Omens are grim as Universal Credit arrives
Limavady will be first and then it will be phased in everywhere, reaching Cookstown, Ballynahinch and Newcastle by September of next year.
Detailed examination of what is involved suggest that its successful implementation rather than Brexit is the biggest and most difficult challenge faced by the UK government. The omens do not look good.
Universal Credit (UC) was the brainchild of former Work and Pensions Minister Ian Duncan Smith. It was conceived for honourable reasons: to simplify what had become a horrendously complicated benefit system and to ensure that it always pays for people to enter work and get on once in a job.
The reform was therefore aimed at resolving a central problem for all governments: how to make work pay, reducing worklessness; provide adequate support for families; all at a reasonable cost to the taxpayer. It is a delicate balance.
The way the system will work is as follows: new claimants will go straight on to the new system. Those in receipt of the benefits which it replaces will be phased on to it by 2022 unless their circumstances change, in which case they will go on to UC straight away.
It replaces six existing benefits:
- Jobseeker’s Allowance (income-based)
- Employment and Support Allowance (income-related)
- Income Support
- Child Tax Credits
- Working Tax Credits
- Housing Benefit (rental)
As already stated the objective is to ensure that working always pays.
Yet the last government also decided on welfare cuts as part of overall austerity measures. Ian Duncan Smith resigned as Minister over this in March of last year furious with Chancellor George Osborne for what he described as “indefensible” cuts.
During his tenure Osborne introduced the National Living Wage but he also pushed through welfare cuts of £14 billion, cuts, which by definition, fall on the poorest households in the UK.
David Finch, a former DWP economist now works for the think tank The Resolution Trust calculates that this translates into lost income of up to £2,800 per annum for some working families.
He also states that far from incentivising people into work UC is trapping people in low pay – a £1 pay rise can translate into as little as 25p in the new system.
The impact of this: further falls in living standards for those already struggling to get by may yet have far greater repercussions that Brexit, however that is finally achieved. Income inequality is set to increase and living standards fall. This is not a happy position for any government to face.
But it is not just the fact that cuts are compromising the stated aims of UC.
The system will eventually apply to 7 million citizens and 52% of all families with children. It is the biggest single change to benefits since the establishment of the Welfare State.
There is an inevitable tension in executing such a massive and complex change between maximising the efficiency of the new system and making it as simple as possible for its intended recipients.
All the evidence suggests that the government has got the balance wrong, catastrophically so.
One of the most striking examples of this is in the rental sector.
On Sunday last The Observer gained access to evidence which is shortly to be submitted to a parliamentary inquiry.
It shows an alarming spike in rent arrears amongst those who have switched to UC. Three councils whose tenants have already been moved on to universal credit said they had built up about £8m in rent arrears. Croydon, Hounslow and Southwark said that more than 2,500 tenants claiming it were now at risk of eviction.
Half of all council tenants across 105 local authorities who receive the housing element of universal credit are at least a month behind on their rent, with 30% two months behind.
By contrast, less than 10% of council tenants on housing benefit are a month behind on their rent, with under 5% running more than two months behind
The reason for this appears to be twofold. Under the new system it takes at least six weeks before claimants receive money. Although there is provision for advance payments, few appear to know about this.
Secondly housing payments now go direct to the tenants rather than to the landlord as was previously the case. The thinking behind this was to give benefit claimants more responsibility to manage their budget, but given so many have to borrow money whilst waiting for payments problems are inevitable.
Many private landlords are turning away potential tenants on UC for this reason.
There have also been problems in accessing helplines with 40 minute waits quite common and in getting the explanations needed for the new system from relevant staff.
It would appear that there has been insufficient thought put into how to successfully transition people, many of whom are vulnerable, from the old system to the new. This has led to a call by many organisations including Citizens Advice for UC’s roll out to be stalled until the mounting problems are resolved.
Citizen’s Advice says: “our research suggests that nearly a third of the people we help have to make more than 10 calls to the UC helpline to sort out their UC, over a third are waiting more than 6 weeks for their first payment of benefit and half are having to borrow money to cope with the initial wait for payment. The move to UC is causing significant financial challenges - our UC clients are nearly one and a half times as likely to seek advice on debt issues as those on other benefits.”
This therefore is what we can expect in Northern Ireland. A simpler system designed to make work pay which has suffered from cuts deep enough for its architect to walk away from it; and an implementation process which seems to be forcing recipients into debt and does not appear to be able to respond appropriately to queries.
It is a significant challenge, not just for DWP but for government as a whole. The UK remains close to the top of low pay leagues. The gap between rich and poor is widening, inflation is rising, debt is mounting. It is a toxic, situation for the Chancellor Philip Hammond.
Brexit is not the only show in town.
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