The £20 Universal Credit should stay. History says the cut will go ahead.

22 Sep 2021 Ryan Miller    Last updated: 22 Sep 2021

Dr Therese Coffey remained in place as DWP Minister during the recent cabinet reshuffle. A change in direction seems unlikely.
Dr Therese Coffey remained in place as DWP Minister during the recent cabinet reshuffle. A change in direction seems unlikely.

The reality of Universal Credit has always been at war with its stated aims. The £20 uplift should stay – or be increased – but reducing payments would be in keeping with standards set by this major welfare reform.

 

For a lot of people and families, £20 spread over the course of one week is not a huge amount. Were it to disappear from the weekly budget, it might not truly be missed.

However, there are many families for which every £20 is important, is vital, and makes a huge difference to their lives.

For obvious reasons, people who rely on social security tend to fall into the latter category.

Next month, £20 will be cut from Universal Credit (UC) payments in the UK. This does not have to happen. Westminster is well able to afford to keep UC as it is (or to even raise it). Nevertheless, the reduction looks set in stone.

The government’s stated rationale is that it wants to make work pay. This harks back to the origins of Universal Credit, one of the major policy initiatives of David Cameron’s time as PM, a policy that has kept rolling under both Theresa May and now Boris Johnson.

Back in 2010, Welfare Reform was a passion project for the then Chancellor George Osborne and Work and Pensions Secretary Iain Duncan-Smith. They said they wanted to simplify the benefits system and to make work pay – two perfectly sensible aims.

If those aims were ever honest, they were betrayed by what Universal Credit became and what it continues to be.

This £20 cut is no different.

Simple

Universal Credit took the whole suite of UK social security (which encompassed several different strands of payments) and brought them into one tent.

This was a good idea. It was the part of the simplification that worked. The parts that did not work were almost everything else.

The rules (now massaged somewhat) about eligibility and entitlement were so strict and self-defeating, and the punishments so mindblowing, that a whole reappraisal of what Universal Credit actually was, as opposed to what it was supposed to be, should have taken place but did not.

Sanctions handed out for non-compliance with bureaucratic rules (that were sometimes impossible to follow) often read like bad, black-hearted satire. Examples include:

The sanctions scheme has eased off, but that took months and years of pressure, pushing back against reams and reams of individual stories like those listed above.

Then there is the scandal of work capability assessments – something that is still ongoing. Personal Independence Payments (PIP) are one arm of Universal Credit, paid to people with long-term health problems or a disability.

Anyone due to receive PIP (or Employment and Support Allowance, a still-running precursor to UC) must undertake a work capacity assessment.

These assessments are carried out by third-party contractors, such as Capita, on behalf of the government. They have been a disaster, disqualifying huge numbers of eligible people from disability supports to which they are entitled. The consequences can be tragic.

Fresh figures show that, right now, 70% of appeals against a rejected work capacity assessment are successful.

None of this is a simplification. It is bureaucratic abuse that should have been accepted as scandalous as soon as it was revealed. Instead, some of it changed over time (under huge pressure) and some of it continues.

Make work pay

Universal Credit is not a pandemic issue, but the pandemic has almost doubled the number of claimants.

18 months ago, around 3 million people were on Universal Credit. The latest government figures now have that number at 5.9 million.

Some of those people are unable to work, some are jobseekers, but 40% of claimants – 2.4 million people – are currently employed. Taking £20 per week from those people in order to “make work pay” makes no sense.

Work and Pensions Secretary Dr Therese Coffey nevertheless made that point, at the same time as failing to understand how much extra work people will have to do to make up the £20 shortfall.

But, even if Dr Coffey had not shown some basic incompetence in her ministerial role, her suggested plan remains magical thinking – people just have to work more hours.

What hours? Where is all this extra work to be spread around millions of people across the UK? Her argument is just a piece of rhetoric, a wave of the hand. And it seems like some of her cabinet colleagues know that full well.

Make work pay is just a few words. Cutting the income of millions of working people by over a thousand pounds per year is the action.

Redistribution

For anyone who needs extra persuasion – beyond the fact that ideally nobody should be poor, and if we can help anyone with struggling finances, we should - the value of a strong and effective social security system goes beyond the families who receive payments.

It is not a zero-sum situation. The cash does not come out of taxpayers’ pockets and into the hands of people on Universal Credit. This money is spent. Some of it in local shops, some in supermarkets, some on energy bills.

This is money that moves through the economy. Money: it’s made round to go round, as the old saying goes.

Indeed, this was part of the rationale of some of the major spending programmes seen during the pandemic. Initiatives like furlough and SEISS were of course designed to help people whose work was affected by Covid-19 – but it did more than that. It avoided a downward spiral for the whole economy by allowing people to at least keep within sight of their normal spending (hospitality and other shutdown sectors notwithstanding).

The Department for the Economy at Stormont is currently trying to roll out its High Street Voucher Scheme, which is designed to provide a boost to local retailers (and for which the benefit to members of the public who spend their £100 vouchers is considered secondary).

Of course, Universal Credit is different from both these temporary scenarios. Furlough and SEISS were extraordinary measures taken in the worst of the pandemic. The High Street Vouchers are a one off. But it remains the case that the value of redistributing money to people who will then spend that money does not end when the benefit is issued.

Disincentivisation: the overstatement of our times

The more money you give people for doing nothing, the less they will want to work. Benefits are a disincentive. That is why they must come down.

This, more or less, is the logic trotted out any time someone wants to justify a cut in social security.

But the power of disincentivisation is vastly overstated. Any disincentives are not nearly so powerful nor so clear cut as this (simple, plausible, incorrect) argument maintains.

Scope wrote previously about how giving cash to people in tough circumstances can provide them with hope, and give them an opportunity to overcome some of the challenges in their lives.

Seen through that lens – one which portrays social security as an investment – the cut to Universal Credit is a problem. This view also shows where the disincentivisation argument goes wrong: by failing to appreciate the complexity of individual people.

And, actually, the central truth of this whole policy concerns people. It is important to consider the economic effects of social security policy in the round, but not to obsess about them, whether positive or negative.

The question is straightforward. Do we, as a society, want to help those who are struggling?

The answer should be yes.

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