Could pausing Universal Credit create the opportunity we need to fix it?

Blog posts

9 Jan 2019

Tony Wilson, Institute Director

Since Iain Duncan Smith’s resignation in 2016, five different Secretaries of State have been tasked with implementing Universal Credit (UC). So Amber Rudd could be forgiven for viewing this as a temporary assignment. It is welcome, then, that she has made the reform of Universal Credit an early priority – with reports this weekend that the government will revisit its plans for the ‘managed migration’ onto UC of three million households currently claiming other benefits.

In reality, the stories this weekend may not signal as dramatic a change as has been suggested. Amber Rudd’s predecessor, Esther McVey, set out in November that the government would ‘test and refine our approach with a very small number of claimants from July 2019 … before we take on larger volumes in 2020’, with ‘no more than 10,000 people…migrated during the test period.’ This weekend’s briefings suggest that there will still be a pilot in 2019, affecting up to 10,000 households, with full roll-out starting in 2020. At the very least though, the parliamentary process will change – and at the most there may be a wider, and welcome, opportunity to look again at the design and delivery of UC.

On the parliamentary process first, the government requires new regulations in order to begin the ‘managed migration’, and had intended to table a vote on these during 2018. In normal times, it is almost unheard of for regulations to be voted down in the Commons (the last time this happened was in 1978). But these are not normal times – and with the DUP hinting that they may abstain on UC, a number of Conservative MPs raising concerns and all other parties lined up to oppose, the government faced the very real prospect of defeat. So what looks most likely is that the government will now seek to pass two sets of regulations – one to authorise the limited pilot this summer, before returning with new regulations for full roll-out from 2020.

This threat of defeat last year at least partially explains some of the welcome changes to UC announced at the Budget. The government committed then that claimants would continue to receive their existing benefits for the first two weeks of their UC claim, helping them to better deal with the five-week wait for their first UC payment. This was a key recommendation from the Social Security Advisory Committee, who released a consultation on the draft regulations last summer. The Committee also called on the government to look again at its plans to require households to submit new claims rather than be transferred automatically, which the government continues to resist. This may well be another area where the government will be willing to comprise, after the pilots this year.

However, this weekend’s reports are a further signal that Amber Rudd is prepared to look more fundamentally at the design and delivery of UC – following comments last month that she wanted to ‘get more money into Universal Credit’ and to get payments ‘into people’s hands earlier’. This is welcome, as have been her New Year’s resolutions to make the system work better for women and to support more people into work. As I have written before, UC remains a good idea in principle. And as the National Audit Office has said, it is here to stay. So what would a better Universal Credit look like? In our view, it would mean focusing on five key principles:

1. Timeliness. The latest figures show that administration of UC has improved significantly – with 84% of new claims paid on time, which compares fairly well with the benefits that it has replaced. However ‘on time’ still means five weeks after the initial claim, and this delay is a root cause of many of the problems that low-income households have faced. Even The Sun is now campaigning for Universal Credit to be paid within a fortnight. The government has introduced new ‘run ons’ to Housing Benefit and extended access to advance payments, but there is a strong case for paying UC earlier and more frequently – monthly payment makes it harder, not easier, for low-income households to manage their money. The Scottish Government has used its limited power in this area to allow fortnightly payment, with around two fifths of households taking this up. As a start, we should trial and evaluate the same approach in England and Wales.

2. Flexibility. UC has a monthly ‘assessment period’, with entitlements based on income over a calendar month and then paid a week later. As with much of UC, this makes things simpler on paper but often fiendishly complicated in practice. For example for those in work, if someone is paid monthly and has a claim date that coincides with their usual payday, then they can easily end up with having two pay days per assessment period in some months and no pay days in the next. This can lead to UC awards varying hugely month to month and in many cases households can be worse off overall, particularly for those with large ‘work allowances’ like lone parents and disabled people. This is irrational and inadvertently discriminatory. The Child Poverty Action Group is currently challenging this in the courts, and has also set out how it could be fixed – most simply, by just allowing claimants to move their assessment dates in these cases. The monthly assessment period creates other issues too – for those with fluctuating earnings and for those who move home. The government needs a more sensible and flexible approach, for example by smoothing or averaging changes in income.

3. Adequacy. As Amber Rudd has rightly identified, the 10 years of cuts to social security now need to stop. Detailed analysis for the Equality and Human Rights Commission has found that tax and benefit reforms since 2010 have reduced incomes of the poorest fifth of households by on average £140 a month and directly led to an increase in poverty of more than two million. This has been driven by a range of measures – including cuts to tax credits, housing reforms, the benefit cap and the benefit freeze – but all of these feed through into Universal Credit. Government research finds that half of UC claimants are in housing arrears or financial difficulty and two in five struggle to keep up with their bills. As a minimum, this year’s Spending Review must end the cash freeze on benefits. But it should also look again at the extra amounts paid for children or disability in UC, the benefit cap, Local Housing Allowance and the severity of the sanctions regime.

4. Partnerships. Just one third of UC claimants report that it is easier to claim than existing benefits, and more than two fifths need additional help to set up their claims. The government is spending £200million on ‘Universal Support’ to address this, with around a quarter of this directly funding Citizens Advice services. But last year’s NAO report describes fraught and difficult local relationships with Councils and the voluntary sector, which are making it harder to coordinate support and may end up undermining efforts to increase take-up (which is one of the key benefits of UC). National and local government need to reset the relationship on UC, starting with a fair assessment of the costs, local impacts and appropriate responses to reform.

5. Employment. Finally, the promise of Universal Credit has been that by simplifying the system, improving financial incentives and reforming employment support, more people would be able to move into more and better work. It is welcome that government has increased work allowances in UC, improving returns from work (although analysis by the Resolution Foundation shows that there is still further to go, particularly for second earners). But we also need to ensure that UC delivers its promise of more and better employment support. This means smaller caseloads than the average of 400 claimants per work coach currently planned; sharing and learning from the good work already being delivered in Jobcentres to support disadvantaged groups; and a renewed focus on supporting working households – including in partnership with the government’s new careers guidance service for those in work.

Taken together, this is a significant and long-term agenda. Amber Rudd may or may not have more time than her successors to deliver on this, but it is welcome that she is prepared to do so. By focusing on these five areas, Universal Credit has the potential to deliver on its promise of a simpler, fairer and more effective social security system.