Universal Credit

File:Universal Credit.png

People in Ashton-Under-Lyne could begin applying for Universal Credit on April 29, 2013 as part of the pilot scheme

Universal Credit is a new welfare benefit in the United Kingdom that will replace six of the main means-tested benefits and tax credits. The Government plans to introduce the Universal Credit over the period 2013 to 2017.

A pilot in four local authorities was scheduled to precede the national launch of the scheme in October 2013 for new claimants (excluding more complex cases such as families with children), with a gradual transition to be complete by 2017. However, only one of the original pilots went ahead at the expected date, in Ashton-under-Lyne, due to persistent IT failures and delays in implementation. The other three pilots went ahead later in the summer, and were met by protests.

Background

The proposed Universal Credit was outlined by Work and Pensions Secretary Iain Duncan Smith at the Conservative Party annual conference in 2010. The Conservative-Liberal coalition aimed to implement it fully over four years and two parliaments, intending to integrate six existing benefits into a co-ordinated modern system, as well as to cut costs. Unlike some existing benefits, such as Income Support, that have a 100% withdrawal rate, the Universal Credit will be gradually tapered away, as is the case with the existing tax credits and Housing Benefit so that, in theory, people can take a part-time job and still be allowed to keep most of the money they receive. In practice, however, large scale criticism from the mainstream media, including Conservative-leaning press, has pointed out that part-time work may no longer pay, and some people would be better off refusing it. The new system may also ensure that self-employment is no longer a viable option for vast swathes of the population due to the "Minimum Income Floor" provision.

There would be substantially higher earnings disregards in Universal Credit but these would be reduced where any housing support is payable.

By comparison, Jobseeker's Allowance allows only £5 of earnings disregard per week for single adults. Thus, people working eight hours a week for £6.50 an hour would earn £52 a week, but would have £47 a week deducted from their benefit and would therefore only gain £5 extra per week by working. Claimants could lose significantly more by no longer qualifying for Housing Benefit through not being able to work sufficient hours to qualify for working tax credits, and therefore be 'better off' claiming benefit rather than working.

When implemented, Universal Credit may drastically affect the low-paid self-employed and anyone who makes a tax loss. It is proposed that Universal Credit, like the current Working Tax Credits, will be "limited to those who exceed the 'floor of assumed income'" based on the National Minimum Wage. Self-employed people who for whatever reason were unable to earn the equivalent of an employed person paid on the National Minimum Wage would have their working tax credit stopped, drastically reducing their income. This raises the likelihood of many self-employed people being forced to cease business due to financial hardship and having to look for employment whilst claiming Jobseekers Allowance. This would mean fewer small businesses, startups and entrepreneurs. As well as directly affecting self-employed people, excluded from any set minimum wage, it could also affect employees who receive below the minimum wage, hitting the poorest workers the hardest (however, no employed workers should be earning below minimum wage, so only employees of illegal employers would be affected).

The Tax Credits being incorporated into the new Universal Credit currently taper, with a withdrawal rate of 41% (2011/12 figure) once the recipient earns above £6420 (2009/10 figure). This income will have already been subject to 11% national insurance, plus 20% income tax on any income above the personal allowance.

Gareth Morgan, writer on welfare benefits and social inclusion, has written a detailed article about the effects of welfare reform on benefits received, including Universal Credit. The Universal Credit has some similarities to the negative income tax, but should not be confused with the universal basic income or basic income guarantee. There is some debate as to whether it should even be considered 'universal' at all given that it is subject to income levels and conditions around work availability.

Conditionality

There will be four types of conditionality for claimants, depending on their circumstances, ranging from them being required to look for full-time work to them not being required to find work at all (people in the unconditional group will include the severely disabled and carers).

Implementation

Universal Credit is part of a package of measures in the Welfare Reform Act 2012, which received Royal Assent on 9 March 2012. The Welfare Reform Act delegates the detailed workings of Universal Credit to regulations, most of which were published in February 2013 as The Universal Credit Regulations 2013. Related regulations appear in a range of other statutory instruments from 2013.

The Department for Work and Pensions (DWP) announced that Universal Credit will be delivered by the best performing DWP and Tax Credit processing centres. An announcement about the selection of these sites was made by the DWP on 28 February 2012. From this it is clear that local authorities, who currently deliver Housing Benefit (one of the key legacy benefits which will be incorporated into Universal Credit), will not have a core role in delivering Universal Credit. However, the Government has started to recognise that there may be useful roles for local authorities in helping people to access the services within Universal Credit.

Philip Langsdale, Chief Information Officer at the Department for Work and Pensions, who had been leading the programme, died on 22 December 2012, and the previous few months had seen other significant personnel changes. Additionally, project director Hillary Reynolds resigned in March 2013 after just four months in the role, with the new chief executive of Universal Credit taking on the role.

A staff survey reported by The Guardian on 2 August 2013 under the headline "Universal Credit staff describe chaos behind scenes of flagship Tory reform" that the comments from Universal Credit implementation staff were highly critical. Comments included: "After 29 years of service this has been the most soul-destroying work I have done," and: "There is too much dishonesty and no one ever admits to making a mistake." Another said: "This is the third review in 16 months, no rollout plans, no confidence in going forward and stakeholders losing confidence in our ability to deliver." The Guardian on 31 October 2013, in an article said to be based on leaked documents, entitled "Universal credit: £120m could be written off to rescue welfare reform" reported that a maximum of 25,000 people – just 0.2% of all benefit recipients – will be transferred on to the programme by the next general election in May 2014.

Pilot

The scheme was initially due to be piloted in April 2013 in four local authorities – Tameside, Wigan, Warrington, and Oldham, with the Credit being paid by the DWP's Bolton Benefit Centre. This was later reduced to one (Tameside), with the other three due to join the pilot in July. In April 2013 it was made clear that the initial pilot in Tameside would cover only around 300 people per month, due to being limited to the very simplest cases, such as single people with no children.

The whole scheme was due to begin nationally in October 2013 for new claimants (but again, excluding more complex cases such as families with children), with a gradual transition to be complete by 2017. However, there is actually no chance of it proceeding according to that schedule. One tester of the system in April 2013 noted that the online forms took around 45 minutes to complete, and that there was no save function.

In March 2013 it was reported that during the pilot all final Universal Credit calculations would initially be done manually using spreadsheets, with the new IT system being used primarily to book appointments and store some personal details. The Guardian reported that at the town hall in Tameside, the first place to pilot the scheme, no claimants turned up in person on day one, leaving it unable to comment in detail on claimants' experiences with the new system (it did note a spelling mistake on the first page of the online process).

The Financial Times reported on 29 April 2013 that the October national rollout will now start with a single Jobcentre or a "cluster" of them in each region, and that in a letter to local authority chief executives in December 2012, seen by the Financial Times, Hilary Reynolds, who had been appointed programme director for the Universal Credit project but moved on after four months in the role, stated: "For the majority of local authorities the impact of [Universal Credit] during the financial year 2013–14 will be limited."

Since the originally planned implementation date of 28 October 2013 it has been acknowledged by the DWP that there has been considerable slippage, and it has also been reported that managers have unofficially stated to staff in Jobcentres that the general roll-out of Universal Credit will not now commence until October 2014, at the earliest.

On 3rd December 2013 the DWP issues statistics showing that between April 2013 and 30th September 2013, only 2,150 people have started on Universal Credit in the four Pathfinder areas of Ashton-under-Lyne, Oldham, Warrington, and Wigan. This report confirmed that six further sites are rolling out between October and the spring 2014, which started with Hammersmith on 28 October, followed by Rugby and Inverness on 25 November and will expand to Harrogate, Bath, and Shotton by spring 2014.

Criticism

Professor John Seddon, author and occupational psychologist, started a campaign for an alternative way to deliver Universal Credit on 24 January 2011 after speaking at a conference alongside a representative from the DWP. He made the case that you can't deliver high-variety services through 'cheaper' transaction channels, and argued instead that this would drive costs up. John Seddon wrote an open letter to Iain Duncan Smith and Lord Freud as the start of a campaign to call a halt to the current plans and, instead, to embark on a better (systems) approach.

Seddon started a petition in August 2011 calling for Iain Duncan Smith to "rethink the centralised, IT- dominated service design for the delivery of Universal Credit. Evidence from a significant number of housing benefit offices demonstrates that local, face-to-face processing of benefits is cheaper and faster than distant automated telephone and online processing. Processing claims face-to-face is not only cheaper and faster but an excellent way of ensuring that vulnerable people understand both their entitlement and their obligations. Feedback from claimants is overwhelmingly positive when their claim is dealt with face-to-face by an expert. If the DWP goes ahead with plans to process the majority of claimants online, they will find many claimants turn to Government-funded welfare organisations, council reception areas, councillors and their MP because the automated system will not be able to deal with their individual questions, particular concerns and unique set of circumstances".

Echoing these concerns, Ronnie Campbell, MP for Blyth Valley, sponsored an Early Day Motion (No. 1908) on 13 June 2011 on the topic of the delivery of Universal Credit which was signed by thirty MPs. It proposed "That this House notes that since only fifteen per cent of people in deprived areas have used a Government website in the last year, the Department for Work and Pensions (DWP) may find that more Universal Credit customers than expected will turn to face-to-face and telephone help from their local authority, DWP helplines, Government-funded welfare organisations, councillors and their Hon. Member as they find that the automated system is not able to deal with their individual questions, particular concerns and unique set of circumstances".

See also

• Basic income guarantee, a different political proposal that has not fully been adopted in any country.
• Negative income tax
• Taxation in the United Kingdom
• UK labour law

External links

• Online benefits calculator - covers universal credit and all means tested benefits
• Universal Credit Calculator
• Universal Credit - welfare that works, Department for Work and Pensions (DWP)
• Universal Credit FAQs
• Universal Credit Toolkit FAQs