ConservativeHome spoke yesterday to Conservative MPs in marginal seats about Universal Credit. One switched-on Parliamentarian told us that food banks in his seat hate the new scheme and that job coaches love it. He said that the former claim it pushes people into debt, homelessness and destitution. And the latter counter that it makes it easier for them to help benefit claimants move into work and get better-paid jobs.
Both perceptions can reflect reality. It was never going to be easy to make a major change to the system which is reliant on people reporting changes to their income in real time, complete with new computer systems to enable this to happen. This helps to explain why Universal Credit, originally intended to be fully operational by 2017, will now not be so until 2023. The payment poses particular challenges for claimaints migrating to it from what Ministers call the legacy system. Last autumn, the Resolution Foundation calculated that 2.2 million families were expected to gain under the system and 3.2 million to lose, with single parents especially adversely affected.
The Government has chucked transitional relief at Universal Credit. Ministers argue that claimants can take on more work to increase their income. Philip Hammond announced more support and an increase in work allowances in last autums’s Budget. But the bottom line is that too many people are being paid late: last summer, the National Audit Office said that it a fifth of those expecting their first full payment were in this position.
A Commons vote is due on transferring three million claimants from the old to the new system. David Cameron had a small majority, but his Government was vulnerable to defeat on welfare-related issues and many others: remember George Osborne’s U-turn on planned changes to tax credits. Theresa May has no majority at all. A handful of backbench protesters could sink the change. Amber Rudd thus had little alternative but to postpone the vote, and has duly done so. She will now seek Parliamentary approval for a pilot plan that transfers just 10,000 people from the old to the new system.
The operation of Universal Credit is complex, but the politics are simple – or straightforward, at any rate. The Universal Credit system is the brainchild of Iain Duncan Smith’s work in opposition at the Centre for Social Justice. It has a visionary aim: to roll six benefits into one, make the system more simple and flexible, and improve incentives to work. Writing on this site last autumn, Alok Sharma, the Employment Minister, complained of three cliff-edges in the legacy system that deter claimants from seeking work, and reported that 86 per cent of people on Universal Credit are actively looking to increase their hours, compared to just 35 per cent of people on Jobseekers Allowance.
If you are going to appoint Duncan Smith as Work and Pensions Secretary, as Cameron did in 2010, you cannot do so without allowing him the room to implement his scheme. And once that’s happened, it follows that the Treasury must take the funding consequences on the chin. It didn’t. Think back to that Osborne tax credits U-turn. The reason for Duncan Smith’s resignation in 2016 was precisely that the then Chancellor was not prepared also to reverse planned savings to disability benefits (which in turn impacted upon Universal Credit).
Amber Rudd is the fifth Secretary of State for Work of Pensions to hold the post since he left – a turnover rate of about one every six months. She has started by doing what every new Cabinet Minister should do if confronted by a policy problem: namely, to promise that she will listen and learn. There is more to this than the usual bromides. Rudd is particularly sensitive to the position of women in the system. She will campaign for more money: Downing Street’s Brexit-driven weakness may thus well be Universal Credit’s gain. That she is on broadly the same wavelength as the Chancellor over EU policy can’t do her cause any harm.
Writing on ConservativeHome last autumn, Tom Clogherty of the Centre for Policy Studies identified what new money could do to help realise Duncan Smith’s goal: a report from the think-tank, he said, “advocates bold action on Universal Credit, suggesting that the taper – the rate at which benefits are withdrawn against each pound of post-tax earnings over any work allowance – should be cut from 63p to 50p. This would give a huge boost to the lowest earners, while also giving them a strong incentive to increase their hours and make progress in the workplace”.
Separately, senior backbenchers and former ministers are piling on pressure for an end to the benefits freeze. A coalition of five former Secretaries of State, ranging from Nicky Morgan to David Davis, made the case last year. Davis said that the freeze contradicts “the basic Tory notion of having a robust safety net and an effective ladder out of poverty.” Rudd can be expected to make the same argument in private. Whatever your take, one thing is certain. If Universal Credit is to be introduced in the first place, it must be paid for.