Universal Credit isn’t working: the Lords Economic Affairs committee’s judgment on UC

The report on Universal Credit by the House of Lords Economic Affairs Committee will not come as a great surprise to anyone who’s been following the evidence.  (Except, perhaps, me: I submitted an evidence paper  myself in March, and in the wake of moving house, and major illness six weeks after that, I’d quite forgotten that I’d done it until I saw it quoted on page 12.)  The chair of the committee, Lord Forsyth, has suggested that the report approves of UC in its ‘concept’, but that there are problems with its design and its administration.  Given the questions that the committee raises about real-time information, digital access and fluctuating incomes, I think the criticisms go beyond that.  The problems they recognise also include a familiar litany of failures:  among them, the 5 week wait, unpredictable benefit streams(“impractical” and “fundamentally unfair”), conditionality, the two-child limit and inadequate levels of benefit.  Despite all that, the system is “not broken irredeemably”.

The initial request for evidence asked whether UC had achieved its objectives.  As the statement of objectives has frequently shifted for political expediency, it’s hard to say even what the current tests are, but the committee proposes a range of distinct principles: dignity, adequacy, providing a predictable income, flexibility, fairness, achievable ends and comprehensibility.  They suggest that there could be a two-week payment up front, a three month fixed level of payment, and that child support could be taken out of the system altogether – those all seem to me to be good ideas.   But the fundamental problems will remain:  a tapered benefit, an obsession with labour market issues when most claimants aren’t going to be in the labour market, and a reliance on information that can’t be supplied or managed.

Yet more failings of 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.

The administration of Universal Credit is judged to be irrational and unlawful

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.

Will the current crisis be the ‘making’ of Universal Credit?

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 social protection system is failing. We have to find ways round the problem.

We have moved into lockdown, and the government has still given little thought to how to protect the situation of people on very low incomes.  The main concessions relate to the failing system of Universal Credit: work allowances and benefit levels have been increased, the presumptive income of self-employed people no longer applies, and new sanctions have been suspended.  Universal Credit is not, however, equipped to respond to people’s circumstances even in normal times, and it cannot cope with the surge in applications.

First, people have to apply.    This is a clip posted on Twitter by an applicant looking to verify his identity:  it will take nearly a month for the position to rise to the point where it can be dealt with and then there is a 45-minute window to respond.  After that, there is a five week wait for benefit delivery. Claimants are offered loans to fill in the gaps, which means a long-term reduction in the future amount of support available.

What are the alternatives?  There is a strong case being made currently for something like a Universal Basic Income.  UBI only provides people with cash, but that meets the present situation: there are plentiful supplies of goods, and what we need to do at present is to make sure that people have the resources to buy them.  I’ve objected to the idea in the past, mainly on two grounds: the distributive impact, which is likely to exclude people on existing benefits, and the opportunity cost.  Neither of those reservations really applies to the present situation.  The government could do worse than offering a flat rate payment to everyone.

However, the mechanisms to deliver a universal income don’t currently exist, and in a crisis, we need to be considering what can be done quickly and immediately.  There are three benefits which have widespread coverage, making it possible to make special payments using mechanisms that are already in existence.

    • The Xmas bonus currently goes to 17.5 million people, mainly pensioners, carers and people with disabilities.
    • The Winter Fuel Payment, which might be more adaptable to special one-off payments, goes to 12 million pensioners.
    • Child Benefit goes to 12.7 million children in 7.3m households.

It should be possible, then, rapidly to make arrangements to make special payments,  with minimum fuss and no additional verification, to up to 37.5 million people (17.5 + 12.7 + 7.3).   It’s not ideal, but we need to find mechanisms that are practical and effective; this would cover a lot of the ground that needs to be covered.

This still leaves a large hole: the position of adults of working age who have no children.  The government obviously hopes that employees within the PAYE system can be supported through businesses, using roughly the same mechanism as Statutory Sick Pay – it won’t work, unfortunately, for the most precarious workers, or self-employed people.    I’ve canvassed in the past another option: make the tax allowance convertible, so that people can claim the equivalent in cash.   That should, in principle, cover most of the people left out by the first proposition, with the added advantage that people who already have sufficient taxable income will be paying it back in tax.

A submission on the economics of Universal Credit

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.

More on the problems of Universal Credit

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.

 

Somewhere, in a world quite unlike our own, Universal Credit is working brilliantly

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.

Some snippets on the Scottish variations in benefit rules

I have spent a little time this week preparing for an evidence session of the Commons Scottish Affairs Committee, which was reviewing the development of social security in Scotland.  The hearing, scheduled for next Tuesday, has now been cancelled, because everyone is currently more concerned with High Politics; the process may resume in due course, or it may not.

I’d been focusing on the back half of the committee’s remit, which was concerned with the relationship between the Scottish system and the UK system.  In the process, I’ve spoken with people from a range of organisations, including the Scottish Federation of Housing Associations, Glasgow Welfare Rights, Citizens Advice Scotland, Clydebank Independent Resource Centre, Child Poverty Action Group and One Parent Families Scotland.  I’ve also seen the written submissions from Inclusion Scotland, Poverty Alliance and the Scottish Campaign on Rights to Social Security: the written submissions should be published more generally  shortly, but publication has to be approved by the Committee first.  Thanks to you all.  I also found a SPICE paper, on administrative costs and relationships with the DWP, particularly helpful.

There have been very positive things said about a couple of the new benefits that rely heavily on the cooperation of the DWP, particularly the Carers Allowance Supplement and the Best Start Grant.  There are more reservations about the operation of variations in Universal Credit, partly because the system from direct payment of rent to landlords isn’t adequately integrated,  and because there seems to be some hesitation about applications.  That may reflect advice from housing associations, and there have been some problems with some rent being paid monthly while income is bi-monthly; but I’d guess that it may also be because bi-monthly payments don’t get over the outstanding problems of an unpredictable, fluctuating level of benefit.

Additional note, 30th October: I have just received notice that, following the announcement of a General Election, the Committee’s review of the Scottish social security system will not now take place.

The problems with Universal Credit can’t be fixed by loans or advances.

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.)