Deven Ghelani and Paul Wallace debate Should Universal Credit be scrapped? in Prospect magazine's The Duel, December 2019. Reproduced with kind permission. Deven Ghelani was invited to take part in Prospect magazine’s The Duel (December 2019) to debate with Paul Wallace, former European economics editor of the Economist and author of ‘The Euro Experiment’. The question posed was Should Universal Credit be scrapped? The article is reproduced here with kind permission. 

Paul Wallace: Yes

Deven Ghelani and Paul Wallace debate Should Universal Credit be scrapped? in Prospect magazine's The Duel, December 2019. Reproduced with kind permission. The conventional view is that Universal Credit (UC) is a good idea let down by poor implementation, delays and cuts. That is far too lenient a verdict: it was misconceived from the start.

The project has now been rolled out to around two million families. If it is ever completed, supposedly by the end of 2023 (six years late), around seven million families will then be getting UC, which replaces six working-age means-tested benefits. The intention is that claimants will face a simpler and clearer system that will encourage them wherever possible to work. But the central premise—that a single form of income support can deal with so many people with such diverse and changing lives—is fatally flawed.

Universal Credit aims to simulate the world of work, with monthly payments in arrears, and sets stern conditions to find jobs. The design disregards just how many claimants live hand-to-mouth, the reason why welfare, including housing support, had previously ensured prompt financial help to those in need. It also fails to recognise that there are many people who have compelling reasons to be out of work for longer periods, such as those who are incapacitated in some way or single parents with young children.

The reform yokes together traditional out-of-work benefits with the more recently introduced tax credits that aim to prop up working incomes. Yet the systems are poles apart in how they operate. Integrating them requires a monthly adjustment of payments that introduces financial instability into the lives of those least able to cope with it.

The fact that UC, where introduced, has coincided with the rising use of food banks and rent arrears is no accident. The new benefit is neither simple nor clear for claimants, and—unlike before—they now have all their eggs in this single baffling basket.

For those who get a job or are already working, money still has to be withdrawn as incomes rise. Merging the calculations into one doesn’t in itself make things more generous. If anything, UC weakens work incentives for lone parents and second earners with children.

The old benefits and tax credits system may have been imperfect, but what is replacing it is far worse. Policymakers, like craftsmen, need several tools rather than one blunt hammer. That is why, even at this late stage, Universal Credit should be abandoned.

Deven Ghelani: No

Deven Ghelani and Paul Wallace debate Should Universal Credit be scrapped? in Prospect magazine's The Duel, December 2019. Reproduced with kind permission. With the current bad press surrounding Universal Credit it is easy to forget why it was first introduced. And to remember that it was introduced with broad cross-party and cross-sector support.

If you have ever claimed benefits—as I have—you would have been left perplexed: under the old system, people had to make lengthy, near-identical applications to three separate agencies to access support through multiple payments with their own rules.

The complexity of legacy benefits means that too often people miss out on help they are eligible for. Around 15 per cent of benefits, worth £13bn annually, go unclaimed. People see support withdrawn pound for pound as they take their first steps into work, and are left uncertain about how changes in earnings will affect their take-home income.

Your fundamental mistake is believing that we need an ever-more complicated system to fit the complex lives of claimants. This reasoning is impractical, and impedes access for those who most need support. People may learn to navigate the social security system through trial and error, but only those with the understanding, resilience and time to persevere—typically the better off—will reliably get everything they’re entitled to.

In fact, UC still has levers to target help to different people. Those with different needs (such as on housing, childcare or incapacity) get different levels of support. The work allowance means those with children or incapacities can move into a job when they are able to without losing benefits, making work a no brainer. A single rate of withdrawal, as earnings rise, means people know they will always be better off if they increase their pay.

Yes, Universal Credit could be made more generous. There is a strong case for investment to raise benefits for those unable to work, and to increase the gains from work. Yes, Universal Credit can and should be simpler—bringing council tax support into UC would be a step forward. But one thing has been clear since long before I first led work on the idea behind UC: the direction needs to be towards simplicity, not complexity.

Paul Wallace: Yes

We both agree that simplicity is better. The trouble is there is nothing simple or easy about Universal Credit.

Claimants struggle with a process that has to be done online, with little more than half registering a claim without help. Then they wait five weeks to get their first payment. Many have no savings so request an advance and start off in debt. By contrast, anyone claiming old out-of-work benefits would get help sooner and then receive it every fortnight. The housing-support component of UC is subject to the same rigid timetable, whereas the benefit it is replacing should be paid within two weeks of a first claim and allows a variety of payment periods.

The design of universal credit is supposed to “mimic” the world of work, where most people are paid monthly in arrears. This vision is unrealistic for a poor person who has lost their job and urgently needs support. It also fails to recognise that many low earners are paid more frequently—only half of them are paid every month.

Recalculated each month, UC injects uncertainty into the lives of those receiving it, making it harder to budget. If their pay is temporarily higher than expected one month, the benefit is cut the next. A similar problem can arise merely from the timing of different pay cycles: if wages come weekly, there are some months when workers get an extra payment of income.

You point out that benefits worth £13bn a year go unclaimed. What matters is how UC alters that figure. The Office for Budget Responsibility estimates that the reform will result in an extra £3bn going to people who aren’t fully claiming benefits to which they are entitled. So it’s at best a partial solution, and this in a period when cuts to entitlement have overwhelmed many of the gains.

The government is now desperately trying to take the rough edges off the scheme in order to get it up and running. But short-term fixes will not solve the underlying problem. However good Universal Credit might seem in theory, it does not work in practice.

Deven Ghelani: No

You agree simple is better. But there is nothing simple about the legacy system; we are just accustomed to the problems it creates. Most welfare professionals do not want a return to the old way. Fifty-page paper forms were not easy to complete, and people got into debt waiting for their first pay cheque, then faced high effective tax rates.

This doesn’t excuse the current failings of UC. It is harder than it should be to verify a claim, advocates have to jump through hoops before they can help claimants, and people have to take out a loan (albeit interest free) while they wait for their first payment.

But had the current mitigation measures, including a two-week run-on of previous benefits, been in place from the start, would we be having this debate? Support could be more generous for sure, but that is an argument about funding, not design.

Universal Credit has to be assessed monthly and yes, this can introduce earnings instability for people who are paid weekly, but their overall take-home income is higher. Monthly assessment means UC rises as income falls, smoothing fluctuations from unstable work patterns and avoiding the large overpayments (and subsequent clawbacks) created by the old tax credits.

An extra £3bn per year through benefit take-up is not small change, and is a clear sign of a better system. Transition to a new benefit system is hard. UC was birthed against a backdrop of austerity and the challenges of claimants during the transition must be seen in this context. The localisation of Housing Benefit in the 1980s caused bigger problems for tenants, while the many flaws of tax credits were tackled only by having billions thrown at them. I’m not arguing that UC is perfect, just that as it evolves, it will improve. It is a better platform on which to build than the system it replaces.

Paul Wallace: Yes

You say that Universal Credit, however imperfect, is better than the system it is replacing. But more and more hard evidence suggests the contrary.

In a recent court case brought successfully by four single working mothers, who had lost out because of fluctuations in Universal Credit arising from the timing of earnings, the government had the gall to suggest they should ask their employers to alter their payroll systems. In fact, three had tried and failed. The court gave that absurd argument short shrift, but it shows how rigidly designed UC is in practice as opposed to theory.

By contrast, the supposedly inferior benefits and tax credits have proved no obstacle to remarkable improvement in the labour market. Over the past eight years employment has surged and the jobless count tumbled. The bulk of this has occurred under the old welfare system, since as recently as 2017 fewer than 700,000 households (a tenth of the eventual total) were actually on UC.

Iain Duncan Smith proclaimed in 2010 that his reform was “going to end the culture of worklessness and dependency” by changing a benefits system “that has too often undermined work.” And the proportion of working-age households where nobody actually works has indeed since fallen, from nearly 20 per cent to less than 14 per cent. The progress is real. But it has happened predominantly under the old welfare system that IDS condemned.

The weakest argument of all for UC is that the reform has gone too far to pull back. If you are heading in the wrong direction, it is better to turn back, however late in the day and whatever the loss of ministerial face.

Universal Credit is simplistic rather than simple. That’s why it isn’t working as it crashes into the messy and complicated realities of life. On this, at least, Labour is right: put it in the bin.

Deven Ghelani: No

How can you fail to see Universal Credit’s potential? Where the legacy system expects people to notify multiple agencies when earnings rise, and then imposes punitive withdrawal rates on them when they do so, under UC the move into work is almost seamless, with the certainty that you will be better off. While the legacy system would often bypass people unless they knew which agency to approach, Universal Credit ensures that people know where to go to get the support they need.

But if you still aren’t convinced of UC’s strengths—as a single award, run by a single department, with a single set of rules that allow workers to retain more earnings—then let’s not waste time reiterating these truths. Instead, let’s talk about why Universal Credit doesn’t yet go far enough. It still isn’t “universal” enough. UC should be the way in which people receive all the support they are eligible for. Moreover, it remains too similar to the legacy system: verification, conditionality and support remain overly-bureaucratic.

But UC is at least the natural place for a universal means test. Having all the data in one place enables officials and ultimately ministers to better understand the true impact of their decisions. Further automation of payments will liberate recipients, and free advisers to focus on supporting people.

While change usually requires investment, UC was being cut before it arrived. This is why the transition has been a struggle. Like all welfare systems, it will need to evolve. But during the election, all parties should focus on reforms that build upon its aims—to be simple, rewarding and effective. It puts in place the infrastructure for a welfare system fit for the future.

Read more about Policy in Practice’s analysis of Universal Credit here

Register for an upcoming webinar

TitleDateStart TimeDurationRegister
London: Boost safeguarding through multi-agency data sharing The responsibility to safeguard vulnerable residents lies with councils and a range of safeguarding partners, but too often vulnerability is identified too late.

Limited data co-ordination between organisations makes it hard to identify people who need support before they hit a crisis and to also understand whether they are known to other safeguarding agencies and the wider safeguarding landscape.

Prevention is critical to improving safeguarding and we know that data needs to be more effectively shared across agencies if we are to better protect vulnerable people and reduce the potential of people falling into the social care system. This is a big challenge.

Join our meeting to hear learnings from a powerful project, backed by the LGA and NHS Digital, to link data across adult services, children's services, public health, the NHS, Police and Fire and Rescue Services.

Join us to hear:

- How this innovative and ground-breaking approach to combining administrative datasets has created a clear view of safeguarding concerns across all partners
- How new smart approaches to data management have tackled the security and data governance challenges
- How the data is brought to life to help multi-agency safeguarding teams, social workers and other frontline safeguarding teams improve communication, liaison and decision making

With guest speaker Paul Withers, Data Protection Manager, Walsall Council.
21/9/202110:00 BST2 hours
Register
How Autumn’s income shocks will hit low income families The factors that have kept many low-income families out of poverty in the past year are changing, meaning many thousands will be worse off.

Families are set to be hit by big income shocks with the ending of furlough, the reintroduction of the Minimum Income Floor, the loss of the £20 a week Universal Credit increase and the ending of the Benefit Cap's grace period. New data analysis from Policy in Practice predicts significant losses for some families who will struggle to cope and who will need the support of frontline organisations to help them through.

In this webinar we will explore what the Autumn may bring for low-income households and how support organisations can work now to prevent hardship and prepare for an increased demand for services.

Join this webinar to learn:

- How much different households are set to lose when Covid supports are withdrawn
- What support tools are available for individuals and organisations
- Best practice advice from a frontline organisation

We will be joined by Monica Kaur from the Money and Pensions Service.
29/9/202110:30 BST1.3 hours
Register
How Kent County and district councils collaborate with data to tackle poverty Covid has turned our world upside down. Many residents in Kent, as elsewhere, have experienced financial hardship whilst, for organisations, the pandemic has been the catalyst energising them to work differently.

In summer 2020 Kent Districts and Communities Recovery Cell set up a group to focus support to residents at risk or already experiencing financial hardship because of the pandemic. Residents unused to facing financial hardship suddenly needed help to navigate support and advice systems. The group knew that things are likely to get worse for Kent's residents before they get better as furlough ends and families who were just about managing are tipped over the edge.

In a first for local government, Kent county and district councils have boldly chosen to collaboratively share their data to get powerful cross-county insights that will drive their poverty prevention activity. The information will help them to target of a wide range of campaigns to residents such as employment support, free school meal take-up, public health interventions, housing initiatives and benefits take up.

Importantly, the project has transparency built in so that councils can very easily benchmark with each other to identify and share best practice in a safe, collaborative way.

Join this webinar to hear:

- Kent County Council's vision for greater collaborative working with districts
- Maidstone District Council's drivers for districts to collaborate with their data
- Folkestone and Hythe District Council's impact achieved so far from data-led poverty prevention campaigns

We will be joined by guest speakers, Zena Cooke, Corporate Director Finance at Kent County Council, Steve McGinnes, Director of Mid Kent Services at Maidstone District Council, and Jane Worrel, Revenues and Benefits Senior Specialist at Folkestone and Hythe District Council.
20/10/202110:30 BST1.3 hours
Register
, , ,
Previous Post
Ten years of benefit cuts: worth the price?
Next Post
2019: Review of our take on Universal Credit

Leave a Reply

Your email address will not be published. Required fields are marked *

Fill out this field
Fill out this field
Please enter a valid email address.

Menu
Skip to content
%d bloggers like this: