The release of Labour’s election manifesto confirms their desire to take a sledgehammer to Universal Credit. But Labour’s crusade against Universal Credit would be a significant step backwards in how our welfare system is designed. They would be far better off focusing on reform, rather than replacement.
It is difficult to understate the structural improvement that Universal Credit presents over the hodgepodge of benefits that preceded it. For example, in the legacy system, many families have to engage with three different government bodies to receive various benefits. This places a much greater burden on claimants, particularly if their circumstances change. In contrast, when Bright Blue interviewed Universal Credit claimants, there was a clear preference for a single payment from a single agency.
The incompatible and inconsistent eligibility rules across the variety of benefits in the legacy system meant that some claimants could be losing more than 90% of their new income when they worked more hours, disincentivising people from improving their situation. Universal Credit’s implementation ensures that any additional hours almost always leads to a consistent improvement, as benefit payments are withdrawn at a rate of 63p for every £1 increase in income, though local Council Tax support can complicate this. Incentives to work could be increased even further by lowering this rate, or by increasing the number and value of different work allowances to more claimants, which allow claimants to earn a certain amount without any withdrawal of benefits.
The above is not to say that the design of the Universal Credit is perfect. There are plenty of kinks to iron out, a number of which Labour has correctly identified. Forcing new claimants to wait five weeks for the first payment has been a disastrous decision, leading people into food bank usage, rent arrears and debt to cope with the wait. To the credit of the Conservatives, the introduction of ‘advances’ has alleviated some of the pressure by allowing claimants to receive money early, but the process of repaying them adds significant pressure on the already meagre finances of those households. Labour’s proposal to simply offer an interim payment will help to fully address this issue.
Labour is also correct in identifying the need for the ability to pay the housing element directly to the landlord and for the need for fortnightly payments of Universal Credit. Our interviews have shown that these are significant sources of concern for claimants and makes it more difficult for some to effectively budget. However, it is vital to emphasise the need for claimants to have the ability to make a choice on the frequency of payments; for many, the monthly payments are not an issue.
Notably, there’s nothing to stop Labour delivering their £8.4 billion welfare spending package through Universal Credit. Increasing the Local Housing Allowance, the Employment and Support Allowance or the rate of support for severely disabled people can all be easily achieved within the current system. Meanwhile, Labour’s desire to introduce greater ‘dignity’ and ‘respect’ into the system could be achieved simply by changing procedures.
Rather than wreck a system that fundamentally improves on its predecessor, it would be far better for Labour to build on it and modify it in pursuit of their vision of the welfare state. This will not only preserve the existing benefits of Universal Credit for those who claim it, but also ensure that they do not have to endure yet another overhaul of the welfare system.
Anvar Sarygulov is a Researcher at Bright Blue
