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25 October 2017

Leader: A universal failure

Rather than minimising the strife and stress that low earners face, the government is intensifying it.

By New Statesman

From its conception in 2010, Universal Credit was sold as a transformative reform that would “make work pay”. Iain Duncan Smith, the then work and pensions secretary, vowed that the programme would remake the welfare state and “improve the lives of millions of claimants by incentivising work”. Grandiose comparisons were made with the Beveridge reforms of the 1940s. The merger of six income-related benefits into one would create a simpler and fairer system.

Since 2013, Universal Credit’s implementation has been delayed seven times as a result of management failings and a botched IT system. This year, it is being rolled out across the country but will not be fully operational until 2022, five years later than promised.

For the 610,000 who already claim it, the promise of “credit” is hollow indeed. They are forced to wait six weeks for their first payment, leading to debts, rent arrears and, in some cases, housing evictions. The Trussell Trust, which runs most of the UK’s food banks, found that demand for parcels increased by an average of 16 per cent in areas where Universal Credit was in place. The number of social housing tenants at least a month behind with their rent was five times higher.

Those who struggle to navigate the labyrinthine online system, or who lack internet access, have been forced to call an expensive and understaffed helpline. Only after pressure from Labour did the government finally agree, on 18 October, to abolish the iniquitous 55p-a-minute charge.

As well as Labour, some Conservative MPs, Citizens Advice, the Trussell Trust and the former prime minister John Major have called for the introduction of Universal Credit to be “paused”. (Mr Major called it “operationally messy, socially unfair and unforgiving”.)

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Universal Credit’s problems are not merely administrative. Its potential advantages in “making work pay” were overstated. Where claimants once lost 73p for every extra pound earned, they will typically now lose 63p per pound – a marginal shift, not a transformational one. The amount that claimants were allowed to keep was progressively cut by the former chancellor George Osborne, now a newspaper editor. These cuts contributed to the resignation of Mr Duncan Smith, who said that Universal Credit had been “salami-sliced”.

In truth, the majority of claimants will be worse off under Universal Credit than they were under the previous benefits system. According to the Resolution Foundation think tank, when the scheme is fully rolled out 2.5 million low-income working households will lose more than £1,000 a year. The worst affected will lose £2,800. Frank Field, the chair of the work and pensions select committee, warns that the system will revive the kind of “hunger and destitution” that the welfare state was founded to eliminate.

In this week’s cover story, our political editor, George Eaton, examines why the United Kingdom is once again being called “the sick man of Europe”, as it was in the 1970s. After last June’s vote for Brexit, Britain has had the slowest growth and the highest inflation among the ten largest EU economies. Real wages have fallen in Britain for the past six months.

The troubled Conservative government’s economic record is not universally poor. Unemployment remains at a 42-year low of 4.2 per cent and employment is at a 46-year high (75.3 per cent). But too few of these jobs are adequately paid. For the first time in our history, most of those in poverty are also working.

When the market is unable to meet basic needs, the state rightly intervenes. Yet rather than minimising the strife and stress that low earners face, the government is intensifying it.

On the day Theresa May became Prime Minister in July 2016, she promised to look out for the needs of the less privileged and those who were “just managing”.

“The government I lead will be driven not by the interests of the privileged few, but by yours,” she said. The fate of those left destitute by Universal Credit has become a defining test of this fragile Prime Minister’s words.

Read the New Statesman’s reporting on Universal Credit here

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This article appears in the 25 Oct 2017 issue of the New Statesman, Poor Britannia