Making Universal Credit work

The report from the Resolution Foundation, Making it work, goes into great detail to address some of the anomalies in the Universal Credit system.  The system as it currently stands is riddled with perverse incentive.  Problems include the exclusion of key benefits (they stress the importance of Council Tax Reduction), the treatment of second earners, the treatment of self-employed people (they give an example of how a self employed person could be worse off than an employee on the same income) and the effects of inappropriate conditionality.

This comes from a group which, by its own account, agrees with Universal Credit in principle.  That’s not a view I share.  There may be some problems that could be resolved easily enough, such as where rent payments go or how long people should have to wait for benefits, but many of the problems of Universal Credit are intrinsic to its design.   Those problems include

  • the poverty trap, and the incompatibility of withdrawing benefits with maintaining financial incentives
  • the inherent difficulty of assessing fluctuating incomes
  • an obsessive focus on work, for a group of claimants where millions are no part of the labour market
  • the hubris of trying to personalise benefits for 7-8 million people, and
  • the impossibility  of trying to respond to changes in ‘real time’.

Most of those issues should have been obvious from the operation of the Tax Credit system.  It would have been easier and fairer to put up the minimum wage and double Child Benefit.  And it would have been cheaper, too.

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