing might reasonably ask, there’s no real difference in principle between monthly assessment and the assessments we used to have?  That may be true.  Many of the problems we’re seeing are problems that we’ve known about for years.  They include:

  •  the problem of offering fluctuating incomes to people on very low incomes – a system, the Ombudsman commented about Tax Credits, fundamentally unsuited to the needs of low income families
  • the problems caused by tapers, which mean that people can’t tell when they’re entitled to benefits and when they aren’t
  • the problems posed by changes of circumstances, and
  • the devasting effect when changing entitlement to one benefit (such as Income Support) spills over into suspension or recalculaltion of another (such as Housing Benefit) .

Universal Credit, I’ve previously written, “brings together every major feature that has caused administrative meltdown in the course of the last forty years … It is as if the designers had painstakingly identified all of the elements of the benefit system that are known not to work and built the new benefit around them.”

 

The ‘rethink’ of Universal Credit doesn’t go very far

A couple of recent announcements suggest that planning Universal Credit has been subject to a “rethink“.  The actual changes amount to something less than that.  There is a delay in the rollout, which will affect those people currently being transferred from existing legacy benefits.  The largest group of people affected by the decision are those who are currently on Employment and Support Allowance, because that is the largest group of people of working age who receive benefits for longer periods.  Most people who were unemployed and in receipt of JSA have already been transferred, and anyone who signs off benefits and then needs to make a claim will have to claim through the Universal Credit.  Amber Rudd has said that even with the ‘pause’, the numbers of people receiving Universal Credit is expected to grow to three million in the normal course of events – more than double the existing figure.

The other major change has been the revision to the two-child policy, which limits support to the first two children.  That does not mean that two children will get fed when the third doesn’t; it means that every child in a larger family gets less support, and that is why the policy is exepcted to have such a large effect on child poverty.  The change is confined to children born before April 2017, which is why it will only benefit 15,000 families.

The treatment of Universal ‘Credit in the press has become increasingly critical, but I’m not sure that most have yet appreciated just how deep the hole is.  It doesn’t help that benefits are paid monthly, that it expects people to be online, or that strict and lengthy penalties are being applied for non-compliance, and the idea that people with no other income can have their benefits stopped for 5 weeks or more is simply outrageous.  Any of those could be stopped in short order. That would still leave us with all the other problems with the scheme.  MPs are well aware of those problems – their constituency surgeries are inundated with them.  The government is trying to offer enough tweaks to defuse the discontent.  It will take more than a few tweaks.

Universal Credit rolls out, despite the problems

Brexit has used up all the oxygen of political debate.  There are few proposed changes in policy for real life, but it’s important to realise that while all this has been going on politically, Universal Credit has been rolling out.  David Webster’s invaluable briefings on sanctions also tell us a lot about the process.

  • 1.3 million people are now on Universal Credit.  (The November figures make that more than 1.4m.)  With more than 100,000 new recipients each month, the numbers are increasing rapidly – even if it will still take four or five more years at that rate to reach the target figures.
  • 580,000 of the UC claimants are unemployed.  339,000 unemployed claimants are still in receipt of JSA.  That means that UC is now the main source of support for unemployed people.
  • 190,000 UC claimants are working.

That leaves 530,000 others to account for.  Most benefits for people of working age are there, not for unemployed people, but other people of working age.  As the numbers receiving UC continue to grow, that must mean that progressively higher proportions of people who are sick, or otherwise out of the labour market, will be receiving UC instead.  But the whole focus of UC, such as the requirement for people to form a claimant agreement with ‘work coaches’, is on the very small minority of people who are unemployed and unlikely to find work in their own right.  That can only mean that problems of UC get worse.

The Economist still likes the idea of Universal Credit

The Economist this week describes Universal Credit as a good idea, badly done.  We can agree at least on the second part.   Here are three justifications they offer for thinking it’s a good idea.

“Streamlining benefits into one monthly payment will eventually make the system easier to deliver.” 

Combining six benefits into one doesn’t actually streamline anything.  Universal Credit ‘brings together’ a range of benefits, but unemployed people are still subject to rules on unemployment benefits, sick people are still subject to rules on sickness (and work conditionality, too!), the housing components are still subject to all the rules on housing benefit, and so on.  Lumping everything together in one mass makes for one, highly complicated benefit.  It also  adds one potentially catastrophic complication: actions which lead to the revision of entitlement in one component (such as changes in household details, or the application of conditionality) can lead, catastrophically, to an interruption or cessation of entitlement.

“It removes perverse incentives whereby somebody moving from welfare to work can lose about as much in benefits as they earn.”

There is a slight mitigation of the ‘poverty trap’, because the interaction of Housing Benefit and Tax Credits are removed for some; but since the taper is 63%, further deductions are made from salary for National Insurance and tax, and the system doesn’t include Council Tax rebates, the  marginal rate of deduction is typically 70-74%, and can be more.

“Allowing people to make a single application for all their benefits should improve take-up, and so reduce poverty.” 

Requiring people to negotiate a complex system, with limited flexibility about application details, has caused major problems in access – check, for example, this blog entry on the NAO report in July – and that can be expected to appear in takeup figures in due course.

It seems, however, that the myth that Universal Credit was sound in principle refuses to lie down and die, despite being shot, stabbed, buried, set on fire and otherwise subject to refutation.   When the scheme was first mooted in October 2010, I wrote that it was over-simplified, impractical and couldn’t achieve what the government claimed it would achieve.  If government sets up a scheme that can’t possibly work, it shouldn’t be surprising that it will make a mess when it’s  put into practice.

The problems with Universal Credit are grim. There are not really more of them, there are just more of the old problems.

The report on Universal Credit by the Public Accounts Committee is pretty damning, but that should come as no surprise.  The PAC argues, amongst other things, that

  • The Department’s systemic culture of denial and defensiveness in the face of any adverse evidence presented by others is a significant risk to the programme.

  • Universal Credit causes financial hardship for claimants including increased debt and rent arrears, and forces people to use foodbanks.

  • The Department is failing vulnerable claimants because it places too much reliance on the discretion of its work coaches to identify and manage the needs of people requiring extra support.

  • The package of support to help claimants adjust to Universal Credit is not fit for purpose

  • Universal Credit is pushing costs onto the local organisations that support claimants – including local authorities, housing associations, and foodbanks.

  • We are seriously concerned about the Department’s ability to transfer around 4 million people from existing welfare benefits to Universal Credit without causing further hardship to claimants.

They also comment that the DWP can’t assess or justify its claim that UC will push another 200,000 people into work, but that’s hardly a major criticism; the suggestion that a rollout causing hardship to 6-7 million people can possibly be justified by changing the behaviour of 200,000 of them simply reinforces the lamentable distortion of perspective and priorities that has blighted this system from the start.

The flurry of criticisms that people have been making in the last couple of weeks are of different kinds.  Some are about poor administration.  Claimants are supposed to track changes in their online journals, and the DWP can’t absorb information that’s presented in this way.  (Even The Sun has noticed.)  Claimants who fall into rent arrears – that’s most – may have direct payments to landlords, but there is evidence from Citizens Advice that in some cases the DWP is deducting the rent from the benefit and not passing it on.  A disturbing proportion of new claims are paid late, or not paid enough.  The DWP is holding claimants to standards that it’s unable to meet itself.

Other criticisms, however, concern the way the benefit has been designed.  The concern about women at risk of abuse was raised formally more than five years ago.  UC has also been criticised for not being able to deal with people who don’t fit in its boxes, but the problems with dealing with non-standard “pathways” were identified right at the start.  In 2003, the DWP commissioned a report which told them that segmentation, or working to ‘typical’ profiles, wouldn’t work: “Profiling outperforms the random allocation of treatments but wrong denial and wrong treatment rates are not trivial”.  That didn’t deter pilots of segmentation for unemployed people in 2005, presenting details of segments in 2010 (when UC was first announced) and further commissioning of a ‘proof of concept’ on it in 2014.  The problem is basic.  This system is supposed to offered a personalised response to millions of people, and with that many people, there will always be some who just don’t fit.

 

Universal Credit: the monster staggers on

It’s being reported that Universal Credit is to be delayed again.  There are also suggestions that a small number of minor tweaks will be made – allowing legacy benefits to run on for two weeks, changing direct payment rules and altering rules for self-employment.  None of that really gets to the heart of the problems.  The system is simply not designed for the variety and complexity of conditions it is supposed to deal with.

The BBC offers this graph of delays, citing the National Audit Office as source.  It’s kind to the record, because it waves aside the failed attempts that led to the system being “reset” in 2013.  The original deadline for the completion of the rollout was not 2019, but 2017.  The planning has, of course, been going on since 2010, and at no stage has it ever seemed likely that UC could be delivered, as Iain Duncan Smith repeatedly claimed it would be, on time and within budget.

Universal Credit delays graphic

I’ve been blogging about the problems with Universal Credit since October 2010, and complaining about the bogus claims made for it since the first glimpse of a business case in 2013.    The Treasury failed altogether to follow its own procedures, undertaking massive expenditures before any plan had been submitted.  The lack of routine scrutiny has been scandalous; but not as scandalous, I regret, as the way that claimants have been treated in the hope of sparking life into the monster.

Unifying benefits is hardly a new idea

In the comments to a previous posting, Andrew Hatton asks when the idea of first unifying benefits was seriously considered by a UK Government. I started to respond within the comments, and then thought it might stand as an entry on its own.

It might reasonably be argued that governments in these islands have always thought in terms of unified systems. The Tudor poor law  of 1536, inspired by the model of Ypres, created national law for responding to poverty. The statutes of 1598 and 1601 – the “Old Poor Law” – instituted a national scheme, at least in principle. The 1834 Poor Law Amendment Act – the “New Poor Law” – was designed to implement a uniform regime within that scheme, treating for example older people and unemployed people on the same terms. The Beveridge scheme was supposed to create a unified national administration based on insurance – popularly described as a system to cover people ‘from the cradle to the grave’. National Assistance initially included income and welfare services for every group not covered by insurance. And Supplementary Benefit, its successor, incorporated a range of provisions into a single means-tested benefit: income, unemployment, disability, rent, mortgages, sickness, old age, residential care for older people and child support among them. Universal Credit is not a great, original idea; it revisits the portmanteau benefits of the past.

Marina Hyde, writing in the Guardian, puts her finger on one of the key problems with Universal Credit.  “The most dangerous type of politician”, she comments, is “the sort who thinks that very complicated things are actually very simple.”  And I wrote something similar in the Guardian myself shortly after Universal Credit was first mooted.

Benefits deal with millions of people, and recipients’ lives are diverse and complicated. If universal credit responds to their needs, it will also be diverse and complicated – and therefore expensive. If it does not, it will cause hardship – and it will look unfair.

There have been, of course, other types of unifying scheme, and currently the one which is most discussed is Universal Basic Income – an idea which has been around since the eighteenth century.  Some of the models for UBI are utopian, but if we take UBI to mean an all-singing, all dancing answer to every human problem, it will fail for the same reason that all the other combined schemes fail: people’s lives are too complicated to be covered neatly and simply in a uniform way.  It’s more important to focus on the idea that Basic Income is meant to be basic – a springboard, an element of income that can be mixed with other income – and forget the idea that it will then be possible to junk everything else about the benefit system, because it won’t be.