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The problems with Universal Credit

Universal Credit is in danger of going down in flames because of a decision that is not absolutely intrinsic to its design, argues Nicholas Timmins.

Universal Credit is essentially a good - if highly ambitious - idea that has proved vastly harder to implement than its proponents ever imagined.

It has been hit by problem after problem since its launch by Iain Duncan Smith in the very early days of the Coalition.

Universal Credit rolls six benefits into one in an attempt to simplify an over-complicated benefit system. The original aim was to ease the transition in and out of work and back again while ensuring, transparently, that it always paid to be in a job.

It is an honourable ambition.

On the original timetable, all eight million in and out of work households in the UK – most of them in work - that currently receive working tax credits, child tax credits, housing benefits, income support, means-tested versions of the jobseeker’s allowance and employment and support allowance were meant to be on the new ‘universal’ benefit by October 2017 i.e. next month.

As of June this year, just 540,000 claimants were receiving it and the implementation timetable now stretches to 2022.

The unintended and unfortunate consequences

Under the old system, the goal was to pay benefits within two weeks of a claim. Under Universal Credit, there is a formal waiting period of one week with no money, with the benefit then being paid monthly in arrears – the intention being that this more closely mirrors what it is like to be in a job. In practice, many of those earning less than £10,000 a year are in fact paid weekly.

The effect of this 'discipline' in practice has led to an in-built wait of six weeks before people get their cash - three times as long as the old system – and the Department for Work and Pensions admits that in around a fifth of cases it is failing to meet even that target, partly because of the information demands it places on the claimants.

Waits of ten or twelve weeks are not uncommon.

The overall effect has been to plunge people already on low incomes into rent arrears and debt and in some cases homelessness. In others cases, it has caused job losses - the very opposite of what Universal Credit is intended to achieve.

The Commons Work and Pensions Committee has been hearing in detail evidence about these effects and bodies as diverse as Citizens Advice and the councils in areas where Universal Credit has been rolled out so far have been telling the Government about this for many, many months.

Compounding the problems

Despite these problems, the next big roll out of Universal Credit is set to go ahead, and what are already major problems look set to be compounded, as The Times among others have recently highlighted.

Apart from the ideological step of making the benefits mirror a monthly salaried job – when growing numbers at the lower end of the labour market are on ‘zero hours’ contracts or other forms of the ‘gig economy' – the six week wait was incorporated, to put it crudely, to save money.

It is just one of the many cuts to the level of support offered by Universal Credit that have been introduced since its inception, to the point where even some of its proponents fear it has become too mean to work for those it sought to help.

Universal Credit would still be Universal Credit without the six week wait. Imposing it was a policy choice, not a necessity, and a choice that can be undone. The answer has to be a shorter wait and not just the loans that claimants can theoretically claim, but which many don’t know about which in any case just bring new problems.

If the Government does not act before the further roll out of Universal Credit to hundreds more offices, it will cause immense hardship and bring the Universal Credit approach into further disrepute.

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