Universal Credit: What’s next?

The 3 big questions for the government

Political parties, think tanks and charities continue to debate the future of Universal Credit. Despite the proposed solutions often being radically different, there’s a fairly broad consensus that more changes need to be made.

Once the rollout is complete, 7 million households will receive the new benefit. It has to work for everyone. Our evidence shows significant challenges remain — and we’ve helped 150,000 people with Universal Credit since its creation.

With the Budget rapidly approaching, and new legislation being drafted to move 3 million people from the old benefits system to Universal Credit, the government has some big decisions to make.

3 big questions the government must answer

There are currently just over a million people on Universal Credit. From January, the government intends to start the final and biggest phase of the rollout — moving people currently claiming legacy benefits (like Tax Credits and Employment and Support Allowance) over to the new benefit.

This process (called ‘managed migration’) will affect nearly 3 million people — a third (36%) of whom have a disability or long-term health condition. Votes need to pass in both the Commons and the Lords for this to happen.

This presents many questions, but 3 stand out:

1. Is UC ready to take on more people — in both design and delivery?

The government has made improvements to the delivery of Universal Credit. But our evidence leads us to the conclusion that further improvements must be made to the system, before tens of thousands more people are asked to move to the new benefit through managed migration.

Universal Credit must be designed and delivered to meet the needs of people with widely varied circumstances.

This means fixing known delivery problems, preventing people experiencing hardship — because large deductions are taken out of their Universal Credit to repay debts — and speeding up the implementation of things like the Landlord Portal, which simplifies the process for evidencing housing costs.

It also means revisiting bigger design decisions — like whether a monthly assessment of entitlement is the right answer for everybody. Many people don’t get paid or budget in this way. Payment flexibilities — like rent paid directly to landlords rather than tenants, or more frequent payments — are welcome. But even with increased awareness of these options, they don’t fully solve the problems.

It’s essential UC design and delivery works for groups with more complex needs, like those with a disability or health problem. Payment timeliness is particularly bad for this group. Beyond questions of the financial value, Universal Credit’s design works well for a lot of people, particularly for those who previously had to navigate multiple benefits. But, for managed migration to work that’s not enough — it has to work for everyone.

UC also needs transparent performance indicators, clear breaks in rollout, and milestones to check its readiness before moving more people on to the benefit.

2. Does UC give people enough financial support?

In a decade which has seen no real pay growth, and at a time when families are increasingly struggling to pay their essential bills, we continue to believe the government should reassess the cuts announced 3 years ago.

Some of the proposed cuts to Tax Credits, reversed in 2015, are still baked into Universal Credit. There are transitional protections to top up the incomes of those who move onto UC through managed migration, but this won’t help families making a new claim, or whose circumstances change.

Of course, transitional protections are just that — they are time-limited, and don’t address the deeper question of whether UC covers the cost of living.

Analysis by the Resolution Foundation has shown there are 2.2 million people who gain and 3.2 million people who lose out from UC.

The Work and Pensions Secretary has reportedly warned colleagues that half of lone parents and about two-thirds of working-age couples with children would lose the equivalent of £200 a month. Our analysis shows that some other groups also face significant losses, including:

• Self-employed people with fluctuating incomes can be entitled to hundreds of pounds a year less in UC compared to directly employed counterparts with identical annual earnings.
• Working disabled people without children can be over £200 a month worse off on UC due to the loss of the disabled workers element that existed in Tax Credits.
• Severely disabled people who live alone without an adult carer will get around £180 a month less in UC. The government has announced enhanced transitional protections for this group as it moves from legacy benefits. This is welcome but UC needs to introduce ongoing financial support for new and future claimants.

3. Will the process of managed migration run smoothly for people?

We believe the government needs to look again at its plans for managed migration. Even if changes are made to address the readiness and financial value of UC, managed migration is itself a huge administrative challenge.

Reform on the scale of UC, affecting so many families, has never happened before. Nearly 3 million people will move from legacy systems to UC through managed migration — a third of whom have a disability or long-term health condition. It is vital that people’s incomes are protected throughout.

Current draft plans don’t provide enough reassurance on this front, and we are discussing our concerns with government. As things stand, the process will require everyone to make a new UC claim — meaning the burden and risk of this change would fall largely on individuals.

We’re not currently confident that the right protections are in place for those who struggle with the process, or miss the deadline to make a new claim. There’s a real possibility some may see their legacy benefits stopped before they’ve started a new UC claim, leaving them with no income to live on.

With so many people struggling already with processes around legacy benefits, this is a major concern. For millions of people, benefit income — whether from the legacy system or UC — is what keeps roofs above heads and food on the table. All steps must be taken to limit these risks.

What’s next

These are big questions for government to answer, but if UC is to be a success it must act.

Arguably the current debate around UC is about more than this benefit. The government needs to take significant steps to restore trust in the way benefits are delivered. Cuts to the value of benefits, poor delivery of disability benefit assessments and questions about the appropriateness of conditionality go across both legacy benefits and Universal Credit.

Creating a benefit system that is simpler to access and easier for people to understand, the aims of UC, are aims we agree with. This debate has rightly become about what we expect our welfare benefits system to do, but also about what we expect in terms of delivery and fairness.