Universal Credit and how it's affecting you

The roll-out of Universal Credit (UC) and the four-year freeze on working-age benefits, has been controversial across the whole country. In this article, Prismatic weighs up the pros and cons, and lays out a qualitative and quantitative analysis of the effects on UC claimants.

According to a report published by Department of Work and Pensions (DWP) in September 2017, there were positive findings on monthly budgeting in families that were UC claimants. Majority of family claimants (75%) reported that they found it easy to manage payments and felt more confident in their ability to budget on a monthly basis. This was, as reported, a result of budgeting support accessed through Jobcentre Plus – a government-funded employment agency and social security office. These claimants showed flexible attitudes towards their work, and there was evidence that a fair amount was keen to increase their hours or earnings.

Family Claimants finding it easy to handle monthly budget
Graphic: Megha Sharma

However, the report also found effects on employment to be significantly small. Six months after making a claim, 56% UC claimants were already working. Whereas, 53% of those who were Jobseeker’s Allowance (JSA) claimants were working within six months as well. The difference was only 3%.

During these first six months, 63% of UC claimants had worked at some point, whereas 59% of JSA claimants had worked as well. Once again, the difference was only 4%.

But why are we comparing the numbers to JSA, and what does it mean? It’s simple. Jobseeker’s Allowance is one of the benefits paid by the state to a person who is unemployed and looking for work. It is also one of the benefits that Universal Credit has aimed to replace.

Rolled out in 2013, UC has replaced six means-tested benefits and tax credits: Child Tax Credit, Housing Benefit, Income Support, Jobseeker’s Allowance (JSA), Working Tax Credit and Employment and Support Allowance (ESA). It’s an all-in-one benefit to simplify the procedure for making claims. So, for example, instead of applying separately for unemployment and housing benefit, claimants would only need to apply for one blanket benefit. Launched as part of the Welfare Reform Bill, UC is a monthly payment to all those who are unemployed, have low income or are ‘just about managing’.

The benefit reform is rolling out one step at a time and was planned to be fully initiated in 2017. But due to minor failures like the ones mentioned above, the initiation has now been delayed to 2022.

In spite of the positive findings on monthly budgeting, it was also found that it tended to be more difficult where claimants were unsure of the actual amount they were going to receive. The situation was worse off when payments arrived late, or not at all.

To overcome some of the problems, the UK government announced a freeze in benefits for the working-age group in the summer budget of 2015. The four-year benefit freeze was decided to start from the tax year 2016-17 and end in 2019-20. A freeze meant that there would be no increase in benefit rates. Generally, benefit rates are increased by a small amount every tax year to support people during inflation, and help them make ends meet.

The idea was conceived by the government in order to ensure the growth in earnings surpasses the growth in claimed benefits “so that it’s always financially better for people to be in work rather than claiming benefits”.

Additionally, the central aim of devising a freeze was to reduce the overall expenditure of the government on welfare. The government has predicted to save £4 billion a year by 2019-20 by freezing working-age benefits. Until now, the move has proven to be beneficial in that scenario.

Regardless, there have been criticisms around this new move. Child Poverty Action Group (CPAG), a UK charity that works towards alleviating poverty and social exclusion, analysed in a report – The Austerity Generation: the impact of a decade of cuts on family incomes and child poverty – that the freeze and cuts to UC work allowances will leave single parents worse off by, on average, £710 a year and couples by £250 a year. The report stated:

“Take a lone parent with children, earning £150 from working 18.5 hours a week. Although UC reduces the effective tax rate to 74%, this lone parent and her children would be £2,336 a year worse off than under the 2010 tax credit system.”

On the other hand, problems have also come up with development and implementation of the Claimant Commitment. Is that another governmental reform? No, it’s fairly easy to understand. After claiming for Universal Credit, the claimants are helped by ‘work coaches’. The two work together to produce a ‘claimant commitment’ setting out job search expectations. The devised information includes the number of hours the claimant needs to work, among other similar data and requirements. According to the DWP report, nine in ten families felt their Work Coach explained the conditions fairly or very well. Nevertheless, the report also stated:

“There was a widespread feeling that the Claimant Commitment (CC) hours were too high and therefore hard to achieve, because of: a perceived lack of job vacancies locally; issues around balancing job search with family life / childcare; internet access; disability or literacy issues; and fitting job search around paid work. For the most part, claimants felt they had been given a ‘one size fits all’ CC which they were struggling to meet.”

Only 42% of them felt that the requirements in their CC took account of their personal circumstances. Only 44% felt the requirements would genuinely increase chances of finding work. Alarmingly, only half felt the requirements were achievable.

After a qualitative research, the report also revealed:

“77% of these claimants agreed that knowing that their Universal Credit could be reduced or stopped if they did not meet certain requirements made them more likely to look for work or to prepare for work. Awareness of joint responsibilities [between couples] was high.”

In a sense, this positive result takes us back to why the government rolled out a benefit freeze in the first place – to ensure the growth in earnings surpasses the growth in claimed benefits “so that it’s always financially better for people to be in work rather than claiming benefits”.

 

what went well, what went wrong

From 11 April, the government has also introduced that it will continue to pay Housing Benefit for two weeks after a claimant migrates to Universal Credit. The step has been taken to compensate a large amount of people hit by the freeze.

However, in its in-depth analyses on the effects and outcomes of the freeze and Universal Credit as a whole, CPAG has stated that it believes the UK government should pause the roll-out and fix some important issues as a priority. It has recommended that the pause continue until the DWP and its stakeholders are confident that a step further in the roll-out is safe for families and children.

According to the organisation, “to restore UC’s poverty-reducing potential” the government must:

  • Restore work allowances. This would benefit all working families by an average of £150 a year – so those on UC would benefit by much more than this figure.
  • Triple-lock child benefit and the child element of UC: this would be the single most effective intervention to reduce child poverty (it would reduce numbers by 600,000). Children have twice the poverty rate as pensioners – it’s right that children’s benefits seek the same protections as the basic state pension.
  • Lift the two-child limit, keeping up to 200,000 children from poverty.
  • Remove the benefit cap, keeping up to 100,000 children from poverty.
  • Reduce the current six-week wait for a first payment to two weeks.
  • Raise the UC childcare ceiling so it’s not limited to two children and pays a higher rate for disabled children.

 

Graphics: Megha Sharma
Sub-editing: Jane Bracher

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