The impact of Universal Credit

Save the Children has identified an anomaly in the rules for Universal Credit. Single parents who currently receive Working Tax Credit while over 16 hours a week will lose on tapers and earnings disregards, with the effect they may be worse off.

It is difficult to be confident about any calculations. The rules for Universal Credit are still obscure; the position of Council Tax Benefit has not been settled; the tax threshold seems likely to change in the near future. There will be other changes, too: the government has signalled that conditionality may be introduced for people who work less than a full working week, which seems particularly likely to affect single parents. It would be surprising, though, if there were not more losers. The only way to reform a system so that some people are better off without others being worse off is to spend more money. The more fundamental the reform, the more it has to cost. My suspicion is that, by the time Universal Credit has been adapted and trimmed to fit, it will prove to be rather less radical than the government hopes. It will be the cuts in benefits, rather than the changing rules, that we’ll notice most.

The crime of forming a relationship

This is from a press statement by Lord Freud, reported today.

Pretending you are a single parent to get benefits when you are actually living with a partner is stealing money from the people who genuinely need help. Sometimes these claims can be fraudulent from the outset, but often a person’s circumstances change gradually and they don’t tell the Department. Either way, it is a crime and one we are determined to put a stop to.”

So gradually forming a relationship, and not knowing quite what the position is, is a crime.

Freud goes on to say:

Universal Credit will simplify and automate the benefits system to make it less open to abuse and ensure this money is going to those who need it the most.

It is hard to see how the introduction of Universal Credit will make a difference to the situation – with one main exception. In the past, claimants have only been liable to repay benefits if they have failed to disclose a material fact. Universal Credit is going to include measures to allow the government to recoup overpayments, irrespective of whether or not a claimant has reported their circumstances, or whether they can reasonably be expected to know or understand that an overpayment has been made.

Universal credit: interim developments

The pattern of Univeral Credit is slowly taking shape, though there are still large gaps. A series of briefing notes have been published, with the latest batch on 10th October – getting on for a year after the scheme was announced. Recent announcements have told us, for example, that Carers Allowance will be paid separately, rather than being integrated into UC; that child care costs will continue to be paid, on something like the present basis (though reduced); and that there will be higher suppot for some long term claimants.

An important new departure, however, is that there will sanctions, for the first time, applied to people who are working but not earning at least the equivalent of a full time minimum wage. Those people will be encouraged to look for additional work, and may be required to accept it. This provision is likely to affect women in particular, who are more likely to be on low part time earnings. The details are in Briefing Note 13.

The Universal Credit

The government’s plans for reforming social security benefits have been mis-sold. They have been presented as if the primary focus was getting unemployed people into work – along with people with serious physical and mental disabilities, who are most of the people identified as being long-term claimants of working age. The proposals for Universal Credit are about something different. They represent a unification of basic means-tested benefits – Jobseekers’s Allowance, Employment and Support Allowance and Income Support – with benefits in work, mainly Working Tax Credit, Child Tax Credit and Housing Benefit.

The crucial problem for any scheme that claims to simplify benefits is that they are liable to over-simplify. This scheme is no exception. Benefits cover a wide range of circumstances. They are not just about getting people into work: they are concerned with lots of other issues, including meeting needs, helping people whose incomes are interrupted, economic management. They are complicated because people’s lives are complicated.

This leads to the second key problem: the scheme is quite impractical. The government believes that a new computer programme will make it possible to respond to changes in “real time”, with implementation beginning in 2013. The computer programme does not yet exist – even on paper – but even if it did, it could not do want the government wants it to do. A computer programme, no matter how good it is, can only go as fast as the information that goes into it. People’s circumstances change with starting rapidity. They find it difficult to say what their situation is – whether they are now disabled, whether their partner has really left them, whether or not the prospect of employment means that they now have a job. Building a system on the hope of firm, confident answers cannot work.

There is no reason to believe that this scheme will increase incentives to work. There is no reason to suppose it will reduce fraud or error – quite the contrary. And there is no real basis for supposing it will make any difference in getting people to work instead. The government’s hopes for the new scheme look like wishful thinking.