Universal Credit

Universal Credit is a United Kingdom social security payment that is intended to simplify working-age benefits and to incentivise paid work. It is replacing and combining six means-tested benefits: income-based Employment and Support Allowance, income-based Jobseeker's Allowance, and Income Support; Housing Benefit; and Working Tax Credit and Child Tax Credit. The new policy was announced in 2010 at the Conservative annual conference by the Work and Pensions Secretary, Iain Duncan Smith, who said it would make the social security system fairer to claimants and taxpayers. At the same venue the Welfare Reform Minister, Lord David Freud, emphasised the scale of their plan, saying it was a 'once in many generations' reform. A key feature of the benefit was that unemployment payments would taper off as the recipient moved into work, not suddenly stop, thus avoiding a 'cliff edge' that was said to 'trap' people in unemployment. Universal Credit was legislated for in the Welfare Reform Act 2012. In 2013 the new benefit began to be rolled out gradually to Jobcentres, initially focusing on new claimants with the least complex circumstances: single adults without housing costs. By October 2018, more than one million households were receiving the new benefit (seven million households are eventually expected to receive it, once it has been fully rolled out). There were problems with the early strategic leadership of the project and with the IT system on which Universal Credit relies. Implementation costs, initially forecast to be around £2 billion, later grew to over £12 billion. More than three million recipients of the six older 'legacy' benefits were expected to have transferred to the new system by 2017; but under current plans, the full move will not be completed before 2023. One specific concern is that payments are made monthly, with a waiting period of at least five weeks before the first payment, which can particularly affect claimants of Housing Benefit, leading to rent arrears. Universal Credit has faced other criticism: the architect of Tax Credits, former Labour Chancellor and Prime Minister Gordon Brown, has warned that a hard-to-navigate application system and cuts to the value of the new payment for some groups of claimants risk bringing a million more children into poverty and adding to demand on food banks. In January 2019 a planned parliamentary vote on moving three million recipients of older benefits onto Universal Credit was suspended pending the result of a pilot study of 10,000 recipients, whose old benefits will be stopped and who will have the opportunity to apply for Universal Credit. The Universal Credit mechanism was itself first outlined as a concept in a 2009 report, Dynamic Benefits, by Iain Duncan Smith's thinktank the Centre for Social Justice. It would go on to be described by Work and Pensions Secretary Iain Duncan Smith at the Conservative Party annual conference in 2010. The initial aim was for it to be implemented fully over four years and two parliaments, and to merge the six main existing benefits (income-based Jobseeker's Allowance, income-related Employment and Support Allowance, Income Support, Working Tax Credit, Child Tax Credit and Housing Benefit) into a single monthly payment, as well as cut the considerable cost of administering six independent benefits, with their associated computer systems. Unlike existing benefits like Income Support, which had a 100% withdrawal rate, Universal Credit was designed to gradually taper away – like tax credits and Housing Benefit – allowing claimants to take part-time work without losing their entitlement altogether. In theory, it makes claimants better off taking on work, as they keep at least a proportion of the money they earn. But reductions in funding and changes to withdrawal rates left commentators on either side of the debate to question whether it would actually make work pay. The Daily Telegraph claimed 'part-time work may no longer pay', and 'some people would be better off refusing' part-time work and in the Guardian Polly Toynbee wrote 'Universal credit is simple: work more and get paid less'. Finally, the 'Minimum Income Floor' used when calculating Universal Credit for self-employed claimants may make it much less worthwhile for large parts of the population to work for themselves.