One size does not fit all: why Universal Credit needs to work for older people

With its age-blind design, Universal Credit is a missed opportunity to tackle the UK’s demographic challenge.

The shape of our labour market has altered dramatically in recent decades. Among the starkest changes is the increase in the number of older workers – from five million in 1992 to 7.5 million in 2012. One in three people of working age in the UK is already over 50 and the growth of this group will continue to far outpace that of their younger counterparts.

For many of these baby boomers, their working lives have coincided with good times of rising employment and a boom in assets like house prices. But it is naïve to think that all the boomers are now sailing into affluent, easy retirements. The UK has four million inactive or unemployed older people, many of whom might still want to work but are prevented by a mix of caring responsibilities, poor health, poor skills and the fact that there’s often no real financial incentive for them to do so. As a result, many people retire or drift out of the labour market without having been able to save all they need for a comfortable old age.

This is bad news for those households left without the savings they need to maintain decent living standards into retirement. But it also spells trouble for the public finances, putting upward pressure on benefit spending and reducing tax revenues just as public spending constraints are at their tightest.

The ageing challenge provides the context for the introduction of Universal Credit (UC). The interaction between the welfare system and incentives is one of the main ways a government can shape labour market behaviour and UC is the government’s flagship welfare reform. The financial support it offers low earners is a potentially powerful tool to boost employment – indeed providing incentives (“work always pays”) is the principle at the heart of UC. And one in five families receiving UC will include at least one person aged 50 or over.

But how effective will UC be in increasing an older person’s incentive to work? This question has received almost no attention. Yet a report out today from the Resolution Foundation, Getting on: older workers and universal credit, shows that while UC offers some benefits to older workers, it also misses an opportunity to develop an age-specific approach to raise their incentives to stay in a job, or return to work.

In fact, while many older workers will be better off under UC, others will see their financial incentives to work sharply reduced. In the most severe case, someone aged over 60 and earning £7 an hour could see their annual income from work fall by £1,640 (from £9,120 to £7,480). This is because many older workers doing between 16 and 30 hours a week on low incomes receive an extra level of support under the current system of tax credits which will disappear under UC. The result is that an additional tranche of low-paid older people working more than 16 hours a week will be worse off.

The problem is that in its welcome attempt to simplify the current mishmash of working and workless benefits, UC has been designed on an age-blind basis. This passes up the opportunity to incorporate age-specific measures which would make work more appealing to older people, especially those over 55 who are nearing retirement. For example, UC could allow older workers to keep more of their earnings before support starts to be withdrawn (raising the ‘disregard’). A new, higher disregard for workers over 55 would leave low paid older workers better off by £150 a month. This would come at an overall public cost of £200 million; however this cost would fall if older people moved into in work as a result - the Treasury saves around £5,300 a year when a person moves from longer-term unemployment to work 25 hours a week.

The introduction of UC is by no means all bad news. Greater simplicity is to be welcomed. UC also makes support more flexible, helping those who wish to retire gradually and those who can’t work full-time because of caring duties or poor health. UC also provides more incentive to save into a pension than the current system, a very desirable change.

Despite the positives, there is a strong case for making UC more attractive for people to work past the age of 50 and on into their 60s. The UK would add another 1.5 million workers if it matched the older employment rates of other advanced economies, and efforts to boost employment among this group will be vital to living standards in the coming decades.

Our ageing population and relatively poor performance in this field makes this a crucial economic issue for the country. As things stand, UC with its present age-blind design is a missed opportunity to tackle the UK’s demographic challenge.

Giselle Cory is senior research and policy analyst at the Resolution Foundation

Work and Pensions Secretary Iain Duncan Smith speaks at last year's Conservative conference in Birmingham. Photograph: Getty Images.

Giselle Cory is senior research and policy analyst at IPPR.

Photo: Getty
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No, the battle in Momentum isn't about young against old

Jon Lansman and his allies' narrative doesn't add up, argues Rida Vaquas.

If you examined the recent coverage around Momentum, you’d be forgiven for thinking that it was headed towards an acrimonious split, judging by the vitriol, paranoia and lurid accusations that have appeared online in the last couple days. You’d also be forgiven for thinking that this divide was between a Trotskyist old guard who can’t countenance new ways of working, and hip youngsters who are filled with idealism and better at memes. You might then be incredibly bemused as to how the Trotskyists Momentum was keen to deny existed over the summer have suddenly come to the brink of launching a ‘takeover bid’.

However these accounts, whatever intentions or frustrations that they are driven by, largely misrepresent the dispute within Momentum and what transpired at the now infamous National Committee meeting last Saturday.

In the first instance, ‘young people’ are by no means universally on the side of e-democracy as embodied by the MxV online platform, nor did all young people at the National Committee vote for Jon Lansman’s proposal which would make this platform the essential method of deciding Momentum policy.

Being on National Committee as the representative from Red Labour, I spoke in favour of a conference with delegates from local groups, believing this is the best way to ensure local groups are at the forefront of what we do as an organisation.

I was nineteen years old then. Unfortunately speaking and voting in favour of a delegates based conference has morphed me into a Trotskyist sectarian from the 1970s, aging me by over thirty years.

Moreover I was by no means the only young person in favour of this, Josie Runswick (LGBT+ representative) and the Scottish delegates Martyn Cook and Lauren Gilmour are all under thirty and all voted for a delegates based national conference. I say this to highlight that the caricature of an intergenerational war between the old and the new is precisely that: a caricature bearing little relation to a much more nuanced reality.

Furthermore, I believe that many people who voted for a delegates-based conference would be rather astounded to find themselves described as Trotskyists. I do not deny that there are Trotskyists on National Committee, nor do I deny that Trotskyists supported a delegates-based conference – that is an open position of theirs. What I do object is a characterisation of the 32 delegates who voted for a delegates-based conference as Trotskyists, or at best, gullible fools who’ve been taken in.  Many regional delegates were mandated by the people to whom they are accountable to support a national conference based on this democratic model, following broad and free political discussion within their regions. As thrilling as it might be to fantasise about a sinister plot driven by the shadow emperors of the hard Left against all that it is sensible and moderate in Momentum, the truth is rather more mundane. Jon Lansman and his supporters failed to convince people in local groups of the merits of his e-democracy proposal, and as a result lost the vote.

I do not think that Momentum is doomed to fail on account of the particular details of our internal structures, providing that there is democracy, accountability and grassroots participation embedded into it. I do not think Momentum is doomed to fail the moment Jon Lansman, however much respect I have for him, loses a vote. I do not even think Momentum is doomed to fail if Trotskyists are involved, or even win sometimes, if they make their case openly and convince others of their ideas in the structures available.

The existential threat that Momentum faces is none of these things, it is the propagation of a toxic and polarised political culture based on cliques and personal loyalties as opposed to genuine political discussion on how we can transform labour movement and transform society. It is a political culture in which those opposed to you in the organisation are treated as alien invaders hell-bent on destroying it, even when we’ve worked together to build it up, and we worked together before the Corbyn moment even happened. It is a political culture where members drag others through the mud, using the rhetoric of the Right that’s been used to attack all of us, on social and national media and lend their tacit support to witch hunts that saw thousands of Labour members and supporters barred from voting in the summer. It is ultimately a political culture in which our trust in each other and capacity to work together on is irreparably eroded.

We have a tremendous task facing us: to fight for a socialist alternative in a global context where far right populism is rapidly accruing victories; to fight for the Labour Party to win governmental power; to fight for a world in which working class people have the power to collectively change their lives and change the societies we live in. In short: there is an urgent need to get our act together. This will not be accomplished by sniping about ‘saboteurs’ but by debating the kind of politics we want clearly and openly, and then coming together to campaign from a grassroots level upwards.

Rida Vaquas is Red Labour Representative on Momentum National Committee.