Universal Credit is a welfare benefit introduced in the United Kingdom in 2013 to replace six means-tested benefits and tax credits: income based Jobseeker’s Allowance, Housing Benefit, Working Tax Credit, Child Tax Credit, income based Employment and Support Allowance and Income Support.[n 1] Universal Credit was announced by Work and Pensions Secretary Iain Duncan Smith at the Conservative Party annual conference in 2010 where it was stated the reform was designed to bring "fairness and simplicity" to the British social security system. It is one of several wide-ranging welfare reforms introduced by the 2010-2015 Coalition Government in the Welfare Reform Act 2012.
Universal Credit is being rolled out gradually to Job Centres with rollout initially focusing on claimants in the most 'simple' circumstances namely single adults without housing costs. As of 22 February 2016, 364,000 people have made a claim on Universal Credit. Government figures claim that "Universal Credit claimants find work quicker, stay in work longer and earn more than the Jobseekers’ Allowance claimants". Despite this Universal Credit has been criticised on a number of grounds including introduction of monthly social security payments and the payment of housing benefit direct to landlords. Critics have also noted problems with I.T. systems and project management which have significantly delayed the rollout of Universal Credit. Existing claimants of 'legacy' benefits[n 2] are not expected to be transferred to Universal Credit until late 2017 at the earliest. According to the current timetable Universal Credit is due to be delivered in 2021. In May 2016 the Resolution think tank published evidence arguing that cuts to Universal Credit mean that the welfare reform risks failing to achieve its original purpose of incentivising work.
- 1 Background
- 2 Implementation
- 3 Policy
- 4 Costs
- 5 Criticism
- 5.1 Online applications
- 5.2 Wait for payments
- 5.3 Direct payments to tenants
- 5.4 Disincentive to save
- 5.5 Impact on self-employed
- 5.6 Impact on disabled people
- 5.7 Impact on passported benefits
- 5.8 Domestic abuse
- 5.9 Impact on families
- 5.10 Work disincentives
- 5.11 Freedom of information
- 5.12 IT problems
- 6 See also
- 7 Further reading
- 8 Notes
- 9 References
- 10 External links
The proposed Universal Credit was outlined by Work and Pensions Secretary Iain Duncan Smith at the Conservative Party annual conference in 2010. The aim was for implementation fully over four years and two parliaments, intending to merge the six main existing means tested benefits and tax credits into a single monthly payment, as well as to cut costs (the administration of six independent benefits, and associated computer systems, having considerable expense). These six benefits are: income-based Jobseeker’s Allowance, income-related Employment and Support Allowance, Income Support, Working Tax Credit, Child Tax Credit and Housing Benefit.
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 some of the money they receive. Criticism from the mainstream media, such as the Daily Telegraph, have claimed "part-time work may no longer pay", and "some people would be better off refusing it [part-time work]". 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.
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 be considered 'universal' given that it is subject to income levels and conditions around work availability.
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 in the previous few months there had been other significant personnel changes. Additionally, project director Hillary Reynolds resigned in March 2013 after just four months in the role. The new chief executive of Universal Credit taking on the role. Emma Norris of the Institute for Government argues the original timetable for the implementation of Universal Credit was "hugely overambitious". She also argues that two reasons for delays are IT problems and senior official responsible for the policy changing some six times.
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 2015. However, by May 2015 over 100,000 people had made a claim for Universal Credit.
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, due to persistent computer system failures and delays in implementation, only one of the original pilots went ahead at the expected date, in Ashton-under-Lyne, The other three pilots went ahead later in the summer, and were met by protests. Once the software teams finally got to grips with Agile methodology, the large-scale roll-out of the Universal Credit was able to start, at a somewhat slow pace.
The roll-out of the Universal Credit was limited to new, single, healthy claimants in the North West of England. It was later extended to couples, then families, in the same area, reflecting the gradual maturing of different aspects of the computer system. Once the North West roll-out was largely completed, the government gradually extended Universal Credit to new single healthy claimants in the rest of the British mainland, nearly completing this rollout as of 13 March 2016. It is expected that this will gradually be extended to couples and families outside the North West once the rollout to mainland single claimants has been completed. Until late 2015, implementation in Northern Ireland has been held up by disputes over policy and funding between feuding parties in the Stormont Assembly, and there is still no published date for rollout to begin.
The scheme was planned 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. The pilot project was reduced to one (Tameside), with the other three to join the pilot in July. In April 2013 it was made clear that the pilot in Tameside would cover only around 300 people per month, and be limited to the very simplest cases, such as single people with no children.
The whole scheme was to begin nationally in October 2013 for new claimants (excluding more complex cases such as families with children), with a gradual transition to be completed by 2017. 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 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 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 told staff in Jobcentres that the general roll-out of Universal Credit would not commence until October 2014, at the earliest.
On 3 December 2013 the DWP issues statistics showing that between April 2013 and 30 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.
With the completion of the pilot phase, and the initially languid roll-out to the North West of England, the pace of implementation was increased drastically. As of September 2015, Universal Credit was available in over half of job centres across Great Britain and will be available in all Jobcentres early 2016.
As of the middle of 2015, 175,000 people had made a claim on Universal Credit, and government figures showed that "Universal Credit claimants find work quicker, stay in work longer and earn more than the Jobseekers’ Allowance claimants". Although the figure might seem somewhat low, the total claimant count in the UK, for jobseeking benefit, is only 760,000 people (representing 2.2% of the working-age population), so this figure equates to over 20% of jobseeking benefit claimants. Total UK unemployment is only 1.69 million people (this figure excludes people in training, education, people not of working age, etc.)
There will be four types of conditionality for claimants, depending on their circumstances, ranging from their being required to look for full-time work to their not being required to find work at all (people in the unconditional group will include the severely disabled and carers).
Payments for Universal Credit will be made once a month directly into a bank or building society account. Any help with rent will be included with the Universal Credit payment and the claimants then pay their landlord themselves. However it is possible to get an Alternative Payment Arrangement (APA) which allows payment of housing benefit direct to the landlord in some circumstances.
Universal Credit claimants will also be entitled to Personal Budgeting Support (PBS) which is aimed to help claimants adapt to some of the changes Universal Credit brings such as monthly payments.
Whilst the DWP had estimated the administration costs for the rollout of Universal Credit to be £2.2 billion, by August 2014 this estimate was revised to £12.8 billion over its "lifetime". The estimated cost has since increased to £15.8 billion. At that date only 7,000 claimants were receiving UC, although there are now over 175,000. Much of the increased costs are associated with requiring to use both systems to continue paying out and the software problems. The rate of rollout has been much slower than had been proposed. This has led to the departure of several senior leadership figures in the program.
Universal Credit has been subject to a number of criticisms relating to its design.
Professor John Seddon, author and occupational psychologist, started a campaign for an alternative way to deliver Universal Credit in January 2011. 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 systems approach which he thought would be better. Seddon started a petition in 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."
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".
Wait for payments
The Trades Union Congress has raised concerns about the five-week delay between making a claim and receiving money. Although most people in moderate- to highly-paid work are paid on a monthly basis, and are quite used to receiving their income one month in arrears, many people in low paid work are paid on a weekly, or fortnightly basis. As a result, many individuals are not used to budgeting for a month, and have struggled to pay bills; the problem has been compounded when such individuals take out payday loans to cover the remaining weeks, and then struggle to pay off the interest on the loan.
The rise in food banks, and their use, may have been fuelled by this problem to a large degree, although there are no exact statistical studies on the matter, with political criticism largely focusing on the number of people that people go to food banks at all, and not on why they do so. The government has attempted to mitigate the problem with remedial budgeting skills lessons being provided, for those who feel they need them, through Jobcentres.
However, the tendency of many low-paid people to live on a hand to mouth basis, and not save money for a rainy day, means that there is often still a residual problem of only having one or two weeks of income from their previous job to cover the costs of their first month of unemployment. Claimants of Universal Credit can obtain short term advances on request, with the advance being taken out of the next few month's benefit payments. Even with these benefit advances, balancing outstanding costs, together with coping with lower subsequent payments while the advance is deducted, have sometimes been difficult for individuals to manage, and the problem remains a subject of controversy.
Direct payments to tenants
Direct payment of housing benefit to tenant under Universal Credit has been the subject of controversy. Although housing benefit has long been paid to most private sector tenants directly, for social housing tenants it has historically been paid directly to their (social) landlords. As a result, the implementation of a social housing equivalent to the Local Housing Allowance policy, which has been present in the private sector without comment for over a decade, has widely been perceived as a tax on having extra bedrooms, rather than the tenant making up a shortfall in the rent arising from a standardisation of their level of benefit.
The Social Security Advisory Committee have argued that the policy [of direct payments] requires "close monitoring" so as to make sure that Universal Credit does not further discourage landlords renting to people on benefits. There is an implied assumption among many commentators that social housing tenants are far more likely to spend their rent money on non-rent purposes, compared to the behaviour of private sector tenants, as if the sanity and ethical standards of the two groups are poles apart, and the two groups are permanently distinct and unmixing.
Disincentive to save
Impact on self-employed
The Resolution Foundation has warned that Universal Credit will hurt self-employed people with dramatic changes in their income from month to month.
According to pressure group the Child Poverty Action Group, Universal Credit may affect the low-paid self-employed and anyone who makes a tax loss.[clarification needed][jargon] 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.[clarification needed][jargon]
Impact on disabled people
Impact on passported benefits
The Daily Mirror, a tabloid newspaper, reported an example of a claimant of Universal Credit whose passported benefits, such as free school meals, were withdrawn in error because officials were confused about her status when she moved onto Universal Credit, as she was no longer in receipt of one of the 'legacy' benefits that Universal Credit replaces.
The campaigns group Women's Aid have argued that Universal Credit could have negative consequences for victims of domestic abuse as under Universal Credit benefit payments are paid as one payment per household something that could risk the financial independence of victims of domestic abuse.
Impact on families
In the report Pop Goes the Payslip the advice organisation Citizens Advice highlight examples of where people who in work are worse of under Universal Credit than under the 'legacy' benefits Universal Credit is replacing. Similarly a report by Save the Children highlights how "A single parent with two children, working full-time on or around the minimum wage, could be as much as £2,500 a year worse off under the new [Universal Credit] system".
A House of Commons Library briefing note raises the concern that Universal Credit might make people reluctant to take more hours at work:
There is concern that families transferring to Universal Credit as part of the managed migration whose entitlement to UC is substantially lower than their existing benefits and tax credits might be reluctant to move into work or increase their hours if this would trigger a loss of transitional protection, thereby undermining the UC incentives structure.
Freedom of information
A freedom of information request was made by Tony Collins and John Slater in 2012. They sought the publication of documents detailing envisioned problems, problems that arose with implementation and a high-level review.
In March 2016, a third judicial case ordered the DWP to release the documents. The argument against releasing the documents was the possibility of a chilling effect for the DWP and other government departments.
Universal Credit has been dogged by IT problems. A DWP whistleblower told Channel 4's Dispatches in 2014 that the computer system was "completely unworkable", "badly designed" and "out of date". A survey of Universal Credit staff found that 90% considered the IT system inadequate.
- Gillies, A., Krishna, H., Paterson, J., Shaw,J., Toal, A. and Willis, M. (2015) Universal Credit: What You Need To Know 3rd edition, 159 pages, Published by: Child Poverty Action Group ISBN 978-1-910715-05-5
- Contributions based Job Seeker's Allowance and contributions based Employment Support Allowance are not part of Universal Credit
- 'Legacy' benefits is a term used to describe the benefits that Universal Credit is going to replace
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