If you want to improve the benefits system, speak up
The IFS says Universal Credit will lower the incomes of millions of people and that the welfare reform “hits the persistently poor the hardest on average.” But change is possible.
Universal Credit has a long and often sorry history.
Its apparent starting principles were a simplification of the social security system and a commitment to make work pay.
Since it was started by Iain Duncan Smith and then-Chancellor George Osborne, the story has been different, and mired in various scandals – often relating to the poor treatment of people with disabilities.
Last week, Stephen Smith – a man whose benefits were cut despite his deteriorating health, with his weight falling to six stone and him struggling to walk – died a few months after winning a long battle to overturn the Department of Work and Pensions (DWP) determination that he was fit to work.
There have also been repeated Kafkaesque case studies about the sanctions regime (punishments for non-compliance with the sometimes ludicrous bureaucratic demands of Universal Credit), which research has found fail in their core purpose of getting people back to work and instead increase poverty.
These experiences highlight core failings of the system and both work capability assessments and sanctions have led to so many shocking decisions – with huge numbers overturned on appeal - that cases like those of Mr Smith cannot be considered exceptional, they are indicative of something systemic.
But what about other aspects of the design? Things that are not, and cannot be, subject to successful appeal and so are social security working as designed? Some of those are not above criticism either.
The Institute for Fiscal Studies (IFS) last week published research looking at longer-term impacts (over the next eight years) of Universal Credit and the headlines are bad although the results are mixed.
The Guardian says that “Almost 2m people will lose £1,000 a year with universal credit – study” – and, while this is true, the reality is a little more subtle.
It’s still not great, though. Per the IFS, the key findings of their study include:
Universal Credit disproportionately reduces incomes among poorer adults - Those in the lowest-income 10% of the population on average lose the most from universal credit – a 1.9% fall in their income, equivalent to £150 per year per adult.
Many people win and lose from universal credit – some quite substantially - 76% (8.7 million adults) of those entitled to means-tested benefits – and 84% (7.2 million) of those in working households – see a change in their entitlement of at least £100 per annum (p.a.). 17% (1.9 million) see a loss of at least £1,000 p.a., while 14% (1.6 million) see a gain of at least that much.
Changes in entitlements are the natural consequence of integrating together benefits – but four specific government choices account for many of the large losses - 77% of those who lose at least £1,000 p.a. are affected by universal credit’s harsher treatment of one of the following groups: those with financial assets; the low-earning self-employed; couples where one member is above state pension age and the other below; and some claimants of disability benefits. The large gains are accounted for partly by universal credit’s more generous treatment of working rented households: 29% of those in such households who are on means-tested benefits see an increase in entitlement of at least £1,000 p.a.
Large losses are often temporary with the effect on incomes over eight years considerably smaller - Those affected by the harsher treatment of the low-earning self-employed on average lose £2,100 p.a. in the year they are affected (the ‘short run’). But when we measure the effect on their average incomes over eight years (the ‘longer run’), they lose on average £850 p.a. – because they often go on to higher-income self-employed work or become employees. Similarly, the average loss from UC’s treatment of assets (among those affected) is £1,430 in the short run, but £420 in the longer run.
The real problems with the long-term effects of Universal Credit, more generally, are where the losses in income persist:
The self-employed, owner-occupiers and people with significant financial assets – all of whom tend to lose out from universal credit – are 1.5 to 2 times as likely as other low-income groups to find that a period of low income is temporary, rather than persistent. Conversely, those who are disabled or who live with a disabled person (who, on average, lose from universal credit) are especially likely to be persistently, rather than temporarily, poor.
This was reiterated by Tom Waters, a research economist at the IFS and an author of the briefing note, who said: “The biggest losses experienced as a result of the switch are mostly down to a small number of specific choices the government has made about universal credit’s design, such as its treatment of the low-income self-employed and people with financial assets.
“Many of those very large losses do turn out to be temporary for those concerned. However, even when measuring people’s incomes over relatively long periods, universal credit still hits the persistently poor the hardest on average.”
Universal Credit has been delayed in Northern Ireland, both because its implementation here happened later than in the rest of the UK, and also because of a package of mitigations adopted by the (then-functional) Assembly.
However, the roll out is now happening here and the mitigations that were drawn up by a working group headed by Prof. Eileen Evason and taken up by the Assembly wholesale will soon come to an end.
It should also be noted that, per an Audit Office report from January, a significant amount of the cash set aside to ease the movement of welfare claimants onto Universal Credit has not been spent.
Next March the time period set aside for the Evason mitigations will come to an end.
This leaves NI heading to a Welfare Reform cliff edge that local organisations such as Advice NI, Law Centre Ni and Housing Rights have been campaigning about and against.
There are some winners and some losers – if you want to frame things in that crude fashion – from the change to Universal Credit but the fact that poorer people and those with disabilities tend to end up with the largest reductions in income seems less than ideal.
Public policy is never settled, however. Everything is mutable.
A joint inquiry by two Westminster committees, the Northern Ireland Affairs Committee and the Work and Pensions Committee, looking at the impact of welfare policy in NI was launched a few weeks ago and runs until May 24.
While this is far from a public consultation into new policy, it is a live conversation in the corridors of power willing to hear about the negatives - and positives – of welfare reform.
If you want to improve the benefits system, speak up.
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