Blogs Tag: Universal Credit

Tony Wilson from the Institute of Employment Studies provides practical solutions to keep people in paid work whilst also helping people into work.

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Good to see serious debate now on how we support those losing money and jobs due to covid-19. Top two priorities must be to keep people in paid work and to get money quickly and efficiently to those out of work. Here’s some proposals for how.

First, nearly 80% of us are in work so top priority must be to min. job losses and give financial relief for unpaid leave, short-time working. We don’t have a system for this. Some employer bodies are calling for ‘temporary lay-offs’ and UC to pick up slack. This is wrong.

Why make people claim for a complicated benefit with a long delay when they’re on your payroll already? Far better for employers to pay, and govt to reimburse – thru emergency loans if needed. The best way to do this is to repurpose SSP to cover temp unpaid leave.

Next, there are 1.9m workers who aren’t entitled to SSP cos of their low earnings. There is a quick and easy fix here, to remove the Lower Earnings Limit in National Insurance. That way if you’ve got a contract you get SSP, no uncertainty or exceptions.

SSP is also too low – just one quarter of a full time min wage.  Most employers don’t pay more than this. So we need to raise SSP, I’d suggest to £175/ week, or 50% of min wage. Some are calling for setting it at % of salaries. Maybe, but I’d prioritise a flat rate for all.

Employers need to be reimbursed for all of this, at least in the short term. From experience, reclaiming SSP is fiddly and takes time to come through – so may need to emergency loans and good will to cover.

All of above would be great but not enough – 5m self-employed don’t get SSP, and many will be made redundant as companies close. So benefits system needs to step in. Given urgency, we need to use existing system – as Torsten Bell of the Resolution Foundation has said, this isn’t time to test UBI etc.

So this means UC and our contributory benefits (New Style JSA and ESA). The rates for these are far too low – just £73/ wk. So we need to increase, at least temporarily. To at least £100/wk. Also need to pay quickly and make full use of Advances for those in hardship.

At same time, Housing Benefit has been gutted over ten years while rents have risen. Many renters will find themselves in significant arrears v quickly. So we need some urgent ££ in the HB system – e.g. raise the Local Housing Allowance rate to median for first month.

Finally, in all of this, important not to forget that there are still jobs and many sectors will be desperately short of people in coming weeks and months – distribution, caring, health services, JCP, local govt.

So it’s imperative that we keep supporting those out of work to find jobs, and keep working with employers to fill vacancies. Govt can’t do this alone – as with last recession, needs to involve recruiters, employment services, community sector.

A few days ago, Jeremy Corbyn announced that ‘Labour will scrap Universal Credit’ if they win the next general election. Calling it ‘inhumane and cruel, driving people into poverty and hardship’, Corbyn said he would ‘introduce an emergency package of reforms’. He promised to bring in a new system ‘based on the principles of dignity and respect’ as part of a new Department for Social Security.

So, it’s dramatic stuff. A total turnaround in the benefit system before the last major benefit reform is even a third of the way through rolling out. Some would say, before more damage is done to the many millions still due to go on to Universal Credit. Others would say, at what cost to the taxpayer? Of course, all of this is dependent on the Labour Party actually getting into power.

My question though is, what does ‘scrapping’ Universal Credit actually entail? How far will it be replaced or reformed if Corbyn gets his chance?

Changed but not replaced

If we look at the detail of what the Labour Party is proposing, it is certainly a radical change. Many aspects, particularly around the administration of Universal Credit, will be replaced. Universal Credit will not be abolished though, and many of the aspects of how entitlements are calculated have not been addressed.

As the proposal stands, people on benefits but not yet on Universal Credit will still move on to it in time, as will new benefit claimants. If nothing changes in the calculation, millions will still be worse off under the new system, most notably many disabled people and lone parents.

Most of the proposed changes are to processes, rather than entitlements. The changes that have been announced that affect how much money people get are only partly to do with Universal Credit. The removal of the rule limiting receipt of benefits to a maximum two children affects Child Benefit, Child Tax Credit and Housing Benefit as well as Universal Credit. It is a major change though, restoring the opportunity to claim benefits for families who have a third, fourth or subsequent child.

Likewise, the abolition of the overall benefit cap affects many different benefits, but Universal Credit is certainly one of them. At present it limits the total benefits that can be claimed by any one family to a maximum limit. It is mainly families with three or more children and/or those with high rents that are most affected by this policy. Some families lose very large sums of money through this rule, so this change will be very beneficial to them.

A new culture

Arguably the biggest changes proposed are all about putting a new culture in place for social security. Labour promises a system based on dignity, universalism and an end to poverty. They will approach this by transforming the payment system and the way claimants interact with the Jobcentre.

The first issue is to end the initial long wait for a first payment – currently at least five weeks. Under Labour’s plan, new claimants will be paid an interim payment two weeks after making a claim with the balance paid once the five weeks are up. Payments will continue on a monthly basis from then on, although plans are being worked on to make fortnightly payments the norm in the future. Splitting payments between members of a couple as a default will be widely welcomed, as will paying the housing element direct to the landlord.

These payment changes do raise some questions though. Will housing payments always be made to the landlord by default? This does not happen for private tenants on Housing Benefit now and many private tenants will not want their landlords to know anything about their claim. Also, with couples, what proportion will be split between them? Labour say the child element of Universal Credit will go to the primary carer of the child, but what about the rest? Will it be split in two? Will the couple decide who gets what or will the government?

Perhaps most significantly, Labour plans an eventual change to fortnightly payments. This means moving the assessment of Universal Credit from a monthly benefit to a weekly one. I’ve argued for this before, but it does mean huge new IT changes for the department. A big part of the intention for Universal Credit was to make changes in circumstances, automated. If your wages go up or down in a month, your benefit will follow it. This causes many issues for people whose wages don’t follow a predictable monthly pattern, so a change to this could be welcome. However, simply changing from a monthly pattern to a weekly one would mean your entitlements would be even more unpredictable if they changed every week. Addressing this automation is key to making this change work.

Finally, as part of the new culture, Labour would bring in 5,000 more social security advisers. This would help to deal with the issues people have with applying and managing their claim online. It also means more staff able to work with claimants to help them find employment, rather than policing their behaviour and sanctioning them if they fail to keep to their end of the bargain. A major piece of this announcement is the suspending of sanctions and the claimant commitment. This wording is surprising from Corbyn, as it is not the end of sanctions, merely the suspension. Also, the claimant commitment will be replaced by a new reciprocal agreement between the claimant and Jobcentre work coach. One that is tailored to them and helps them best to find work or training. This sounds a lot like how the claimant commitment is supposed to work already, although in practice it often falls far short.

What will the claimant be required to do then, under the reciprocal agreement, to claim Universal Credit? There are big questions here. Labour say, ‘The claimant will agree to search for suitable work and undertake training opportunities where appropriate’. Well, what if they don’t? If they refuse to agree to that, or if they agree but then don’t do it, what happens? It does not seem clear. Will this agreement be entirely voluntary or will some or all of the benefit be dependent on it? Housing Benefit and Child Tax Credit currently require no behavioural commitment. Will Universal Credit follow suit and allow anyone to claim it without agreeing to do anything in return, or will the suspension of the sanctions regime prove temporary?

Universal Credit is here to stay

So, this is all very big news and we can expect major changes to social security in the advent of a Labour government. We’ll await the detail on how they plan to implement the administrative changes proposed and we’ll have to see if anything more comes from them on restoring the entitlements of the many millions who are worse off under Universal Credit.

With appropriate planning, most of these proposals are welcome and should make claiming and receiving Universal Credit easier. We can now be sure though, that Universal Credit is here to stay as the central pillar of the benefits system. If changes this wide ranging don’t abolish it, we can expect it to last at least another ten years. It may even have finished rolling out by then.

Over the last week, Universal Credit has been the subject of two major debates in Parliament called by the Opposition reflecting mounting concern over the way it is being introduced across the country in order to replace six other working age benefits, known as ‘legacy’ benefits.

A government consultation on what statistics it should publish on Universal Credit has just closed. They are unlikely to ever have a mass readership, but actually the use of statistics has been crucial to the debate over Universal Credit.

A key issue has been the six week wait for an initial payment once a claim has been made. According to the government‘s own figures, one fifth of claimants are still waiting longer than that to be paid in full and there is mounting evidence that the wait for payment is pushing people into debt and rent arrears.

The government should publish regular statistics on how many people are waiting longer than six weeks and how much longer they are waiting. It has said that it is going to address the problem by making it easier for people to get advance payments. That means we also need regular updates on how many people are requesting them and how many are getting them. 

Even after the initial six weeks, Universal Credit is always paid a month in arrears. The government says that it is designed to mirror the world of work where people are paid monthly salaries.

However, the Office for National Statistics released figures this week showing that over a fifth of lowest paid workers are paid fortnightly or even weekly. They often do not have the savings to see them through six weeks without any money coming in.

Labour has been pressing the government not just on when Universal Credit is paid, but also how. Universal Credit is paid to only one person in a household and as a single payment, even though that covers different elements such as help with housing costs.

Paying Universal Credit to only one person in a household can make it more difficult for victims of domestic abuse to escape an abusive relationship. Including help with housing costs in a single payment to a claimant rather than directly to a landlord may also create difficulties for more vulnerable claimants such as people with learning disabilities.

It is possible to request alternative payment arrangements, but the government does not publish figures for the number of people asking for them or the number granted so we don’t know either how many people need them or how difficult it is to get them.

Ministers have repeatedly argued that people claiming Universal Credit are more likely to move into work and remain employed. However, the figures it quotes date from 2015 before cuts to the amount that people can earn before their Universal Credit starts to be reduced (known as work allowances) had been introduced.

The kind of people claiming Universal Credit at that time were also very different. Initially, in what it is known as the live service of Universal Credit, claimants were predominantly young, single people looking for work. The full service is now being rolled out and it can take claims from people whose circumstances may be more complex.

The government should publish figures on Universal Credit claimants under the full service who find and remain in work. It is important to know as well if people are progressing in employment, either through working more hours or finding a better paid job.

The government’s statistics for sanctions also only cover the live service and so at present we don’t know the sanctions rates for people in the full service of Universal Credit.

The figures for both sustained employment and sanctions should cover gender, age, disability, ethnicity, the number of children in a household and other groups such as care leavers.

There appears to be a very high sanctions rate for care leavers under legacy benefits. We know that because care leavers are flagged up in legacy benefits as they are a particularly vulnerable group, but there is at present no way of tracking them in Universal Credit. [[Hi Andrew, Are we sure that’s the case? Or is it that the system is there, but it’s not working properly. If we are sure, then please leave in]]

This autumn the government is accelerating the roll out of the full service of Universal Credit from 5 to 50 Jobcentres a month. To address the flaws in the design and delivery of Universal Credit we urgently need accurate and up-to-date statistics to see what impact it is having.

The government’s consultation asks respondents for what purpose they would use the statistics. The answer is to hold government to account and ensure that policy affecting some of the most vulnerable people in our society is based on facts not fiction in the form of out-of-date figures.

Margaret Greenwood is Member of Parliament for Wirral West and Shadow Minister for Employment and Inequalities.