Today’s report on Universal Credit is hardly surprising. But the failing system can still be fixed

Universal Credit is running at least six years late, it causes hardship, its employment impacts cannot be measured and any benefits are unlikely to be realised. 

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Universal Credit remains a good idea in theory. Back in the summer of 2010, the government set out its vision: a simpler benefits system, with modern payment systems, fewer “cliff edges” around housing, work and childcare, and improved financial support in work. It predicted that by now, in 2018, Universal Credit would be fully rolled out and there would be 300,000 more people in work as a result – with many more to follow, because of its new, “dynamic” effects. 

But £1.3 billion later, today’s report from the National Audit Office lays bare just how wrong things have gone. Universal Credit is running at least six years late, it causes hardship, these problems aren’t being mitigated, its employment impacts cannot be measured and its benefits are unlikely to be realised. Sometimes, NAO reports can be dry affairs – with the real meanings obscured by the numbers, charts and official language. This one, though, pulls no punches. Universal Credit is not now, and is not ever likely to be, value for money. In nearly 20 years I can’t remember having read a report this scathing. And, this is after DWP had the chance to critique the draft.

For those who have been following Universal Credit, today’s report is shocking but not surprising. We and others called for Universal Credit to be paused a year ago, as some of the impacts from the “full service” rollout were starting to become clear. And last week we had the first independent research on Universal Credit “full service”, which scotched the myth that these reforms were now back on track. Half of claimants reported that they were in either housing arrears or financial difficulty. Half reported having to get additional funds – usually from family and friends – to make ends meet. Just one third felt that Universal Credit was easier to claim than the benefits that it had replaced.

The saving grace for claimants, then, is that Universal Credit is running so far behind schedule. Not only does that mean that fewer claimants will experience the hardship, delays and difficulties of claiming, but it also means that overall there will be more money in the pockets of low-income families (as Universal Credit is ultimately a savings measure – as we explained in November). These delays are also likely to get worse, as they rely on the government finding the time and political energy to get new “enabling” regulations through parliament before the summer. As with the trains, expect more delays...

In the long run, the government is still forecasting hugely positive impacts from Universal Credit, worth £34 billion over ten years. However, this report reveals just how unrealistic some of these assumptions are – such as work coaches being able to support nearly four hundred people at a time, and running costs being one fifth what they were in the old system. In practice, the NAO show that current caseloads are four times smaller and unit costs four times larger than these targets – and that even small changes in the business case assumptions will increase costs by billions.

Perhaps the most troubling thing in today’s report though is the long list of things that the government isn’t measuring or doing. It doesn’t recognise that there are ongoing local costs, so these were left out of the business case. It doesn’t accept that the reforms can cause hardship, so it won’t talk to partners about how to address them – leading to what the NAO describes as a culture of “claim and counter-claim”. And most remarkably, the report also reveals that the government can no longer measure the impact of Universal Credit on employment – because there are no comparable groups that UC claimants can be assessed against. So we will never know whether all of this upheaval has really been worth it. 

Despite this absence of any evidence, the government continues to claim that Universal Credit increases employment and earnings. However this is based on analysis of a small sample of claimants, who started claims under the “live service” at least three years ago, and who were in the earliest (and best resourced) pilot sites. 

Under Full Service we now know (from last week’s survey findings) that a third of those claimants who should be looking for work “intensively” are doing no job-seeking at all, while one-quarter reports not having regular meetings with their work coach. At the same time, our own analysis suggests that the number of “claimant” unemployed doubles after Universal Credit rollout – which is likely to be driven by changes in how claimants are classified in the benefits system, but may also reflect people taking longer to find work. Increasingly, I am concerned that Universal Credit may actually be harming employment prospects for those out of work.  But without any evaluation or impact assessment, we may never know. 

The National Audit Office concludes that it's now too late to turn back on Universal Credit.  In effect, there is no legacy benefits system to go back to. However, it's also not too late to try to fix things.  For us, this means doing four things:

  • Pausing the “migration” of existing claimants until at least 2020 – which, in practice, will surely happen anyway.
  • Use this autumn’s budget to reverse the damaging £2.3bn cuts to “work allowances”, so that Universal Credit always pays to work.
  • Reset the partnership with local government and agencies. This report paints a picture of fraught and difficult relationships, distrust and piecemeal funding. From our evaluation of the Universal Support pilots, it was clear to us that Universal Credit will only work if local partners are empowered (and resourced) to work with government to support the most vulnerable, address hardship and manage the impact on local services.
  • Review and reform how we support claimants to prepare for work, get into work and get more and better work. This means having caseloads closer to 100 than 400; regular, face-to-face and expert work coach; better alignment with adult skills, apprenticeships and other local provision; and the funding to commission and deliver the right support.

Tony Wilson is the Director of Policy and Research at the Learning and Work Institute.

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