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How George Osborne learned to relax and start loving Universal Credit

The Chancellor is using the reform as a trojan horse for benefit cuts, says Emily Thornberry. 

Remember Universal Credit? You know, “the most radical overhaul of our welfare system since its inception”? The “once in a generation reform” that was going to “improve the lives of millions”?

Yes, some truly ridiculous things have been said about Universal Credit over the years, mostly by Tory ministers. On the more realistic end of the spectrum, my predecessor Stephen Timms once pointed out, with admirable restraint, that the government was “in danger of overselling the benefits of Universal Credit.

I cannot think of a more egregious example in recent years of a policy which promised so much and delivered so little. 

It isn’t just the endless delays, computer crashes, “resets” and inter-departmental squabbling that have conspired to bring about the failure of this flagship Tory welfare reform.

Far more important is the fact that, almost without being noticed, the Tories have been hacking away at Universal Credit to the point where become almost unrecognisable.

The reasons for this aren’t hard to fathom. The comprehensive mauling the programme received following the general election had the Chancellor’s grubby fingerprints all over it.

For all the flaws in its implementation, Universal Credit was actually a perfectly good idea, at least in theory. By bringing a number of benefits and tax credits together into a single monthly payment, which was available to those in work as well as out and would be gradually withdrawn as earnings increased, the government was working to the fundamental principle that work should always pay – and be seen to pay.

This principle, which used to be shared by all parties, was even built into the design of Universal Credit. This worked by setting a minimum amount that each household could earn – a “work allowance” – before their benefits would start to be taken away.

That sounded perfectly sensible, and it was.

But last summer Universal Credit ran into serious trouble, as George Osborne was flailing around in search of a spare £12 billion. That, of course, was the amount that the Tories had promised to save from the welfare budget before the election, despite the fact that none of them seemed ever to have got as far as thinking about where they might actually find it.

The truth is that benefits system has never been as generous as the deplorable stereotypes of right wing tabloids and shows like Benefits Street tend to suggest. So in terms of the sheer scale of the cuts the Government was proposing, there just weren’t that many places within the welfare budget to look. Tax credits was one – and we all know how that turned out – and Universal Credit was the other.

But while tax credits threatened to ignite a political row approaching the scale of Thatcher’s infamous poll tax, Osborne himself has pointed out that he managed to make equivalent cuts to Universal Credit, saving around £3 billion, just a few weeks later.

He did this by exploiting an obscure loophole in parliamentary procedure, which Governments sometimes use to pass controversial legislation without the need for a vote, almost no-one outside Westminster batted an eyelid.  

Shortly after that, Iain Duncan Smith announced that the government is now tripping over itself to see that Universal Credit is rolled out nationally from April next year That’s just around the time, remember, that those now-abandoned cuts to tax credits had been due to kick in.

This is of course no coincidence. It is becoming increasingly clear that cutting tax credits and cutting Universal Credit is effectively the same thing. They hit the same families in the same way – the only difference is in the timing.

Following the government’s Spending Review in November, a leading think tank pointed out that for the first time, “Universal Credit is now squarely a welfare reform which saves money”. And that money has to come from somewhere.

According to the IFS, that somewhere is the pockets of 2.6 million low-income working households, who stand to lose an average of £1,600 a year with the transition to Universal Credit.

The government insists that most of this process will be complete by the time of the next election. And while there may yet be further delays, that seems far less likely now that the Chancellor is a convert to the cause.

Whenever Universal Credit does arrive, one thing’s for certain – it won’t be the same Universal Credit we were promised back when it was introduced with all that high-falutin rhetoric.  

Emily Thornberry is MP for Islington South & Finsbury and shadow secretary of state for foreign and commonwealth affairs.

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Scotland's vast deficit remains an obstacle to independence

Though the country's financial position has improved, independence would still risk severe austerity. 

For the SNP, the annual Scottish public spending figures bring good and bad news. The good news, such as it is, is that Scotland's deficit fell by £1.3bn in 2016/17. The bad news is that it remains £13.3bn or 8.3 per cent of GDP – three times the UK figure of 2.4 per cent (£46.2bn) and vastly higher than the white paper's worst case scenario of £5.5bn. 

These figures, it's important to note, include Scotland's geographic share of North Sea oil and gas revenue. The "oil bonus" that the SNP once boasted of has withered since the collapse in commodity prices. Though revenue rose from £56m the previous year to £208m, this remains a fraction of the £8bn recorded in 2011/12. Total public sector revenue was £312 per person below the UK average, while expenditure was £1,437 higher. Though the SNP is playing down the figures as "a snapshot", the white paper unambiguously stated: "GERS [Government Expenditure and Revenue Scotland] is the authoritative publication on Scotland’s public finances". 

As before, Nicola Sturgeon has warned of the threat posed by Brexit to the Scottish economy. But the country's black hole means the risks of independence remain immense. As a new state, Scotland would be forced to pay a premium on its debt, resulting in an even greater fiscal gap. Were it to use the pound without permission, with no independent central bank and no lender of last resort, borrowing costs would rise still further. To offset a Greek-style crisis, Scotland would be forced to impose dramatic austerity. 

Sturgeon is undoubtedly right to warn of the risks of Brexit (particularly of the "hard" variety). But for a large number of Scots, this is merely cause to avoid the added turmoil of independence. Though eventual EU membership would benefit Scotland, its UK trade is worth four times as much as that with Europe. 

Of course, for a true nationalist, economics is irrelevant. Independence is a good in itself and sovereignty always trumps prosperity (a point on which Scottish nationalists align with English Brexiteers). But if Scotland is to ever depart the UK, the SNP will need to win over pragmatists, too. In that quest, Scotland's deficit remains a vast obstacle. 

George Eaton is political editor of the New Statesman.