18 October 2017

Fix Universal Credit to unlock its poverty-fighting power

By Campbell Robb

It’s been a tough few weeks for Universal Credit – the Government’s flagship welfare reform that integrates six working age benefits into one single payment. The length of time people wait for a first payment has been singled out for scrutiny. With risk of debt, eviction and destitution during this period, MPs are currently debating the reform’s roll-out. Getting this right is essential, not only for the sake of low income families but for wider confidence in the system too. Universal Credit is the right reform in many ways, but we need to focus on how to fix it.

In the eye of a political storm such as this, it’s worth stepping back and reminding ourselves of the prize at stake.

The current benefit system is fragmented, difficult to navigate and traps some people in poverty. In particular, the point at which people move into work can be risky; they have to switch from the out of work system administered by one department – the DWP – to a different system of in-work benefits administered by HMRC. These are the moments when people can fall through the cracks.

If fully implemented and properly funded, Universal Credit could be a revolutionary change to welfare. It aims to simplify the system, increase incentives to work, and smooth peoples transition in and out of work. These principles are widely supported. If we can get Universal Credit right it has potential to dramatically transform the welfare system for the better.

Much of the public debate so far has focused on the six week wait between making a claim and receiving the first payment. This is not the result of poor administration, it is the way Universal Credit is currently designed. While the introduction of same-day budget advances will help, they don’t get to the heart of the problem: six weeks is simply too long to wait for low income families, 69 per cent of whom have no savings and a further 10 per cent have less than £1,500 to fall back on.

There are two relatively simple and quick steps that government can take to improve the situation. Firstly, part of the delay results from the arbitrary seven waiting days that most claimants have to go through at the beginning of a claim, during which they aren’t eligible for any benefit payments. Part of the idea behind Universal Credit is that it mirrors the world of work. However, no job forces an employee to work for the first seven days for free. The seven waiting days should be scrapped. The cost of this small change would be minimal in the context of the wider policy.

Secondly, claimants should be allowed greater choice and control over their claim by choosing their payment frequency. This will enable people to responsibly manage their budget in a way that works for them. Those choosing fortnightly rather than monthly payments would then have a shorter waiting time at the beginning of their claim. The capability to do this already exists within the system.

However, to really live up to its potential, we need to look again at the support Universal Credit provides to people in work. Making work pay was one of the most important ideas behind Universal Credit, but George Osborne’s 2015 Summer Budget implemented a deep cut the work allowance – this means people keep less of what they earn.

Restoring the work allowances would put money directly into the pockets of the ordinary working families that the Prime Minister has prioritised. It would increase the incentives for claimants to move into work or work more, and help ensure work always pays. This would require a significant investment in Universal Credit, but it would be a symbol of the commitment to supporting the living standards of low income families. The cut to the work allowance took £3 billion from working families with the lowest incomes; this change alone is responsible for a quarter of the projected increase in poverty among children in working households by 2020/21 according to the IFS.

Analysis has shown the votes of low income households are up for grabs. Making these changes would show the government is on their side.

Campbell Robb is chief executive of the independent Joseph Rowntree Foundation