One of the most “radical reforms” (w4mp.org,2011), (BBC,2010) proposed is to introduce the Universal Credit (UC) to replace a myriad of different benefits available under the current system. The aim is to simplify the system and to reduce the budget deficit by reducing the amount of overpayments (and underpayments) caused by error and fraud. Furthermore, as UC would incorporate both in and out-of-work benefits it would ease the transition into work by incorporating benefits currently administered by three different departments: the Department for Works and Pensions (DWP), Her Majesty’s Revenue and Customs (HMRC) and local councils. In addition, PAYE earners would have their money reduced or increased in line with their earnings automatically. (Crown Copyright,2011 pp. 4-13)  

The new UC would take into account household income and there would be a withdrawal rate of benefit for working families at a rate of 65p in every pound. This last figure is higher than the 55p per pound that the Centre for Social Justice (CSJ) recommended for the 2010 Green Paper: 21st Century Welfare. The CSJ (ironically headed by Iain Duncan-Smith) believed that a higher withdrawal percentage would lead to less incentive for people to work additional hours and have a negative impact on second earners. (Ibid. p 10)

Original proposals for UC suggested that there would be two elements: Universal Work Credit aimed at the unemployed and very low paid and the Universal Life Credit designed to provide additional help with living costs for those with low incomes. (Ibid.) 

The table below, (Table 2) summarises the main benefits to be replaced by the proposal.

Current Benefits

Type of claim and Administrator

Job Seeker's Allowance (JSA)

Income-based element. Out-of-work benefit. Administered by DWP

Income Support (IS)

Out-of-work benefit. Administered by DWP

Employment and Support Allowance (ESA)

Income-based element. Out-of-work benefit. Administered by DWP

Incapacity Benefit (IB)

Income-based element. Out-of-work benefit. Administered by DWP

Carer's Allowance (CA)

Paid if looking after disabled person 35+ hours a week. Can work, but benefit affected after certain level of earnings (Currently £100 a week) Administered by DWP.

Housing Benefit (HB)

Paid towards rental or mortgage interest of main home for claimants whose household income is under the amount appropriate for their needs. For claimants on some benefits rental is paid in full: social housing tenants or private tenants whose rent is under the Local Housing Allowance for their area. Administered by Local Council.

Council Tax Benefit (CTB)

Paid towards council tax of main home for claimants whose household income is under the amount appropriate for their needs. For claimants on some benefits Council Tax Benefit is paid in full and is paid regardless of tenure of the main home. Administered by Local Council.

Working Tax Credit (WTC)

Payable to low-paid working households with or without children. Help with childcare costs may be paid for approved providers through the childcare element. Administered by HMRC

Child Tax Credit (CTC)

Replaced child-related premiums formerly included within certain out-of-work benefits. Payable to families with children that also claim child benefit, whether in or out of work. Administered by HMRC

Disability Living Allowance (DLA)

Paid to disabled people to help meet extra costs related to their care or mobility needs. Administered by DWP

This new method of paying benefit would certainly streamline the process and make it easier to ensure that claimants were claiming the right amount of benefit for their circumstances. Many people are not currently claiming all the money they are entitled to, as there are so many different benefits on offer; often the uninformed claimant does not know that they are being underpaid. Data suggests that there is £1.3bn of benefits under-paid. (Full Fact,2011 p.4) I would argue that this may affect people with learning difficulties and hidden disabilities (like autism) the most; as they are most likely to accept what they are given without digging deeper.

I can understand the need to streamline the system. In my experience, different benefit departments using different computer systems do not always communicate changes of circumstance in a timely manner. This leads to over- or under-payments of benefits and, in the case of over-payments, can lead to investigations for benefit fraud and huge cuts to benefits to repay the debt.

However, the Government is not simply consolidating existing benefits into one payment; they are introducing new thresholds and constraints on the system. There will be new and fixed limits set on the amount to be paid and time constraints on certain entitlements. (Crown Copyright,2011)  According to The Guardian,

“The Department for Work and Pensions said that the central aim of the universal credit was to "make work pay", especially for the lowest earners.” (The Guardian,2011) 

The Institute for Fiscal Studies (IFS) would disagree with this sentiment. According to their statistics 1.4 million families will be worse off under the new system and the target group to be most disadvantaged will be Lone Parents. (ibid.)  They do, however concede that 2.5 million families would be better off, particularly those on the lowest incomes, which would endorse the Government claims that

“"Our reforms will move 350,000 children and 500,000 adults out of poverty. This will change Britain for generations – a change we cannot wait any longer for.” (ibid.)  

The news is not so positive for the sick and disabled. Their needs are different to the general population. Many long-term sick, autistic and mental health patients have ‘hidden’ disabilities that make it impossible for them to undertake functional employment. Most of these will be on long-term Incapacity Benefit, soon to be reassessed under ESA criteria, and could lose out on the help and support they need to be able to live productive and healthy lives. In addition, unless UC takes into account the possible need for vulnerable people to drop into and out of work and accommodate this without penalty, there could be a real issue with the loss of certain benefits for these people and the passported benefits they receive in health and social care.

One of my biggest concerns is how each aspect of the Universal Credit will work alongside the others. Why spend millions of pounds moving everyone from Incapacity Benefit to ESA just to abolish ESA as soon as everyone has been reassessed? Surely, if there is a likelihood of UC passing into law then all reassessments of current IB claimants should be postponed until 2013 and be integrated into the merging of all the out-of-work benefits into one? In my opinion, by appearing to make immediate changes to welfare, Osborne and Cameron are likely to cost the taxpayers more money through being so hasty in their decisions. They could argue that they are carrying out plans already in place from the Brown Government, but in light of their criticism of the Blair/Brown governance I believe the ConDems should have paused and taken stock of Brown’s plans and seen how they fit into their own plans for UC.

 

    Author

    I have just finished a Certificate in Higher Education in Social Policy and the Care Sector. 

    My final module was a 7000 word thesis on welfare reform and the upcoming changes proposed by the Coalition Government. This blog contains that Project.

    Please note: the material is copyrighted and must not be reproduced in full or in part without permission; except for academic purposes where it must be cited as follows:

    Gourlay, Kirstein, 2011, UK Welfare Reform in the 21st century: The Consequences for the Vulnerable in Society, Birkbeck University:London

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