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The A-Z of Universal Credit

Everything you need to know about an epic government policy failure. 

An updated version of this feature was published in the New Statesman on 16 January 2019. Read it here.

Ever since it was announced in 2010, the government’s new welfare system Universal Credit has been defined by its problems. Here is everything you need to know about what’s going wrong, as it is introduced to benefit claimants across the country.

A is for Advance payments

Advance payments are not what they sound like – they are actually loans. You can apply for one when you first claim Universal Credit (or report a change in circumstances that means you’ll need more money) if you can prove you need upfront financial help while you wait for your first proper payment.

If you’re allowed one, you then pay it back via deductions from your monthly Universal Credit payments, starting from the first one – and you have to pay it all back within 12 months (from October 2021, this period will be extended to 16 months). From October 2019, the maximum rate of deductions to repay this debt will be 30 per cent of the Universal Credit personal allowance – at the moment it’s a whopping 40 per cent.

This means claimants are getting into debt at the very beginning of the process. It also means that while they make repayments, they are receiving a lower amount of benefits each month. As their benefits were initially calculated to cover their living costs, this means they are therefore receiving less than they need. Citizens Advice warns that this could lead to people turning to other sources of borrowing, and being disincentivised from working or earning higher wages (as the money would be eaten up by repayments).

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

B is for Benefits freeze

As part of former chancellor George Osborne’s four-year benefits freeze, jobseekers’ allowance, income support, tax credits, child benefit, housing benefit, and part of employment and support allowance (ESA) have been cut in real-terms since April 2016.

Universal Credit is part of this freeze – its working-age benefits won’t rise in line with inflation, therefore making people worse off. Ahead of the government’s Budget in 2017, the Joseph Rowntree Foundation poverty charity calculated that a couple with two children claiming Universal Credit is £832 worse off per year than if benefits had kept up with prices since 2010. It warned that continuing the working-age benefit freeze would push nearly half a million people into poverty. Last October in his Budget, the Chancellor Philip Hammond refused to end the freeze.

C is for Cuts

There are other cuts in Universal Credit too. It was originally a less generous system than its predecessor. While the idea of a new welfare system was ostensibly to “simplify” benefits and “make work pay”, it was also intended to save money as part of the Conservatives’ austerity agenda.

In his first speech announcing Universal Credit in 2010, then-work and pensions secretary Iain Duncan Smith said he intended to fix a “wildly expensive benefits system… No more spend and waste”.

This bid to cut the welfare budget was compounded by the Tories pledging £12bn of welfare cuts in their 2015 manifesto – putting people on benefits under increased financial strain before they even got to Universal Credit. Even the “architect of Universal Credit”, Deven Ghelani, who advised Duncan Smith on the policy, argues that the reform has been undermined by the welfare cuts.

So what’s being cut? There are the well-known cuts most associated with austerity, such as the benefits freeze (see B), Bedroom Tax, the employment and support allowance cut, and the household benefit cap, which continue under Universal Credit.

Then there’s the two-child limit, which restricts the child element of Universal Credit to two children. You used to be entitled to child tax credits for all your children – now that’s been restricted to two, and Universal Credit will deny support for a third or subsequent child born on or after 6 April 2017.

Disability premiums have also disappeared under Universal Credit, which are supposed to cover the costs of living alone with a disability without a carer. The new Work and Pensions Secretary Amber Rudd admitted to the Work and Pensions Select Committee in December 2018 that she has “yet been able to get cross-government support for the proposals I want to do” to ensure these premiums aren’t lost.

D is for Digital

Universal Credit is “digital by default”, with the aim to get 80 per cent of claimants managing all their benefits online. Claimants have an online journal, which they can log in to to manage their claim. The idea is that they can report their income, changes in financial circumstances, job search information, etc, and this can be monitored by work coaches. Claimants can chat to their work coaches via the journal.

The majority of Universal Credit claimants use this system. But in general, people who are struggling financially and older people are less likely to have a computer or smartphone of their own or an internet connection.

Ten per cent of households still don’t have internet access, according to Office for National Statistics figures for 2018. This rises to 41 per cent in households of one adult aged 65 or over. People with disabilities are less likely to be able to access the internet if they don’t have access at home; 22 per cent of adults with disabilities in 2017 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, due to library cuts and Jobcentre cuts (see J). In rural areas, only 35 per cent of claimants live within 30 minutes’ travel of a Jobcentre – with 90 per cent over 45 minutes away from one.

E is for Esther McVey

Esther McVey, the previous work and pensions secretary, began her career at the DWP under Iain Duncan Smith serving as disabilities minister (2012-13) then employment minister (2013-15), when she attracted much ire for the government’s welfare cuts and sanctions. It was during this time that the current shadow chancellor John McDonnell – then a backbench Labour MP – made his notorious “Why aren’t we lynching the bastard?” and “stain of inhumanity” comments about McVey.

When she was promoted to work and pensions secretary in January 2018, McVey continued to present a lack of empathy for those on the receiving end of her Department’s policies.

In a meeting with Philip Alston, the UN special rapporteur who came to investigate poverty in the UK last year, McVey reportedly dismissed his concerns about the impact of single household payments on domestic abuse victims (see S), by saying: “93 per cent of people in the United Kingdom have joint bank accounts anyway, so what’s the problem?.. Well, you know, if they’re having problems, they should get counselling and if things get really bad they should leave” (in Alston’s words).

Last July, McVey faced calls to resign after she misled parliament about Universal Credit. She claimed the National Audit Office wanted its roll-out to be accelerated, when it had actually suggested a “pause”.

She apologised to the Commons for this, but not for two further claims out of her “three mega-Trumpisms” (as Work and Pensions Select Committee chair Frank Field described them): that the NAO believed Universal Credit was working when it said this wasn’t proven, and that its report hadn’t taken recent welfare improvements into account when these were only signed off by the DWP days earlier.

Somehow, despite this apparent breach of the ministerial code (which states ministers must give accurate and truthful information to parliament), McVey stayed in the job – only resigning voluntarily over Theresa May’s Brexit Withdrawal Agreement last November.

F is for Foodbanks

Foodbank use increases in areas where Universal Credit has been rolled out. According to the UK’s biggest foodbank charity Trussell Trust, the in-built five-week wait for Universal Credit (see W) means more people are turning to foodbanks, with no money to pay for food themselves.

Analysing data from its foodbank network, the Trussell Trust found that foodbank use in April-September 2018 was 13 per cent higher than the same period the previous year – with 22 per cent of referrals resulting from benefit delays. Foodbank use has increased by 52 per cent in areas where Universal Credit has fully been 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 then-work and pensions secretary Esther McVey, the Times revealed last October.

One of these contracts (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 government was accused of gagging charities and other bodies from criticising the secretary of state and the new welfare system, and buying their silence with these deals.

The DWP called it “standard procedure”, denying that the organisations were banned from criticising Universal Credit, and saying such arrangements were to protect commercially sensitive information and protect both parties’ best interests.

The CEO of a homeless charity called Humanity Torbay even claimed that a Lottery official warned her she wouldn’t receive funding if she continued publicly criticising Universal Credit, saying last October that she was told “categorically if we were to receive a big lottery grant we would be unable to speak out against Universal Credit”. A Big Lottery Fund spokesperson denied this, saying “it is incorrect to suggest we would withhold funding from any organisation on the basis of what they say publicly on social issues”.

H is for Hardship

The Department for Work and Pensions 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”.

Even the former secretary of state Esther McVey (see E) herself admitted on the BBC that some would be worse off under the new system, reportedly telling cabinet colleagues privately that many claimants could lose as much as £200 a month.

The reality for many groups is hardship. 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. Foodbank use (see F) has rocketed in Universal Credit areas.

Debt (see A), rent arrears (see R) and cuts (see C) have led to intense hardship under Universal Credit. There have been stories of claimants turning to prostitution, being forced to steal, crowdfunding to provide for their family over Christmas or cancelling Christmas altogether, experiencing exacerbated mental health problems, and even overdosing while on the phone to the DWP.

I is for Iain Duncan Smith

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

During his time in office, Duncan Smith swiftly became the villain of the Tory welfare agenda, loathed by the left and the Treasury alike. Driven by an ideological zeal to reform welfare – an unswerving faith that work and family unity were routes out of poverty – he blindly believed in the policy despite its mounting problems.

This made Duncan Smith appear completely out-of-touch, from his Department’s hastily cancelled week-long “celebration” of its tougher sanctions regime in 2013 (when the plans were leaked to the Guardian) to his claim on live radio that he could live on £53 a week, like a benefits claimant the BBC interviewed during the segment (Duncan Smith’s cabinet salary at the time was £134,565).

Duncan Smith’s Department was accused by a National Audit Office report in 2013 of having a “‘good news’ reporting culture” and “fortress mentality”. The Public Accounts Committee echoed this language in a damning report on the DWP last October, showing that the Department’s immunity to criticism of Universal Credit outlives Duncan Smith’s leadership.

Duncan Smith’s treatment of claimants with disabilities – restricting benefits via a focus on eligibility assessments and pushing them to work – made his ultimate resignation in protest against disability benefit cuts in 2016 rather hollow.

J is for Jobcentres

As Universal Credit is rolled out, reports have emerged of Jobcentre staff lacking training in managing the new benefit. The leader of the public worker union PCS Mark Serwotka said “many members reported that they had no training whatsoever” and “the training and mentoring window for work coaches is very short” – while talking to the Work and Pensions Select Committee about domestic abuse victims claiming Universal Credit.

The committee’s chair Frank Field MP commented: “The lack of training and expertise at the front line in Jobcentre Plus is a thread running through all of our benefits inquiries – and now it is becoming apparent to the public how this is leaving them unprepared to deal with the most vulnerable claimants.”

Staff both working the phones in service centres and in person in Jobcentres have blown the whistle on a “heartbreaking” call targets culture on the Universal Credit helpline and unprepared Jobcentre staff in “absolute crisis management” and being “thrown in at the deep end” when administering the new system.

Simultaneously, Jobcentres are closing across the country – with over 100 cut (about 15 per cent) between 2016 and 2018 – as pressure builds on staff trying to administer a new system. Jobcentres have only a third of the resources and staffing that they had in 2012, according to analysis by the Learning and Work Institute.

Universal Credit is supposed to be a chiefly online (see O) system (“digital by default”), with no need to regularly come face-to-face with work coaches. But claimants are still required to attend mandatory appointments and must periodically submit physical evidence for their claims. And when Jobcentres were redesigned a few years ago to supply free wifi, computers and printing, this was to aid Universal Credit applicants with their digital claims – a service that becomes harder to access when Jobcentres are closing.

K is for Knock-backs

As of November last year, one in three people who applied for Universal Credit had their claim knocked back in the space of a year. That’s 400,000 people who had their benefits rejected or stopped. The chair of the Work & Pensions Select Committee Frank Field, who uncovered these numbers, warned that they represent “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 onto Universal Credit by December 2023.

M is for Managed migration

Managed migration is the stage of implementing Universal Credit when existing claimants on the old system are moved onto the new one (at the moment it’s just new claims). This was originally supposed to happen in April 2014-October 2017 but large-scale migration is now only expected to begin in November 2020.

N is for Not working

Iain Duncan Smith, the work and pensions secretary who dreamt up Universal Credit (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 One-monthly payments

Universal Credit is paid once a month to claimants to mimic a monthly salary – the idea is to budget and receive money as a working household does. It’s paid in arrears, so that it can be tweaked each month according to your income. This is a change from the previous system, when benefits would generally be paid twice monthly.

The problem with it is that some workers, particularly those in low-paid industries who are more likely to be claiming in-work benefits, 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.

So waiting four weeks is not natural for a significant number of Universal Credit claimants, which can make it difficult to budget or manage money paid in one lump sum for the month.

As charities have pointed out, claimants who don’t have savings and are not accustomed to saving may struggle to deal with the one-monthly sum and may prioritise spending money from the lump sum on unforeseen costs over rent (see R) and bills.

Aside from budgeting issues, having no money coming in during the month is particularly tough on lower-income households: one single mother on Universal Credit told the New Statesman that she could no longer provide fresh fruit and vegetables without the weekly or twice-monthly income required for replenishing perishable food for her seven-year-old daughter.

Claimants can request for the frequency of payments to change in certain circumstances, but the majority are paid monthly. They can get budgeting help from their work coach.

P is for Pension age

Another sneaky cut under Universal Credit could make couples with an age gap (known as “mixed-age couples”, where one partner is pension age or above, and the other below) over £100 worse off a week.

Under the legacy benefit (see L) rules – which are still currently in practice – if you are in this kind of couple, your eligibility for means-tested benefits is determined by the oldest person in the couple.

Universal Credit will reverse this – meaning a mixed-age couple will be defined by the working-age person, not the pensioner. This came into law in 2012, outlined in the Welfare Reform Act, but there is so far no set date for when this change will come in.

Once the change is introduced, future mixed-age couples will no longer be able to claim pension-age benefits. They will need to claim Universal Credit – which will class them both as a working-age couple – instead.

Q is for Quirks

Whistleblowers who work to deliver Universal Credit have reported design and process flaws in the system that are leaving people out-of-pocket. Glitches like this can delay payments beyond the in-built five-week delay (see W).

Last August, the Child Poverty Action Group claimed that complications in the system (a quirk caused by pay dates falling close to the start of benefit assessment periods) meant low-income working families losing out on hundreds of pounds each year.

The New Statesman has spoken to many claimants who have gone months without rent payments, without childcare support, and even being driven to the point of homelessness, because of mistakes in the system delaying their benefits.

R is for Rent arrears

Council tenants claiming Universal Credit have more than double the rent arrears as those who have not yet been moved onto the new benefit system, according to BBC Panorama figures. In some places it’s higher – the New Statesman’s report on Islington last December found 75 per cent of Universal Credit claimants there are in rent arrears, and rent arrears for council tenants on Universal Credit are nearly seven times that of those on the old housing benefit.

Under legacy benefits (see L), housing benefit was paid directly to the council or landlord, depending on your accommodation. But under Universal Credit, in most cases the housing element is paid directly to the claimant along with the other benefits in one lump sum.

Accidental delays in payments or underpayments (see W and Q) and the challenge of budgeting under the new system (see O) have increased rent arrears – putting landlords off renting to Universal Credit housing element claimants.

This has led to warnings of a rise in evictions, with fears that as many as 1.3m households could be evicted from their private rented homes because of the effect of Universal Credit, and a reported increase in homelessness, according to homelessness charities.

S is for Single household payments

In a bid for simplicity and “strengthening the family”, Universal Credit is designed to roll all benefits into one monthly payment 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 more dependent on their abuser and unable to leave.

And a further report by the Home Affairs Select Committee last October urged the government to make split payments to couples the default, calling single household payments “particularly retrograde and damaging”.

Concerns from the start voiced by women’s groups and domestic abuse survivors went unheeded, and the latter report quoted the charity Women’s Aid, which pointed out the danger of default single household payments and said welfare reforms are “having disproportionate impact on survivors”.

At the moment, the only action available is to call the DWP. If a couple breaks up or a partner leaves the household, they have to inform the department and start a separate claim – which could leave them without payment for weeks, making it even more difficult to escape.

If someone is being denied access to their money by a partner, they are advised to call the Universal Credit helpline (which has a notorious volume of repeated and failed calls).

Applying for a split payment forces the victim to navigate a system designed against them – and to overcome the fear to do so. “Such arrangements place the burden on survivors to negotiate an exceptional status within the Universal Credit system at the same time as they are seeking to survive a controlling and coercive context,” commented the charity Surviving Economic Abuse.

The Mirror revealed last year that only 15 people in the whole of the UK are using the “split payments” exception.

And even if your application for a split payment is successful, it gets reviewed after three months, as the DWP prefers its default payment system.

“Wherever possible, these alternative payment arrangements will be temporary,” reads the Department’s website.

According to the website, if you’re a victim of domestic abuse, you have to prove you’ve been a victim of domestic abuse – first by telling your work coach face-to-face at the Jobcentre about it (bear in mind Universal Credit is designed to be accessed entirely through an online account, not face-to-face – see D), and then by providing “written evidence” within a month of this work coach discussion.

T is for Timetable

Universal Credit is notorious for pushing its deadlines. It was supposed to be fully up and running by 2017, according to the original timetable presented to the Work and Pensions Select Committee by then-Work and Pensions Secretary 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 jobseekers (the simplest cases) in 2015 and 2016, with the “full service” national rollout for all claimant groups only beginning in May 2016. On the original timetable, this was all supposed to be completed by April 2014.

As of October last year, the “managed migration” (see M) of existing claimants over to Universal Credit has yet again been delayed. Until then, large-scale migration was due to start in July 2019, but now won’t begin until November 2020 at the earliest. It’s not expected to be fully operating until December 2023.

By April 2014, when all new claimants were supposed to be on Universal Credit, millions of pounds had been wasted on unworkable IT changes, five different people had run the project since mid-2012, the National Audit Office and Public Accounts Committee had condemned the lack of financial control over the programme, and the Department for Work & Pensions had been compelled to do an implementation review that included suspending the governance board.

U is for U-turn

Even Conservative MPs have been spooked by what they hear in their constituency surgeries about Universal Credit – therefore pressuring the government to tweak 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 your benefits through Universal Credit are withdrawn as you begin to earn more) in 2017, and £2.7bn worth of changes in the 2018 Budget.

During the latter event, Chancellor Philip Hammond also announced an increased work allowance (the amount of money you can earn before your benefits start being withdrawn if you have children or a disability) by £1,000, making these recipients better off by £630 per year. He also announced additional measures worth £1bn over five years for the DWP to transition to the new system, and help for claimants repaying advance loans (see A) by extending the repayment period and reducing the maximum rate of deductions.

Last March, the government also U-turned on its plan to cut housing benefit for 18-21-year-olds under Universal Credit.

V is for Voters

There are fears among some Conservatives that Universal Credit could cost their party votes. Former prime minister John Major has compared it to the Poll Tax, the hugely unpopular policy that partly led to the fall of Margaret Thatcher. Outspoken Tory MP Johnny Mercer warned that getting Universal Credit “wrong and with our inabilities elsewhere at the moment, it’s the sort of thing that could cost us an election”.

According to YouGov polling, there isn’t much enthusiasm for the policy among the public, with close to four in ten (38 per cent) opposing the introduction of Universal Credit, compared to 27 per cent who are supportive, and 37 per cent who “don’t know”.

W is for Wait

When you first apply for Universal Credit, there is an in-built five-week waiting time.

This is based on the assumptions that you are accustomed to being paid monthly, you would be paid a notice period in the event of losing your job before going onto benefits, and you 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, before claiming Universal Credit.

This waiting time has such a negative impact on claimants that the government was pushed to reduce the original delay of six weeks down to five (see U), but this wasn’t far enough to satisfy Labour and other opponents of the system.

One in five claimants does not receive their full payment on time, according to the National Audit Office’s latest report (last June) into the Universal Credit roll-out. On average, these late payments were four weeks late, on top of the five-week wait (see W).

X is for Xmas

For the past three years, there have been stories of families with no benefits coming in over the festive period in areas where Universal Credit is rolled out before Christmas. There have been reports of claimants cancelling Christmas altogether, turning to crowdfunding, and the story of one parent in the i newspaper who told her story of making decorations from used bottles and food containers, putting free sugar packets from cafés into her daughters stocking, and cooking using a clothes iron and candles.

Universal Credit claimants also do not get the one-off Christmas bonus 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 including Universal Credit are exacerbating youth homelessness, according to the Young and Homeless report 2018 by charity Homeless Link. This reported that 92 per cent of its survey respondents said delayed Universal Credit payments were having an impact on youth homelessness. The government did, however, U-turn (see U) on its plan to remove housing benefit for 18- 21-year-olds under Universal Credit.

Z is for Zero-hour contracts

Four weeks into the job, Work and Pensions Secretary Amber Rudd had her first outing before the Work and Pensions Select Committee last December, and said jobseekers should enter insecure work to avoid having their benefits sanctioned, saying “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.

Anoosh Chakelian is senior writer at the New Statesman.