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Reforming Universal Credit: the priorities

The new report into Universal Credit is welcome. Nicholas Timmins chooses four of its most important recommendations that should be prioritised.

The new report into Universal Credit is welcome. Nicholas Timmins chooses four of its most important recommendations that should be made priorities for the government

The House of Lords Economic Affairs Committee has taken a long hard look at Universal Credit (UC), the government’s long-troubled flagship reform of benefits for those both in and out of work. Its new report,[1] published 31 July, is awesomely comprehensive.

In just under 300 paragraphs it works its way through pretty much any issue that anyone has raised about this much-delayed drive to merge six working-age benefits into one.

What does the report cover?

Just about everything is tackled: the monthly assessment period, the five-week wait for the first payment, adequacy, payment frequency, split payments, housing payments, how to handle the self-employed, the treatment of those with disabilities, debt, the withdrawal rate as income rises, childcare support (which the committee recommends taking out of UC, creating a new and separate benefit) – and that list is not even a complete one.

It congratulates the Department for Work and Pensions (DWP) for its handling of the mighty surge in claims that came with lockdown, acknowledging that the “legacy benefits” UC is replacing would not have coped, and that “the efficient management of an unprecedented number of claims over such a short period would not have been possible” without the digitised, automated, nature of UC.

What’s in a name?

But the report's provocative title – Universal Credit Isn’t Working – is hardly likely to endear it to the Treasury and DWP ministers it most needs to influence. And reading it, they must feel they have been hit by a blunderbuss, given that the welter of recommendations comes with no sense of an order of priority, little in the way of costings (with one or two exceptions), and not much in terms of acknowledging which changes are difficult and which are easy to do. The committee might have done better to direct a few well-aimed rifle shots at a limited number of targets, before listing other desirables. So here is an attempt to do that.

Four key ways to improve Universal Credit

Of the report’s many recommendations, four stand out as being worthy priorities for the government. The first change to UC should – paradoxically enough – be no change. As part of its response to coronavirus the government pumped an extra £6 billion into UC, most of it going into “temporarily” raising the housing element, and equally “temporarily” adding an extra £20 a week, or £1,040 a year, into the standard personal allowance. These measures went some way to restoring the prolonged cuts that both have undergone and which have led to some of the hardship that the committee records. These temporary measures should be made permanent.

Second, the government is clearly worried about the rise in child poverty that the fallout from the pandemic is likely to worsen – the evidence being the prime minister’s repeated misuse of the child poverty statistics to try to argue that it has not been rising. This first produced a rebuke from the Children’s Commissioner[2] and this week the judgement from the Office for Statistics Regulation that Johnson's use of the numbers is “incorrect”.[3] Putting money into the child rates in UC, and/or ending the two-child limit that means that third and subsequent children do not qualify for UC would help with that.

Third, do something serious about historic benefit debt. Reclaiming tax credit and other benefit debt is leaving large numbers of claimants living on 30% less than the standard UC allowance – another significant cause of the hardship that some on UC face. That will remain the case even when the deduction rate is reduced to 25% in October this year. In acknowledgement of the issue, the government has suspended such debt recovery as part of its coronavirus package, but that is not permanent. The committee recommends scrapping the £6bn or so of debt from tax credits, treating it as a “sunk cost” of the benefit that UC is now replacing. This would be sensible.

Fourth, introduce a non-repayable two-week grant for new claimants and for those transferring from tax credits. This would merely mirror and complete the steps the government has already taken in providing two week run-ons of housing benefit, Jobseeker’s Allowance and Employment and Support Allowance as people transfer to UC – measures taken in acknowledgement that the five-week wait for the first payment has been problematic. It would help further tackle that wait by reducing the need for the repayable advances that claimants can take to tide themselves over.

These four steps would make a real difference

Each of these, it should be acknowledged, is costly. But each would have a real impact, helping rebuild the reputation of a major benefit reform that started out with huge cross-party support. In technical terms, the first three are easy to do. The first involves doing nothing, the second merely alters benefit rates, and the third would leave in place some of the current suspension of debt repayment.

The fourth – an initial grant – involves a much more complex change to UC that could not be done overnight. By way of declaration of interest, versions of the third and fourth of these propositions were in the Institute for Government’s March 2020 report on making UC work better. But others too proposed such changes. And this does feel like a sensible set of priorities that essentially only complete, or make permanent, steps that the government has already taken. Steps that would make a real difference.

 

[1] House of Lords Economic Affairs Committee, Universal Credit isn’t Working: proposals for reform, 2nd Report of Session 2019–21, https://committees.parliament.uk/publications/2224/documents/20325/default/

[2] Penington E, ‘Fact checking claims about child poverty’, The Children’s Commissioner, 22 June 2020, www.childrenscommissioner.gov.uk/2020/06/22/fact-checking-claims-about-child-poverty

[3] Humpherson E, letter to End Child Poverty coalition chair and National Children’s Bureau chief executive, 27 July 2020, www.endchildpoverty.org.uk/wp-content/uploads/2020/07/Ed_Humpherson_to_Anna_Feuchtwang.pdf

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