Criticism of universal credit has intensified ahead of the next stage of the roll-out, with former Prime Ministers John Major and Gordon Brown both comparing the reform to the poll tax. And calls for the government to scrap it entirely are getting louder.
This isn’t surprising. The aims of universal credit – to simplify the benefits system and to improve work incentives, by removing benefits more slowly as claimants’ incomes increase – are the right ones. But people’s practical experience of the roll-out so far has been a world away from these laudable aims.
The Trussell Trust’s network of foodbanks distributed a record 1.3 million food package last year. More worryingly, they report that while this represented a 13 per cent increase on the previous year, they have seen a much larger increase (52 per cent) in areas where universal credit full service had been in place for the whole year. At the same time, research carried out by the National Federation of ALMOs and the Association of Retained Council Housing shows that three quarters of universal credit recipients are in arrears and that their average arrears are one and a half times higher than among tenants in general.
All of which poses the question, is it really possible to ‘fix’ universal credit? We think it is, but only if the government is prepared to make substantial changes. We are at a crisis point and without significant, immediate change it is looking increasingly likely that universal credit is going to fail entirely.
The problems with universal credit are well known and some of the solutions can be introduced immediately. Most obviously, the government can use today’s Budget to reverse cuts to work allowances and to end the ongoing freeze which prevents various benefits, including local housing allowance rates, from being increased annually in line with inflation.
Both measures have reduced the amount that many households are receiving under universal credit, but the cuts to work allowances in particular have also eroded a key principle of the system - that claimants should keep more of their money as their income increases. Any major change to the welfare system will always produce ‘winners and losers’ but the Resolution Foundation’s analysis shows that (transitional protection aside) there are now more losers than winners under universal credit - 3.2 million of them to be precise, compared to 2.2 million who are better off. It was never meant to be that way.
We also need an urgent review of the use of sanctions. The government’s own statistics show that as many as three per cent of universal credit claimants are subject to a sanction at any given time, a huge increase when compared to people on job seeker’s allowance (0.3 per cent). This is far too many and with a high proportion of sanctions eventually being overturned on appeal, it is clear that many are being applied wrongly.
And the changes can’t stop there.
As part of last year’s Budget, the government announced several changes intended to ease the long wait for a first payment under universal credit. This included allowing existing housing benefit claimants to carry on claiming it for a further two weeks after they had made their universal credit claim. That has made a real difference, but new claimants still face a five-week wait and that is too long.
There are several options for a more fundamental change. Ministers could give claimants a shorter initial assessment period, so that they can transition more gradually to monthly payments. They could move to a system where universal credit is regularly paid half in advance and half in arrears. They could even abandon monthly payments altogether and move to a fortnightly system, which would mirror payments made under the existing system and be closer to the weekly payment cycles that many people in low-paid employment are already familiar with. A major change like this isn’t an easy fix. It needs proper consideration and will take time to implement, but we simply can’t pretend that the current approach is working just fine.
Similarly, we know that there is a lot of concern about payments being made to a single member of each household. There is a real risk that this will exacerbate problems with domestic abuse by giving abusers complete control of the household’s finances. Practically and logistically this isn’t an easy fix either but the Scottish Government is committed to finding a solution and to introducing ‘split payments’ as the default for all claimants. We would urge the Westminster government to work with Scotland on this and to consider introducing the same approach across the UK, once it has been shown to work.
The reasons universal credit was established in the first place are still relevant - we all want a simpler welfare system that is more generous for people in low-paid employment. But we must recognise that, in its current form, the system simply isn’t fit for purpose. It’s not too late for government to ‘save’ universal credit, but it might be now or never.
David Pipe is a policy and practice officer at the Chartered Institute of Housing