Universal Credit: what it’s trying to achieve and why this matters
Universal Credit is the most important welfare reform for at least a generation.
So let me explain what it’s trying to achieve, why this matters and how it’s being rolled out: and then explain why the (Labour) idea of pausing isn’t the best way forward at all – and how far from the truth was Jeremy Corbyn’s scaremongering on Gloucester.
In 2007-8 I got many mails and letters about our Welfare System’s biggest flaw: it did not incentivise work. If you were on full benefits, there was no advantage in working more than 16 hours – because after that basically you lost the same amount of benefits as you gained income from working.
The technical phrase for this was that the average average was that you retained 4p out of every pound of income you received for more than 16 hours work a week. In practice some were actually worse off, as they explained.
And the same was true for some who were offered a promotion – they would lose so much in benefits that the extra cash (let alone the extra responsibility) simply wasn’t worthwhile. I had letters from employers asking why our country designed welfare, paid for by their full time workers, to prevent others in benefits not to want to work longer and reduce subsidies from their colleagues.
How crazy was that? Why would anyone want to create a welfare system that prevented people from working or getting promoted? What was the message behind this? Was the government saying ‘no you’re not capable of anything than having benefits chucked at you’ or ‘we’re so rich a country that we can afford to put an ever higher percentage of the population into an alternative way of life subsidised by others who work’? And the people who wrote to me asked what the Conservatives would do about this.
So my two strongest motivations for getting into politics was to make work pay and to make saving pay (which it didn’t if you had two people living next door on the same salary: one saved for retirement and got a usual state pension; the other didn’t and then got a much better means tested pension. We needed to have a more generous state pension for all: and encourage people to save with tax breaks: all of which we have now introduced).
Universal Credit (UC) makes work pay by the simple principle of doing a complicated thing of bringing 6 different benefits together and then calculating a gradual reduction (or taper) of benefits as an individual gets more income – with the individual keeping 37p of every extra pound earned and losing 63p of benefits, through software that calculates this automatically.
Those on 16 hours a week who go onto UC will therefore always be better off working more hours, as well as getting more hours of free childcare. In philosophical terms it recognises the greatest inhibition to more work was fear of losing benefits (especially housing), getting rid of that fear, and the giving every claimant his or her own work coach to help them identify the best opportunities to get extra skills, a full time job or find better long term job prospects.
At the same time if you change jobs, or go from part time to full time, the system can cope with that: you don’t have to come off benefits, or re-apply to go back on if you lose your job: there is great flexibility and much less form filling. In short there is a better ladder up and a more flexible safety net in case you fall.
All of this is why many charities and (often left supporting) organisations like the Joseph Rountree Foundation agree that the principle of UC is absolutely the right way forward and can be transformational. (And most also recognise that the huge taxpayer subsidies of Labour’s tax credits, disastrously implemented, still costing HMRC a lot of money in over payments, and an idea not taken up by any other country in the world, must fade away over time as a result of UC).
You may ask if this was such a good idea why Labour didn’t think of it. The short answer is that David (Lord) Freud did make the proposal to then Chancellor Alastair Darling, but as Darling later said (perhaps on the back of the earlier disasters of Tax Credits), ‘we decided it was too complicated’.
So when the Conservatives came in and Iain Duncan-Smith and David Freud implemented UC they deliberately didn’t advocate a Big Bang (as with Tax Credits): they went for an incremental approach, rolling out UC bit by bit, with pilot projects across the country so they could see what the issues were and fix them one by one.
In Gloucester today UC has been around for about two years already, mostly for single people on Job Seekers Allowance (JSA). During this time I’ve met those who work in the JCP and those on UC and both groups much prefer it. It has been broadly a success – though there is an issue I raise below about cash flow which is being tackled.
The question in general was whether it would work as well when rolled out more widely to families and a more complicated mix of benefits including ESA. The extension in Gloucester starts in Feb 2018, though again the roll out is over quite a long period of time. Nationally only 10% of those on benefits will be on UC by early next year.
There are three issues which are often raised about UC. Let me tackle each:
* People get into more debt in UC because you don’t get paid for so long
There is a cash flow problem, especially for those already in debt or with minimal savings coming into UC, where the first payment takes on average six weeks (and payments thereafter come at the end of each month). The government’s solution is to offer an advance of 2 weeks’ benefit (repayable over 6 months) immediately.
Over half of new UC claimants already get this. Making sure that UC claimants get an advance ASAP if they need them – and many do – is crucial and JCPs and Housing Associations/other landlords need to work more closely on this.
Where there is evidence of any claimant waiting longer it is almost always to do with an administrative issue like filling in a form incorrectly, and where anyone needs help on this I’ve asked all those involved (like the CAB) to alert me ASAP to make sure that we resolve this fast. No-one should have to wait for a cash advance to seem through the start of coming into UC.
* People are being evicted because of UC
People are evicted only as a last resort if a tenant shows continued irresponsibility about how they spend their housing and other benefits. It does not happen often: in fact there are far fewer evictions in Gloucester today than under the Housing Dept of the City Council when we had a Labour government.
But where a claimant arrives into UC already with significant rent arrears (and meets one of the ten criteria) automatic deductions from the individual’s housing benefit to the landlord can be triggered. Some Housing Associations are now also allowing flexibility on early rental payments to claimants with existing debt issues, in order to prevent those tenants spiralling into more debt.
The relationship between Housing Associations like Gloucester City Homes and JCP is improving and soon there will be an implant from GCH in the JCP. The status of Trusted Partner and the use of the new Landlords Portal will make it easier for Housing Associations to know their tenants better, and help make decisions on how their rent is paid. Eviction will always be the last resort.
* The solution is to pause the roll out
A continued roll out, with the DWP/JCP looking carefully at each issue and responding accordingly – like this week’s announcement of making the UC query line for claimants free last week, and all welfare lines free next year – is I believe the right way forward.
Interestingly the original Labour motion had ‘pause and fix it’. The final version had no mention of ‘fix it’ because too many Labour politicians aren’t interested in UC succeeding. They want UC to fail completely – because they believe that would help their political goal of gaining power. This should be about what is best for individuals, our welfare system and the country.
And when you look at the evidence for pausing – what Jeremy Corbyn called a ‘shambles’ – it is not impressive. He claimed at Prime Minister’s Questions that GCH had evicted 1 in 8 of all its tenants because of UC – implying 650 of some 5,000 tenants. The actual figure is 8, and all had significant debt issues before coming into UC. Which is why I corrected him publicly twice in the Commons – corrections no-one in the Parliamentary Labour Party has disputed.
So UC is two different causes. For me it is the crucial tool to make work pay: complicated, and inevitably needing tweaking as it’s rolled out. The cash flow is a real one, and a much wider one about individual and family resilience and saving for a rainy day: and may need further thought by the DWP. Let’s see what difference more Advances and better knowledge of tenants by Housing Associations and other landlords makes.
But there is another darker cause for one political party. Some there want to find every instance of where there is a problem and rather than solve it, blow it up and get into the media. If the figures of failure aren’t compelling enough then exaggerate them. Above all weaponise UC: show the country that it’s the policy of a heartless, uncaring cruel party driving people into debt and eviction – and above all make it a vehicle to propel one man and his party’s revolutionary fervour into power.
That’s why Corbyn’s team gave him the wrong statistics for PMQ, and why his party withdrew the words ‘fix it’ from the motion in Parliament.
I spend a huge amount of time helping my constituents’ problems – dealing with some 12,000 issues a year. My focus is relentlessly on trying to make sure that things work and constituents who get into problems can get out of them. The staff of GCH, the JCP, the Councils and others overwhelmingly try to do the same and work closely with me on these issues. Frankly we should not have to deal with wild exaggerations and – to use language I cannot use in Parliament – lies from the Leader of the Opposition about our city (about which he knows absolutely nothing).
So you must decide what approach you prefer – helping make work pay and rolling out UC slowly, deliberately, helping individuals where we can – if you know of someone on UC with problems do put them in touch with me – or whether you want to be part of the great socialist revolution, exaggerating and scaremongering, and trying to politicise anything, whether a dreadful accident like Grenfell Tower or a handful of evictions in Gloucester.
Meanwhile let’s all not forget that this city has 60% less unemployment than it did have: and 85% less youth unemployment. In the list of 650 constituencies we have overtaken 100 others with our levels of employment over the last few years. Ours is a city that is predominantly working, and working better than we have for a long time, which is why we’re the seventh fastest growing city in the country. UC will help more into work, and into better work.
What we have to do at the same time is provide help for the weak and motivate them to find opportunities. That is exactly what I’m doing, through working with the George Whitfield Centre and the JCP, and with GCH and others on UC.
I hope this approach of helping people to reduce their dependence on benefits through UC while helping the weakest get the help they need is reassuring and has your support.