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Five reasons Universal Credit will fail - even if they sort out the IT

Duncan Smith's crusade to force eight million people onto a botched new benefit is a recipe for debt, eviction, poverty and distress.

Work and Pensions Secretary Iain Duncan Smith. Photograph: Getty Images

Another week, another government blunder on Universal Credit. Most attacks on Iain Duncan Smith have been about the administrative shambles at the top. But there are problems just as serious on the ground - and eight million unemployed and low income claimants will suffer the consequences. Here are five key problem areas we can expect to hear more about as a larger number of claimants are transferred to the new benefit.

1. Claimants have to manage benefits online

Under the new system, all benefit claimants will ultimately have to apply for and manage their benefits online. Many will be unable to do this. Citizens Advice Bureau (CAB) research released last month suggests two-thirds of their clients will fail without significant help. For some, it's a lack of digital skills and confidence. The government promises support - but it's hard to imagine austerity-obsessed ministers laying on tailored training sessions for several million claimants. Cash-strapped charities and councils are not likely to plug the gap either.

It's also not enough to be digitally literate. Computers and the internet are expensive, particularly on £71.70 a week. Libraries are not the obvious solution they may first seem - 1,000 will have closed by 2016, travel is costly and even impossible in rural areas, and public computers are often time-limited and oversubscribed. 

2. Tenants pay their landlords directly

Universal Credit rolls housing, unemployment and other benefits into one. Currently, around a quarter of housing benefit claimants have their money paid to their landlord directly, because they are seen as "vulnerable" or have previously missed payments. The government wants them to take responsibility for paying rent themselves, and will transfer the money into their bank accounts for them to do so. 

Landlords recently warned this may stop them letting to Universal Credit claimants as they fear tenants will be unwilling or unable to pay their rent. Arrears rose from around £20,000 to £140,000 among council tenants in Torfaen, Wales, just seven months after a pilot of the new system began. Housing associations in some trial areas have had to hire new staff to chase up residents in arrears.

Part of the problem lies in access to banking. Nearly half of the CAB's clients were unable to pay priority bills using a bank account:

Some need help understanding how they can use direct debits and standing orders. Others do not feel comfortable using services that seemingly undermine their ability to control the money that comes out of their pocket. Money may be tight, or they may fear becoming overdrawn and incurring charges.

But much of the problem is linked to the challenges of budgeting on a low income, something not helped by a further part of the Universal Credit reforms - monthly payments.

3. Claimants receive the benefit monthly

Paying out Universal Credit in a single monthly sum makes budgeting far more difficult as money has to be made to last a far longer period. Claimants currently receive different benefits across the month. According to the CAB, many will struggle to "adapt existing patterns of managing their money to spread their costs". Paying housing benefit to claimants only makes the challenge harder. It will be the first time some have had thousands of pounds lining their accounts. 

"If you have more money, it is tempting to use it to cover other, more immediate pressures," said Richard Goodman, a CAB manager in Hammersmith, where Universal Credit has already been rolled out. Keeping warm, getting three meals a day and replacing children's school shoes are often greater priorities than rent.

Some CAB clients also lacked basic budgeting skills. As with IT, there are fears that government funding for support will be inadequate.  Goodman, whose branch currently offer budgeting lessons to those requesting it, says: "We're worried we won't be able to satisfy demand."

4. Officials are unprepared for difficult cases

So far Universal Credit has only been piloted and rolled out in a handful of areas for several thousand claimants. Only the simplest cases - single, first-time claimants without dependents - have been included in the trials and phased launch. Goodman suggested this initial group is likely to be mainly young people, and to pose fewer problems than other claimant types. One can only assume Duncan Smith is more interested in a smooth rollout that appears "successful" than in learning from the harder cases - the long-term unemployed, immigrants, single parents, large families, the sick and the disabled. As Goodman put it:

It’s a soft launch. It doesn’t stress-test the system. For instance, claimants will probably have greater digital literacy than others with more complicated circumstances.

If they’re dogmatic about the 2017 deadline, they’ll squeeze a lot of people onto universal credit without fully testing it. And that means systems crashing, people not being paid and lots of hardship and misery.

5. The cost of living has not been addressed

Budgeting to the last penny is tough on any income, let alone incomes under sustained attack. Half a million people have been forced to turn to food banks, and there is little to suggest the queues will shorten any time soon. With energy firms hiking prices, landlords increasing rents and affordable housebuilding slowing to a trickle, the rising cost of living means every penny has to go further for unemployed and low-income families.

Four in five new jobs pay under £8 an hour, and are often precarious. 2.4 million people are unemployed, chasing 0.8 million vacancies. Benefits have been slashed, capped, frozen and abolished across the board, their recipients stigmatised and sanctioned with ever greater ferocity.

All in all, shoving eight million people onto a botched new benefit in such circumstances is a toxic recipe for debt, arrears, eviction, poverty and distress. Will the Prime Minister evict Iain Duncan Smith, too, in a reshuffle before 2015? Sadly, even if he gets the chop, there seems little prospect of millionaire IDS  having to sign on to universal credit for a taste of his own medicine.

Tom Belger is a student journalist. Follow him at @tom_belger.