Universal credit is a Wonderland reform divorced from real lives

Financial Times - 19 Oct 2018

The rollout of universal credit is the latest attempt made by reformers to balance four competing objectives in the British welfare system. These goals have bedevilled successive postwar governments: providing an adequate minimum income to the poor; incentivising them to get a job and climb the pay ladder; simplifying the administration of benefits; and limiting the size of the bill for taxpayers.

How successful have the latest generation of reformers been in meeting those objectives? Not very. Evidence gathered from the Commons work and pensions select committee, as well as Feeding Birkenhead — a programme I set up four years ago to counter hunger and destitution in the town — suggests that the design and delivery of universal credit, the government’s radical overhaul of the benefits system, are divorcing it from the reality of how millions of people on low incomes live, work, and budget. As a result, a barrage of financial risks is being offloaded on to the shoulders of poorer people; all too many are being pushed deeper into poverty and, in the case of some particularly vulnerable women, into sex work.

The government has landed us with a benefit that is now almost too costly to roll out, but also too costly to scrap.

The committee’s investigation last year was spurred by a glut of evidence from local councils worried about the rent arrears and homelessness that accompanied the arrival of what ministers had claimed was the biggest reform of the welfare state since the Beveridge report laid its foundations in 1942: universal credit. I cannot think that William Beveridge would be pleased with what we found.

At that point, a year before the rollout was originally due to finish, universal credit had already been delayed five times: against the original prediction of 7m people claiming, there were about half a million. Despite the low caseload, a trickle preceded a flood of evidence around the impact on people’s lives. Food banks were struggling to cope and had begun pleading for emergency donations; the self-employed were being penalised by universal credit’s failure to recognise the reality of starting or running your own business; desperate people were not receiving help when they most needed it because of the immense complexities involved with setting up an online claim; parents returning to work were disincentivised from doing so, because they were unable to access upfront support for childcare costs; and landlords were stunned by having two-thirds of their universal credit tenants in rent arrears.

People in low-paid work are not paid monthly. Yet the system is built around monthly earnings. Likewise, no one in the real world has their wages paid to a partner. Yet the system pays a whole month’s universal credit into a single bank account belonging to one member of the household. Again, it is people in acutely vulnerable positions — children and survivors of domestic violence — who have most to lose. As one mother told the committee, the risk posed by universal credit is that “he’ll wake up one morning with £1,500 in his account and piss off with it, leaving me and the kids with nothing”.

Ministerial attempts at defending such unjust features ring hollow. They come from the Wonderland that ministers and officials have been wandering through, Alice-like, from the start. They say that universal credit aims to “mirror the world of work”. But they are surely through the looking glass.

The eye-wateringly high rates at which debt is recovered from universal credit payments are behind the rising demand for food banks. In several recent cases, people’s entire monthly income has been wiped out by debt recovery practices that make Wonga look like Santa Claus.

The government has been made fully aware of the risks that its approach poses to people who live hand to mouth. But it has so far refused to shoulder them. Instead, the burden has been almost wholly dumped on those individuals — along with charities, local services, local authorities and landlords — left trying to patch up our unravelling welfare safety net.

People should only be moved on to universal credit once the state has fulfilled a set of minimum terms. Organisations such as Citizens Advice should dictate the numbers of people who can be moved safely on to the benefit.

The first minimum term should be that everyone who is transferred on to universal credit is not made worse off, does not lack income and does not face hunger or destitution. To that end, the gap between when a universal credit claim is made and when it is paid — at least five weeks, at present — must be bridged by, for example, continuing to pay existing benefit payments.

Nobody should face debt repayments that leave them unable to afford food, rent, and utilities. And the government needs to ensure that those brave people who have chosen self-employment to try to free themselves from poverty are encouraged, not discouraged. For parents who find work, the government must guarantee childcare payments up front, not a month in arrears.

Lastly, given that this benefit is designed for people on monthly payments and not for poorer working people, who receive smaller, more frequent sums, the government should support a Citizens’ Bank. This would help people manage their money in a dignified way and ensure that none faces hunger, destitution, or losing their home.

If reformers are to stand any chance of meeting their objectives, the universal credit design needs much greater flexibility to match claimants’ lives. We need urgently to ensure that robust financial safeguards are in place for the most vulnerable.