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.

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Owen Smith is naïve if he thinks misogynist abuse in Labour started with Jeremy Corbyn

“We didn’t have this sort of abuse before Jeremy Corbyn became the leader.”

Owen Smith, the MP challenging Jeremy Corbyn in the Labour leadership contest, has told BBC News that the party’s nastier side is a result of its leader.

He said:

“I think Jeremy should take a little more responsibility for what’s going on in the Labour party. After all, we didn’t have this sort of abuse and intolerance, misogyny, antisemitism in the Labour party before Jeremy Corbyn became the leader.

“It’s now become something that is being talked about on television, on radio, and in newspapers. And Angela is right, it has been effectively licenced within the last nine months.

“We’re the Labour party. We’ve got to be about fairness, and tolerance, and equality. It’s in our DNA. So for us to be reduced to this infighting is awful. Now, I understand why people feel passionately about the future of our party – I feel passionately about that. I feel we’re in danger of splitting and being destroyed.

“But we can’t tolerate it. And it isn’t good enough for Jeremy simply to say he has threats too. Well, I’ve had death threats, I’ve had threats too, but I’m telling him, it’s got to be stamped out. We’ve got to have zero tolerance of this in the Labour party.”

While Smith’s conclusion is correct, his analysis is worryingly wrong.

Whether it is out of incompetence or an unwillingness to see the extent of the situation, Corbyn has done very little to stamp out abuse in his party, which has thus been allowed to escalate. It is fair enough of Smith to criticise him for his failure to stem the flow and punish the perpetrators.

It is also reasonable to condemn Corbyn's inability to stop allies like Chancellor John McDonnell and Unite leader Len McCluskey using violent language (“lynch mob”, “fucking useless”, etc) about their opponents, which feeds into the aggressive atmosphere. Though, as I’ve written before, Labour politicians on all sides have a duty to watch their words.

But it’s when we see how Smith came to the point of urging Corbyn to take more responsibility that we should worry. Smith confidently argues that there wasn’t “this sort of abuse and intolerance, misogyny, antisemitism” in the party before Corbyn was voted in. (I assume when he says “this sort”, he means online, death threats, letters, and abuse at protests. The sort that has been high-profile recently).

This is naïve. Anyone involved in Labour politics – or anything close to it – for longer than Corbyn’s leadership could tell Smith that misogyny and antisemitism have been around for a pretty long time. Perhaps because Smith isn’t the prime target, he hasn’t been paying close enough attention. Sexism wasn’t just invented nine months ago, and we shouldn’t let the belief set in that it did – then it simply becomes a useful tool for Corbyn’s detractors to bash him with, rather than a longstanding, structural problem to solve.

Smith's lament that “it’s now become something that is being talked about” is also jarring. Isnt it a good thing that such abuse is now being called out so publicly, and closely scrutinised by the media?

In my eyes, this is a bit like the argument that Corbyn has lost Labour’s heartlands. No, he hasn’t. They have been slowly slipping away for years – and we all noticed when Labour took a beating in the last general election (way before Corbyn had anything to do with the Labour leadership). As with the abuse, Corbyn hasn’t done much to address this, and his inaction has therefore exacerbated it. But if we tell ourselves that it started with him, then we’re grasping for a very, very simple solution (remove Corbyn = automatic win in the North, and immediate erasure of misogyny and antisemitism) to a problem we have catastrophically failed to analyse.

Anoosh Chakelian is deputy web editor at the New Statesman.