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16 January 2019

The A to Z of Universal Credit

Since it was announced in 2010, the project to transform the benefits system has been beset by problems. What is going wrong?

By Anoosh Chakelian

For six years, I’ve been reporting on Britain’s welfare system. Central to my coverage has been the haphazard arrival of Universal Credit, announced in 2010 by the Conservative government’s then work and pensions secretary Iain Duncan Smith. It was intended to roll the six main benefits into one monthly payment to simplify the process and “make work pay”. With its origins in a 2008 white paper by New Labour’s work and pensions secretary James Purnell, the reform was originally greeted with cautious support by the opposition and some charities.

The standard monthly allowance for a single person aged 25 or over on Universal Credit is £317.82, and the maximum benefit allowance for a household per year is £20,000 (£23,000 in London). Social security benefits and tax credits (top-up payments to redistribute income to people on lower wages) made up 28 per cent of public spending in 2016/17, with the government spending £217bn on these payments. State pensions and pension-age benefits comprised most welfare spending, at 59 per cent, and are not subject to cuts. By contrast, disability and incapacity-related benefits account for just 8 and 7 per cent of welfare spending respectively, and unemployment benefits under 1 per cent.

People who need the state in order to survive are struggling in an increasingly hostile environment. In many Universal Credit cases I’ve come across, it seems claimants can no longer rely on a system once known as a “safety net”. In October 2017 I spoke to Paula, a 39-year-old single mother living in south London. She was working two jobs, as a health worker and a weight loss coach, while looking after her seven-year-old daughter. When she was moved on to Universal Credit, the payment delay meant she was left without £900 in rent she needed for the month. For four months, she received nothing but £171. Her landlord took her to court, and she was evicted. She also left one of her jobs, having been advised that she would receive more benefits if she reduced her hours. She was crying, waiting for bailiffs to arrive the following week. “I don’t know where we’ll be after next Thursday,” she told me.

Universal Credit delays payment for five weeks by design, but often the wait is longer. It can also disincentivise parents from working because there is no money coming in for childcare or because they won’t receive as much as previously, despite working more hours. As Paula put it: “They [the government] make decisions on what works for them, not for us.”

A is for advance payments

These are not in fact “payments” but loans. You can apply for one when you first claim Universal Credit if you can prove you need upfront financial help while you wait for your initial payment.

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If you’re allowed one, you then pay it back via deductions of up to 40 per cent from your monthly UC standard allowance – and you have to pay it all back within 12 months (from October 2021, this period will be extended to 16 months). This means that claimants are getting into debt at the very start of the process; and while they repay an advance, they are receiving a lower amount of benefits each month. Citizens Advice warns that this could lead people to other sources of borrowing, such as loan sharks.

The government uses advance payments as a rhetorical get-out card – a way of saying no one will be left entirely without money by the switch from other benefits to Universal Credit. But the reality is different, and advance payments are only necessary because of the five-week wait (see W) deliberately built into the system.


B is for benefits freeze

As part of the former chancellor George Osborne’s four-year freeze on benefits levels, the rates of jobseekers’ allowance, income support, tax credits, child benefit, housing benefit and part of the Employment and Support Allowance have remained flat since April 2016, while prices have risen. Universal Credit is part of this freeze – its working-age benefits don’t rise in line with inflation. Ahead of the Budget in 2017, the Joseph Rowntree Foundation charity calculated that a couple with two children claiming Universal Credit are £832 worse off per year than if benefits had kept up with prices since 2010. Last October the Chancellor, Philip Hammond, refused to end the freeze.


C is for cuts

There are other cuts wrapped into the Universal Credit system. While the idea of a new welfare system was ostensibly to “simplify” benefits and “make work pay”, it was also intended to save money in an age of austerity. In his first speech announcing Universal Credit in 2010, the then-work and pensions secretary Iain Duncan Smith said he intended to fix a “wildly expensive benefits system… No more spend and waste”.

The Tories pledged to make an additional £12bn of welfare cuts in their 2015 general election manifesto. The “architect of Universal Credit”, Deven Ghelani, who advised Duncan Smith, argues that the reform has been undermined by the welfare cuts – Iain Duncan Smith resigned on 18 March 2016 over Osborne’s benefits freeze.

Claimants used to be entitled to child tax credits (top-up payments designed to redistribute income to parents or people in work on a low income) for all their children – now that’s been restricted to two children. Disability premiums have also disappeared under Universal Credit; these are supposed to cover the costs of living alone with a disability without a carer.


D is for digital

Universal Credit was designed to be “digital by default”, with a target of 80 per cent of claimants managing all their benefits online. Claimants have an online journal. The idea is that they can report their income, changes in financial circumstances, job search information and so on, to be monitored by “work coaches”. The majority of Universal Credit claimants use this system, but people who are struggling financially and older people are less likely to have a computer or smartphone or an internet connection. Ten per cent of households still don’t have internet access, according to the Office for National Statistics. This rises to 41 per cent in households of one adult aged 65 or over. In 2017, 22 per cent of adults with disabilities had never used the internet. People living in more remote areas will find it harder to access the internet at a local library or jobcentre (see J), some of which are closing due to cuts. In rural areas, 25 per cent of claimants have to travel more than 45 minutes to get to a jobcentre.

E is for Esther McVey

McVey, who resigned as work and pensions secretary on 15 November 2018, began her career at the Department for Work and Pensions (DWP) under Iain Duncan Smith, serving as disabilities minister (2012-13) then employment minister (2013-15). In a meeting with Philip Alston, the UN special rapporteur who investigated UK poverty in 2018, McVey reportedly dismissed his concerns about the impact of single household payments on domestic abuse victims (see S), by saying: “Well, you know, if they’re having problems, they should get counselling and if things get really bad they should leave.”


F is for food banks

Food-bank use increases in areas where Universal Credit has been rolled out, according to the Trussell Trust, which says that the inbuilt five-week wait (see W) means people are left with little money to pay for food. Analysing data from its network, the Trussell Trust found that food-bank use has increased by 52 per cent in areas where Universal Credit has been fully rolled out for 12 months or more.


G is for gagging orders

At least 22 organisations working with claimants had to sign contracts with “publicity clauses” agreeing to uphold the “standing and reputation” of the then work and pensions secretary Esther McVey, the Times revealed last October. One of the contracts (which together were worth more than £1.8bn of government money) seen by the newspaper stated that a charity would not do anything that may “attract adverse publicity” or “damage the reputation” of the work and pensions secretary. The DWP called it “standard procedure” and denied that these organisations were banned from criticising Universal Credit.


H is for hardship

The DWP refuses to engage with the “hardship” it is creating, according to a report by the Public Accounts Committee last October. It accused the DWP of “persistently dismiss[ing] evidence that Universal Credit is causing hardship for claimants and additional burdens for local organisations, and refuses to measure what it does not want to see”.

Single parents are hit particularly hard, losing £800 a year on average, with some losing more than £2,000, according to single parent charity Gingerbread.  Council tenants claiming Universal Credit have more than double the rent arrears than those still on the old benefit system, according to BBC Panorama figures. In some areas it’s higher. Under legacy benefits (see L), housing benefit was paid directly to the council or landlord, depending on your type of accommodation. But under Universal Credit in most cases the housing element is paid directly to the claimant. Accidental delays in payments or underpayments (see Q and W) and the challenge of budgeting under the new system (see O) have increased rent arrears, putting landlords off renting to Universal Credit claimants.

This has led to fears of a rise in evictions, with the Lib Dems warning that as many as 1.3 million households could be evicted from their privately rented homes.


I is for Iain Duncan Smith

Iain Duncan Smith was the work and pensions secretary who introduced Universal Credit, announcing the policy idea during a Conservative Party conference speech in 2010.

Driven by ideological zeal to reform welfare – with an unwavering faith that work and family unity were routes out of poverty – Duncan Smith blindly believed in the policy. But he often appeared out-of-touch, claiming, for example, during a 2013 radio interview that he could live on £53 a week (his cabinet salary at the time was £134,565). His department was accused by a National Audit Office report in 2013 of having a “good news” reporting culture and a “fortress mentality”.


J is for Jobcentres

Jobcentres are struggling to manage the roll-out of Universal Credit. Mark Serwotka, leader of the public worker union PCS, told the work and pensions select committee last year that “many members reported that they had no training whatsoever”. The committee chair, Frank Field, spoke of the “lack of training and expertise at the front line in Jobcentre Plus”, which left employees “unprepared to deal with the most vulnerable claimants”. Staff have reported a “heartbreaking” targets culture on the Universal Credit helpline. Jobcentres are closing across the country, with over 100 shut down (about 15 per cent) between 2016 and 2018, and have only a third of the resources and staffing they had in 2012, according to the Learning and Work Institute. Though Universal Credit was supposed to be “digital by default” (see D), claimants must attend mandatory appointments and periodically submit physical evidence for their claims.


K is for knock-backs

As of November 2018, one in three Universal Credit applicants had their claim rejected in the space of a year. That is 400,000 people, described by Frank Field as “a small army of people [who] seem to be disappearing from the system and an unknown number into destitution shortly after they try making a claim”.


L is for legacy benefits

These are benefits under the old social security system. The idea is to have everyone off this system and on Universal Credit by December 2023.


M is for managed migration

This is the stage of the roll-out when claimants on the old system move on to the new one (currently, only new claimants are being put on Universal Credit). This was originally supposed to happen between April 2014 and October 2017, but large-scale migration is now expected to begin in November 2020.


N is for not working

Iain Duncan Smith (see I) wanted the system to “make work pay”. In reality, it has been found to disincentivise single parents from returning to work, and to disincentivise second earners in households from working.


O is for once-monthly payments

Universal Credit is paid once a month to mimic a working salary: the idea is to train claimants to budget and receive money as a working household does. It is paid in arrears, so that the size of the payment can be tweaked each month, depending on other income sources. This is a change from the previous system, when benefits would generally be paid twice-monthly. However, some workers, particularly those in low-paid industries, are paid on a weekly or hourly basis. Research by Lloyds Banking Group into its bank accounts found that 58 per cent of new Universal Credit claimants in 2016-17 had been paid weekly or fortnightly in their previous job. Claimants can request for the frequency of payments to change – and can receive budgeting help from their work coach – but the majority are paid monthly.


P is for pension age

Another covert cut under Universal Credit could make “mixed-age couples”, where one partner is of pension age or above, more than £100 worse off a week. Under the legacy benefit rules (see L) still being used in practice, eligibility for means-tested benefits is determined by the oldest person in a relationship. Universal Credit will reverse this, so a mixed-age couple will be defined by the working-age person, not the pensioner. They will need to claim Universal Credit – which will class them both as a working-age couple – instead. This came into law in 2012, outlined in the Welfare Reform Act, and will be implemented from 15 May.


Q is for quirks

Whistleblowers have reported design flaws in the system that are leaving people out-of-pocket. We have spoken to many claimants who have gone months without rent payments, without childcare support, even being driven to the point of homelessness, because of mistakes in the system.


R is for Rudd

Amber Rudd, who has been Work and Pensions Secretary for two months, is attempting to change the perception of Universal Credit. She has announced tweaks that will be politically popular, but are far from the “reset” that has been claimed.

Rudd introduced a concession not to apply the two-child benefit limit retrospectively to families that had children before the policy was announced (although it will affect all future families); she has delayed a vote on managed migration (see M), while nevertheless sticking to the government’s deadline of 2023 (see T); she has repeated a previous claim that household benefits should be paid to the “main carer”, but has no plan to split single household payments that endanger women (see S); and she has announced a new system for private landlords to request rent directly to ease rent arrears and the risk of eviction (see H). But this still keeps direct housing payments (the heart of the problem) as the default.

Amber Rudd has also hinted at an end to the benefit freeze (see B) next year when it’s up for renewal, but she will need to persuade the Treasury.


S is for single household payments

In a bid for simplicity and to “strengthen the family”, Universal Credit is designed to combine all benefits into one monthly payment paid into a single bank account per household. A report by the work and pensions select committee last August found that this set-up risks a family’s income going entirely into an abusive partner’s bank account, making partners and children unable to leave.

Concerns were voiced from the start by women’s groups and domestic abuse survivors, but these went unheeded. At present, if a partner leaves the household, they have to inform the DWP and start a separate claim – new claims take weeks (see W), though Jobcentre staff (see J) can arrange for payments to be made within hours to people suffering domestic abuse, so no one should be waiting weeks in that situation. If someone is being denied access to their money by a partner, they are advised to call the Universal Credit helpline.

The Mirror revealed that, as of June 2018, only 15 people in the whole of the UK were using the “split payments” exception. Even if a split payment application is successful, it is reviewed after three months, as the DWP prefers
its default payment system.

According to the DWP website, if you’re a victim of domestic abuse, you have to prove it – first by telling your work coach face-to-face at the jobcentre (bear in mind Universal Credit is designed to be accessed entirely through an online account), and then by providing “written evidence” within a month of this discussion.


T is for timetable

Universal Credit is notorious for delays to its implementation. It was supposed to be completed by 2017, according to the original timetable presented by Iain Duncan Smith.

After repeated delays, it was piloted in a handful of jobcentres in 2013 and 2014, and rolled out only for new claims by single job-seekers (the simplest cases) in 2015 and 2016, with the “full service” national roll-out beginning in May 2016. As of October last year, the “managed migration” (see M) of existing claimants to Universal Credit has been again delayed. It’s not expected to be fully operational until December 2023. By April 2014, all new claimants were supposed to be on Universal Credit. Instead, by that point, millions of pounds had been wasted on unworkable IT changes.


U is for U-turn

Some Conservative MPs have been alarmed by what they have been hearing in constituency surgeries, and the government has been forced to revise the policy numerous times. The most significant row-backs include reducing the waiting time (see W) from six weeks to five (announced in November 2017); reducing the taper rate (the rate at which benefits through Universal Credit are withdrawn as you begin to earn more) in 2017; and £2.7bn worth of additional changes in the 2018 Budget, in which Philip Hammond also announced an increase in the work allowance (the amount of money you can earn before your benefits start being withdrawn if you have children or a disability). This made these recipients better off by £630 per year. He also announced help with advance loans (see A) by extending the repayment period and reducing the maximum rate of deductions.

Last March, the government reversed its plan to cut housing benefit for those aged 18 to 21 under Universal Credit.


V is for voters

There are fears among some Tories that Universal Credit could cost their party votes. Former prime minister John Major has compared its effects to the poll tax. Tory MP Johnny Mercer warned that getting Universal Credit wrong, “with our inabilities elsewhere at the moment, it’s the sort of thing that could cost us an election”.


W is for wait

When you first apply for Universal Credit, there is a five-week wait.

This is based on the assumption that anyone losing a job serves a notice period, and could survive for five weeks on savings.

Of course, these aren’t the circumstances for many who apply for Universal Credit. You may have been on a zero-hours contract or self-employed (therefore without monthly pay or a notice period),
or you may never have worked.


X is for Xmas

For the past three years, there have been stories in areas where Universal Credit has been implemented of families with no benefits coming in just before Christmas. Claimants do not receive the “Christmas bonus”, a tax-free payment of £10, which claimants under the old system receive in the first week of December.


Y is for young people

Welfare reforms are exacerbating youth homelessness, according to the charity Homeless Link. The government did, however, U-turn (see U) on its plan to remove housing benefit for 18-to-21-year-olds under Universal Credit, which would have forced them to stay in the family home, or even sleep on the streets.


Z is for zero-hour contracts

On 19 December 2018, Amber Rudd had her first outing before the work and pensions select committee. She said that job-seekers should enter insecure work to avoid having their benefits sanctioned, adding that “the principle of sanctions is that there is a conditionality…if people are offered work, they should take it”. They were not obliged to take zero-hour contract jobs under the old system. 

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