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What isโ€ฆUniversal Credit?

Introduced in the Welfare Reform Act 2012, Universal Credit (UC) brought six benefits - Housing Benefit, Working Tax Credit, Jobseeker's Allowance (JSA), Child Tax Credit, Income Support and Employment and Support Allowance (ESA) together into one payment.

Initially proposed in a 2009 report by the Centre for Social Justice, a think tank established by Conservative MP Ian Duncan Smith, it outlined a model of more personalised, localised and extended support for those making the effort to engage in work. UC aimed to make the social security system more straightforward and to remove the distinction between out-of and in-work support.

Recipients would be eligible for financial aid based on circumstances and accommodation needs, assessed via online forms and an interview where they would be required to agree to a claimant commitment identifying which activities they would carry out regularly in order to receive UC. Paid monthly, the first payment would take around 5/6 weeks to be issued however there would be provision to apply for an advance to help with living costs.

Recipients would be able to work whilst claiming UC with no limit on the number of hours - how much UC awarded would be dependent on earnings and gradually reduce as earnings rose. The main goal of the policy was to reduce the number of workless households by ensuring that work paid.

However, from the beginning of its roll out in 2013, UC has been surrounded by controversy including the complexity of the system, admin errors and delays to payments. These concerns were considered serious enough to warrant a Lords Select Economic Affairs Committee inquiry published in July 2020. Their main findings were:

Universal Credit design:

  • The accuracy of UC is dependent on correct information, the error rate has affected tens of thousands with some claimants being unfairly penalised due to discrepancies in the data beyond their control.
  • The five-week wait entrenches debt, increases poverty and harms vulnerable groups disproportionately. The measures put in place to mitigate its worst effects fall short of what is needed.
  • The way UC is assessed does not provide income predictability if a claimant is working. The โ€˜whole-monthโ€™ approach to changes in circumstances does not reflect the lives of many low-income households and creates random variations in income as the frequency of earnings (weekly/bi-weekly/4-weekly) affects UC payments.
  • Incorporating childcare support into UC has created further complexity - paying costs in arrears is a barrier to working.

Managing on Universal Credit:

  • Even with the recent uplift to UC taken into account, historical cuts have increased poverty and hardship among many claimants. UC must provide an adequate income and act as a safety net. The temporary increase demonstrates that the original rate was not adequate.

Employment, sanctions and support:

  • The social security system must be flexible and adapt to a changing labour market. Current sanctions are inappropriate - the focus on sanctions-backed compliance needs to be reviewed with more emphasis on and resources for personalised employment support for those who can work.
  • Claimant Commitments over-emphasise obligations and penalties - claimants can be at their most vulnerable when making their first claim, this is not an appropriate time for people to make important commitments or decide exactly what support they will require.
  • The UK has some of the most punitive sanctions in the world but the evidence that sanctions achieve positive change and lead to better outcomes is mixed. Removing a personโ€™s main source of support risks pushing them into extreme poverty, indebtedness and reliance on foodbanks. There is also considerable evidence to show that
    sanctions (or the threat) can severely affect a personโ€™s mental health.
  • A significant minority struggle with the principally online service - as claimants are expected to manage their UC accounts online for the duration of their claim, there is a need to provide digital support.

The findings of the Lords Select Committee confirm the extensive reports of acute hardship, which it is feared, will be exacerbated with the imminent removal of the ยฃ20 uplift. The concern is so great, that 100 organisations have urged the Prime Minister to abandon the plans - will they be successful?