Tag: Universal Credit

“To govern”, Polly Toynbee writes, “is also to deliver”.  For anyone looking for further evidence of governmental incapacity and incompetence, Universal Credit is the gift that goes on giving.  A new report from the National Audit Office  focuses in the main on the problems facing new claimants, but on the way it points to a series of other issues.   The most immediate problems are

• The effect of the 5-week delay before first payment.  57% of claimants seek advance payments, which means that their benefit is subsequently reduced to repay the advance; a further 22% delay claiming and incur debts as a result.  So, taken together, 80% of claimants face financial difficulties because the benefit is not designed to provide help when it is needed.
• ‘Fraud and error’ – a figure which lumps together a load of different problems – is running at 10.5% of payments, almost a record for benefit payments.  Most of this, the NAO reports, is down to fraud by claimants;  we’re not told what type of fraud, but if so, UC is even more untypical of other benefits than it seemed to be at first.
• The cost of implementing the benefit is increasing: the current estimate is £4.6 billion.

It’s worth reflecting on the last of these.  The Full Business Case for UC had claimed that UC would yield £24.5 bn in people choosing to work more, £10.5 bn in distributional improvements, whatever they are, and £9.1 billion in reduced fraud and error.   The ‘distributional benefits’ are unclear: UC has imposed a terrible cost on the people it has failed to serve, with most claimants suffering financial hardship and (despite some moderation) a ridiculously large number having benefits stopped in the name of discipline – nearly 90% of all  sanctions in 2019 were imposed as a penalty for missing appointments.  The last figure is obviously wrong, and in the wrong direction.  For the first, if there was ever any basis for the DWP’s claim that 200,000 more people would move into work – there probably isn’t – £4.6 billion would cost £23,000 for every one of these.  For the same price, the government could have created rather more than 200,000 useful jobs.

In an extraordinary judgment, the Court of Appeal have declared that an element of the assessment of Universal Credit is so irrational as to be unlawful.  Gareth Morgan has explained, at some length, how Universal Credit manages to take information about regular, predictable incomes and rent, and convert that into an irregular and unpredictable stream of income. The point of contention in this case is a small part of that, but the problem the court was looking at is pretty straightforward.  Banks do not operate on bank holidays and weekends, and the Universal Credit assessment ignores that.  That has meant, for people unlucky enough to have an assessment marked down for an awkward date, that regular income will be  counted as too high, or too low, and the amount they receive will fluctuate wildly.  The court was not impressed by the DWP’s arguments that changing the assessment in this case would be expensive or inconvenient.

“The Secretary of State for Work and Pensions’ refusal to put in place a solution to this very specific problem is so irrational that I have concluded that … no reasonable SSWP would have struck the balance in that way. “

How, we might reasonably ask, did the DWP get in this mess?  There have been three recurring problems.  First, Universal Credit was designed by people in a mental bunker, determined not to share, consult or engage people who understood how benefits work – including their own front-line staff.

Second, the system has been built around the capacity and convenience of the ICT, rather than the tasks that needed to be done.  The technology has never been capable of doing the sort of things that are needed to run a system properly – the failure of the verification system  is an illustration.  The process we now have in place is cumbersome, complex, slow, very expensive and difficult to change.  We did things faster, and cheaper, forty years ago.

Then there is the failure of the safeguard, which depends on the scrutiny of regulations by the independent Social Security Advisory Committee.  I’ve been critical in the past of the SSAC’s approval of policies and regulations that I cannot believe would stand the test of judicial review, such as mandatory reconsideration or the sanctions regime.  (Both policies violate the centuries-old principle of audi alteram partem, or natural justice: no legal penalty should be imposed without first giving the person sanctioned the opportunity to be heard.)  The problem is, I think, that the SSAC tries to reach decisions through consensus, and an insistence on compromise  is fundamentally inconsistent with the role of independent expert advisers in identifying specific issues that fall within their area of expertise.  Illegality should not be treated as being open to negotiation.  The bulk of the SSAC’s work is confidential, but in the light of this judgment they need now to review whether they had identified the fatal legal flaws in the regulations,  and if not why they failed to do so.

I’m not keen on Gareth Morgan’s proposed fix for the problem of dates, which is designed to tweak the assessment for the people affected while minimising disruption to the information that the DWP gathers.  By all means, let’s disrupt this. Real-time assessments are beyond our capacity to deliver; whole month assessments, delivered at the end of the same month, lead to radically unstable income streams; individual variations in payment arrangements lead to complexity and confusion.   I lean towards the French system, which is to use, as far as possible, retrospective information about means, and the same predictable, common dates for everyone: it makes a huge difference to the predictability and stability of income.

A thoughtful blog by Fran Bennett asks whether Universal Credit will come into its own now that more than a million more people have claimed it.  She argues that the benefit has been changed in important respects as a result of the current crisis.   The biggest changes have been the extension of the benefit to cover self-employed people, the abandonment of work requirements, and the reluctant acknowledgement that the benefit is no longer primarily concerned with long term dependency on welfare – if it ever was.

Many of the complaints about Universal Credit focus on mean-spirited, ill-considered rules  rather than the essentials.  The benefit cap, the two child limit and the five-week wait for benefits are all high on the list. But the flaws in the benefit run much deeper.

The central failing of Universal Credit reflects a failure to appreciate that people cannot live on thin air.  Benefits have to provide for financial need; they have to secure essentials;  they have to allow people whose income is interrupted to meet essential commitments, such as housing costs or fuel bills, even if those commitments are higher than a person living on a minimal subsistence income would need.  Universal Credit does not secure even a minimal income.  In normal times, benefits have routinely been stopped arbitrarily. The rise of the food banks is not an accident of nature.    Even with all the changes that the government has made in the current crisis, there are some obvious problems.  People have to go without for weeks before they receive money.  If they  receive an ‘advance’ payment, it is treated as a debt which they must repay, guaranteeing that their future income will be inadequate.  Some people are excluded altogether.

The next set of problems relate to the benefit’s unpredictability.   Universal Credit adjusts to income, and income is intermittent.  The attempt to adjust benefits on a ‘whole month’ basis means that the amount of entitlement can be changed very shortly before its actual payment.  Unless people are completely destitute (and growing numbers of people are), they cannot reasonably be expected to know whether or not they will be entitled, how much benefit they should receive, and when they might cease to be entitled. It is a prescription for confusion.

The third, and possibly the most fundamental flaw in the scheme is its dizzying complexity.  It tries to deal with far to many disparate circumstances, and it does most of them badly.  The treatment of disability, divorce, chronic sickness, housing subsidies, low income and care have been rammed forcibly into a template that was intended to deal with a tiny number of people who were continuously unemployed for long periods.  It inflicts injustice on all of them.

Universal Credit has wrought disaster at every point of its development.   We cannot just stop delivering it, but we push it to the sidelines – putting more money into benefits that can offer a reasonable degree of social protection.  This one never will.

The House of Lords Economic Affairs Committee has asked for submissions on ‘The Economics of Universal Credit’.  My submission has just appeared here, as an MS Word Document. This is my summary of the main points:

The aims of Universal Credit (questions 1 and 2)
• Universal Credit is a portmanteau benefit, not a simplification.
• It has not reduced costs, reduced error or improved the efficiency of benefit administration.
• ‘Personalisation’ has led to unstable, unreliable income flows.

The relationship of UC to the labour market (questions 6 and 7)
• UC has not evidently reduced worklessness, but the relentless emphasis on work is in any case a distortion of perspective.
• The marginal rate of deduction is very high. There is no good evidence of incentive effects, but arguments on this basis are more concerned with equity than with economic behaviour.

I conclude that “The purposes of UC are defeated by its complexity, and its failure to provide a stable, predictable income.”  I doubt that anyone who has followed this blog over the course of the last ten years will be surprised by that judgment.

This document was in MS Word, a proprietary format, because that was what the Lords Committee specified.  To make it accessible, here is a PDF version.

A report from the IPPR is critical of Universal Credit.  The report focuses on a series of features about UC which are causing problems. They include

• • • • the five-week wait
      • monthly payments
      • the two-child rule
      • the benefit cap
      • the high taper rate
      • the level of benefit
      • joint payments
      • sanctions and conditionality
      • the management of ‘debt’ to the system.

What’s striking in this list is that only one of those features – monthly payments, linked to monthly assessments – is integral to the design of the benefit.  All of the others have been tacked on, like decorations on a Xmas tree.  But UC has other, built-in flaws – problems that exist because of what the benefit is.  They include

• • • • the attempt to lump disparate benefits together, with the effect that problems in one part can lead to catastrophic suspension of the whole
      • the dismantling of the support system for Housing Benefits
      • the unpredictable and fluctuating benefit entitlement, exacerbated by the idea that assessments relate to income now rather than historic income
      • the very idea of a taper, which means that people cannot know when they become entitled to a benefit and when they cease to be entitled – a recurring problem with Housing Benefit and Tax Credits
      • the obsession with entry or re-entry to work, when the vast majority of intended claimants will not be part of the labour market
      • the implications of the ‘work allowance’, set too low to allow for continuous contact, and
      • the idea that technology, rather than competent administration, can settle complex human problems.

The IPPR are right to complain that this is “a tightrope over poverty, not a social safety net”.   But they don’t go anything like far enough.

 

Universal Credit has its defenders, and the Daily Express has come out fighting:

“disruptive” proposals could hammer 30 million Britons, cost tens of billions of pounds and send taxes soaring.

The middle bit of this could be true, because all major reforms have a price tag; introducing Universal Credit had cost more than £2bn by last year, though that figure ignores the false start and ‘reset’.  The very belated Final Business Case claimed that UC will gain £24.5 bn in people choosing to work more, £10.5 bn in distributional improvements, and £9.1 billion in reduced fraud and error.  The National Audit Office has told us that “We cannot be certain that Universal Credit will ever be cheaper to administer than the benefits it replaces”; their 2018 report said that

 the extended timescales and the cost of running Universal Credit compared to the benefits it replaces cause us to conclude that the project is not value for money now, and that its future value for money is unproven.

We now know that the figure on fraud and error is wrong, and that Universal Credit has made fraud and error  much worse; and ‘distributional improvements’ don’t save money, they move it to a different place.  So the only possible saving could be by encouraging people into work, and given that only a very small proportion of claimants are continuously unemployed – the majority of claimants are too ill to work, carers, short-term unemployed or already working on low incomes –  it isn’t going to be anything like £24.5bn.  If I had to guess, I would estimate the net gain, by comparison with the previous system, at something closer to zero.

That leaves us with the extraordinary claim that 30 million benefit claimants will be affected.  Yes, that really is what the Express article says:

It would immediately impact around one million people currently on Universal Credit, but it would likely also have an impact on the 30 million-plus people receiving some form of benefits.

To get anywhere near 30m, that has to include all pensioners, and every child where the families receive Child Benefit.  It seems that the lives of children and pensioners have been turned around by the prospect of a benefit that neither group gets, and they can all look forward to a brighter future, if only this benefit remains in place.  But perhaps I  mistake the argument, and the Britons in question are the occupants of a parallel dimension, like the Man in the High Castle, where everything is subtly different.  Suddenly, everything in the Express starts to make sense.

PRESS RELEASE: UC APPG responds to childcare announcement

From the APPG I have the news that people on Universal Credit will be able to get a loan or advance to pay for their child care.  Whenever someone gets a loan or an advance they have to pay it back, usually by deductions from their benefits.  That means that, whatever their benefit entitlement may be, in the future they will get less than that entitlement.

I apologise for stating something that should be painfully obvious to anyone after a moment’s thought.  (‘Painfully’ was not the first adjective that sprang to mind.  I thought it better to moderate my language for public consumption.)

The All Party Parliamentary Group on Universal Credit has published a detailed report on Universal Credit, including something in the region of 50 reasonable proposals to help the system work better.  The group has notable expertise in the field, and there is no recommendation I wouldn’t agree with, but I don’t think it goes anything like far enough.  The fundamental design flaw, which they point to at the outset, is this:

many claimants say they cannot understand how their UC is worked out, and it is subject to so many variations that it is far harder to budget on UC that it was on tax credits.

That instability of income is built in to the system.  Some of the fluctuations would be damped down by the group’s proposals, including modifications to work allowances, a review of the treatment of self-employed people and 53-week years, but they would not prevent the wild fluctuations in the amounts being paid month by month. To stop that happening, the system needs

(a) to make payments on a uniform date, rather than a personalised one which varies with weekends and bank holidays;

(b) routinely to make rental payments direct to landlords, as Housing Benefit did; and

(a) to relate entitlement to a preceding period, rather than the current one.  As this report says,

This mismatch of pay cycles and assessment periods and the ‘whole-month’ approach to changes of circumstances, can leave people struggling to budget with unpredictable and arbitrary awards.