Universal credit was firstannounced in 2010 and introduced by the government in 2013 (DOWP, 2015). It isone of many welfare reforms introduced by the Coalition government in the WelfareReform Act 2012, designed to make claiming benefits simpler (it merged sixbenefits into one payment).
The initial aim was for it to be implemented fullyover four years – under two governments. This hasn’t yet happened and it isstill being introduced gradually. The government is planning to starttransferring people that are still on tax credits, or existing benefits, ontouniversal credit from July 2019 and compete this process by 2020 (Turn2us,2018). Designed for working age people, itsupports someone with low or no income. It is paid monthly. On the old benefitssystem, payments are weekly, fortnightly or four-weekly. This is one of themain differences between the existing benefits and universal credit.
Being paidas one monthly amount, it is trying to encourage people to manage their money.The government say this is like getting paid when you are at work. Entitlement is worked out by comparing whatthe government deem as basic financial needs, to a person’s financial resources.It’s available for people on low income, people unable to work due to illness,disability or commitments in childcare and those who are out of work; includingthose looking for work (DOWP, 2018). The government believes that theold system is “too complex” and that there are “insufficient incentives toencourage people on benefits to start paid work or increase their hours” (DOWP,2015). Therefore, the main principles are that people keep more of theirbenefits when they find a job, and that it simplifies the benefits system.The idea is that you can claimbenefits even if you were in work. Under the old system if you work over 16hours a week you lose all benefits (BBC,2018).
The system is designed to keeppeople in work, to work more hours and to encourage people to go into full-timeemployment. For the first time, people will stay in touch with the jobcentreeven when they have found work. Although the principles soundgood on paper, universal credit is letting many people down. Currently just450,000 people are on universal credit (Butler, 2017). The Institute for Financial Studies estimates2.1 million families will be worse off, and 1.
8 million will be better off,under the universal credit scheme. Since the start universal credithas been very controversial. It isargued that despite the first principle, that getting a job should befinancially worthwhile, many people will be worse off compared to the oldsystem. According to Joseph Roundtree Foundation families who work full timecan easily find themselves with less money in comparison to if they workedpart-time. If a family with children works more than 10 hours they will getnothing extra (Toynbee, 2013).
However, the Department of Working Pension saidthat claimants are earning more than the old system; they say that claimantsmake £80 more in the six months, which works out £3.08 more a week. The National LandlordsAssociation (NLA) has warned that there will be a “steady decrease” in thenumber of landlords willing to rent out their properties to people that are on universalcredit due to the likelihood to fall into rent arrears (Pidd, 2018). This is becauserent has typically gone up 1.2% in the 12 months (OFNS, 2018), however benefitshave stayed the same so the allowance doesn’t cover the cost of housing. Landlords in areas whereuniversal credit is in place, such as Buxton in the Peak District; havereported that where single people have been on Universal Credit fortwo-and-a-half years, there has been a dramatic increase in non-payment inrent. A letting agency in Buxton said 90% of its universal credit tenants werein rent arrears (Pidd,2018). Housing associations report that over 80% of rentarrears are down to Universal Credit.
A report in the Guardian said that manylandlords and politicians want the system overhauled (Butler,2017). Whenuniversal credit comes fully into place it is predicted that there will be adecline in landlords willing to accept people on universal credit.Universal credit treats theself-employed far more harshly than employees with the same annual income,saving £1.
2bn in the process (Resolution Foundation 2018). Self employedclaimants face being more than £2,000 a year worse off than employees with thesame earning (Savage, 2018). Universal credit is causinghomelessness up and down the country. The Mayor of Greater Manchester isforecasting rough sleeping will double because of the universal credit rollout(Peck. T, 2017). The design and implementation of Universal Credit has drivenvulnerable people further into poverty.One of the causes of this is thatsome people aren’t used to having one monthly payment and are finding itdifficult to budget.
Many people find it difficult to budget, but for someone usedto more frequent payments covering shorter time periods, monthly payments aremore difficult to manage. One way to tackle this problem is the governmentmaking it easier for people to have their rent paid directly to theirlandlord. The Scottish Social SecurityMinister, Jean Freeman, said that it should be possible for people to have thechoice of making the housing element paid directly to the landlord.
TheScottish government has agreed, and they are changing the law to make thishappen. In addition they are using their welfare powers to introducefortnightly payments. The biggestissue is the length of time that people wait to get their first payment. Peoplebeing moved onto universal credit are waiting roughly six weeks or more for paymentand therefore getting into debt.
According to The Work and Pensions SelectCommittee, waiting six-weeks for the first payment causes “acute financialdifficulty”. However, if claimants can show that they are in financialneed during this wait they can apply for an advance payment. This is a loanthat must be paid back and will be worth 50% of the value of credit (BBC, 2018).There have been reports that many people did not know about this and weren’treceiving these early payments. The government should be address this problemand reduce the time between sign up for universal credits to payment. Thenpeople won’t be building up further problems whilst waiting for the firstpayment. There have beennine changes to universal credit since 2013 (Butler, 2017), most of which havereduced its overall generosity. They include:· a four-year freeze on universal credits· cuts to work allowances.
· restricting child credit to two per family. This goesagainst the original aim to encourage people to work more hours by lettingpeople keep their low-wage top ups even if their income rises.We know thatwork is the best route out of poverty, and Universal Credit is designed tostrengthen incentives for parents to move into and progress in work. Ignoringthe impact that Universal Credit has on incentivising work and raising theincomes of families is inappropriate.The impact ofUniversal Credit cannot be considered in isolation– it is a key component of abroader strategy to move Britain to a higher wage, lower welfare, lower taxsociety “We discover new problems every day.
It is adisaster,” MP, Drew Hendry (Gentlemen,2017). Newcastle city council reportedthat it was spending £390,000 supporting Universal Credit claimants, almost aquarter of which was for additional rent arrears support (Stewart, 2017).Thegovernments response is that however badlythe policy is going in practice the original ‘principles’ were sound(Jayanetti, 2017).Universal Credit is causingdebts, rent arrears and even homelessness up and down the country, with many ofthe claimants already in work. The number of Tory MPs prepared to rebel overthe issue has grown to around 25, according to the Telegraph.You could argue that somethingthat needs so much fixing, is not fit for purpose in the first place. Trying tofind all these solutions, using time and money, is it worth it? The governmentargue that it is as, “Universal Credit is already transforming lives andevidence shows people are moving into work faster and working longer with UCthan under the old system” (DOWP, 2017 p.
8). However, there is sparse evidencethat supports these claims. The report looks at narrow range of measures, for single,unemployed claimants without children” because “methodological improvementshave been made which make the analysis more robust, but which are moretime-consuming to implement” (DOWP, 2017 p.3″. There is no information on howit affects much of the universal credit population, such as; couples with nochildren, lone parents, and people with disabilities. These are the people that arebeing done hard by. According to the Guardian and the Institute for FiscalStudies low income families will lose up to £200 a month, this will affect 1mhouseholds by 2020 (Butler, 2016). This is forcing families to go into poverty,using food banks and going to charities for support.
Lone parentfamilies will be on average £2,380 a year worse off, while families with twochildren lose £1,100 on average and those with three youngsters lose £2,540(Butler, 2017). For single parent families it ismuch worse. The government needs to take into consideration that they are lesslikely to work, due to the high cost of childcare and withdrawal ofmeans-tested benefits if they join the labour market.
The primary reason foruniversal credit was to get people into work as it pays; however, understandingits impact on single parent families must be taken into consideration. A studyby the university of Essex found that single parent families receive slightly lessunder universal credit in comparison to the current system (Brewar, 2017).For couple households theirmonthly payment will be paid into one account, this can cause problems.
Couplesare forced to chose one account that the universal credit goes in to. This doesnot work like a joint account but instead one member will receive the lump sum,and this could have effects on stability in relationships and family formation(Griffiths, 2017). The government have said that Universal Credit is “designedto promote self resilience and personal resilience” (DOWP, 2017), however forcouples, under universal credit only one person could have full access to thebenefits. One way this could be overcome is to follow in Scotland’s footstepsof allowing joint claimants to split universal credit equally. They could alsoadjust the policy, for example by making child benefits go to the lead carer. Policy in Practice recommendsthat the Government reconsiders its proposed changes to work allowances andcontinues to invest in Universal Credit applicant support so that UniversalCredit continues to incentivise people into work, as it was introduced to do. TheGovernment need to address the flaws in the proposed universal credit systemwhilst keeping to the original principles which it argues are sound.
(Jayanetti, 2017). Over shadowing the entire programis the disconnect between what it set put to achieve to what it is now likelyto achieve. For Universal Credit to function properly it requires greaterfunding to improve financial motivations to work. The government cuts £3bn ayear (Butler, 2017), this is not going to improve the welfare of people, anddecrease living standards.They need to invest in theapplication processing to reduce assessment time and communicate the advanceloan process more effectively. They should investigate and address theshortfalls in the scheme for lone parents and consider how to make it fairerfor self-employed claimants. They should consider the impact of making singlemonthly payments to claimants who have no experience of monthly budgeting, considerdirect payments to landlords and look at the effectiveness of the Scottishapproach to joint claimants and fortnightly payments.Work is required if the system isto meet the principles for which it was created.