Iain Duncan Smith is a former Secretary of State for Work and Pensions, and is MP for Chingford and Woodford Green.
This year has tested many of our institutions to the limit but one, Universal Credit (UC), has been the quiet ship in the fleet, rising to the challenge, and delivering – despite the huge increase in claims as the Coronavirus struck, providing a lifeline for millions up and down the country.
Even the Labour Party has acknowledged the triumph of UC. Despite its to scrap it, Stephen Timms, the Labour Chair of the House of Commons Work and Pensions Committee and former self-confessed critic, now calls UC “…a national asset which we should make the most of” and rightly stated that through the pandemic “Universal Credit has delivered”.
An astonishing million new claims were made in a fortnight in March 2020 but, despite this unprecedented influx, 96 per cent of claims made during the first months were paid in full and on time, a figure which is now at 98 per cent.
The five million claims made since the beginning of the pandemic represent two-fifths of all claims made since UCs creation in April 2013 – a figure that would just not have been possible under the paper based legacy system that UC replaced.
It is also worth reminding ourselves that, under the previous system, many claimants would have had to go in person to the Job Centre to make their claims, thus increasing the risk of catching Covid: instead, they were able to avoid that and claim online.
In the face of this unprecedented challenge, the Chancellor made the right decision to increase the amount that UC claimants received. This meant families on UC had an extra £20 a week in their pockets and, over the winter of 2020, 600,000 people were insulated from poverty.
I and five of my successor Secretaries of State at the Department for Work and Pensions have since made it clear that we believe the Chancellor should seize the opportunity to protect more families from poverty and make the £20 uplift permanent.
Importantly, the £20 returned to UC some of the original investment that was in my design, but which was removed by the then Chancellor, George Osborne. The additional money shouldn’t be seen as an exceptional uplift, but as a means of restoring UC to its rightful level. Removing it now would hit one third of working age families with children across the country.
As Conservatives, we believe in a welfare system that supports aspiration and allows people to live with dignity. UC is designed to support people and move them into work, which ultimately is the best route out of poverty. Those on UC who take on extra work hours are supported through the flexible taper rate, meaning that no one is penalised for securing extra work.
The furlough scheme has a fraud and error rate as high as 10 per cent and, although it was needed through the critical phase of the pandemic, the Chancellor is right to now bring to an end.
The Treasury must understand that, since UC gives a true picture of the need of each household, it can be better targeted and more efficient, thus resulting in significant further savings. UC has, more than any other form of Government spending, the greatest capacity to tackle poverty as it is hugely targeted meaning every pound spent on UC goes in the pockets of those who need it most. Research by the Resolution Foundation has shown that increases to UC, and in particular raising the UC work allowance, is a notably much more efficient way of improving the incomes of the poorest than raising the personal income tax allowance.
As our economy fully re-opens, there may be bumps along the way and the flexible design of UC allows the system to adjust nimbly to these changes. As the jobs market begins to expand, the taper rate of UC could, for example, be lowered. This would leave low hours workers with more money, helping accelerate them into full-time work and off benefits. This in turn would reduce the total amount of money spent on UC, as people move on into work and start to pay tax.
That’s why, instead of seeing this £20 uplift to UC as a problem to be solved, we should see it as a dynamic investment in a system that can turn people’s prospects around, in turn saving taxpayers’ money whilst improving lives.
As the economy reopens, UC won’t just be critical in building social cohesion, but will be seen as an investment in people who have too often been left behind. After all, you can’t advocate levelling up if you first level down.