Universal Credit must be made to work. But it can’t lower poverty unless it is part of a comprehensive anti-poverty strategy, says Helen Barnard.
There were tetchy exchanges this morning about the government’s flagship welfare policy – Universal Credit. The policy will eventually affect 10 million people. As we have seen with the introduction of tax credits in the past, getting this kind of change wrong causes hardship and mistrust that can last for years.
Universal Credit has not had an easy path so far. Last year’s National Audit Office report criticised “weak management, ineffective control and poor governance”, and the implementation timetable has had to be extended several times. Originally, a million people were supposed to be on UC by April this year. This morning, Iain Duncan Smith said that the current figure was 40 000. However, a slower timetable which delivers a system which works is far preferable to attempting to meet earlier deadlines and ending up with a situation where families’ payments are late and wrong.
Abandoning the policy altogether would lose a once-in-a-generation chance to create a better system. The current welfare system is confusing, unreliable and creates poor incentives to work for some. The principles behind Universal Credit are absolutely right – to create a system which is easy to understand, predictable, in which working more is always financially worthwhile and where moves in and out of work are as smooth as possible. Our 'state-of-the-nation' report this week showed that poverty is increasingly a problem for people in work and that our changing labour market leaves many more people in short-term, poorly paid, insecure jobs. This highlights the importance of Universal Credit – the welfare system should not reinforce the worst aspects of today’s labour market, but it should be able to keep up with the more fluid nature of modern jobs.
There are still many aspects of Universal Credit which need improving, and the quality of its implementation is not yet proven. Some of the changes that we would like to see include increasing work allowances (the amount that claimants can earn before tax credits are withdrawn), uprating the total amount of childcare costs which can be claimed and reducing the ‘taper’ so that people can keep more of every pound they earn.
But there is a much bigger issue that was not discussed this morning. Universal Credit should be part of a comprehensive anti-poverty strategy – it cannot deliver lower poverty in isolation. In the run up to the next election, every party should set out a strategy to reduce poverty. These should include action to reduce the costs of essentials through making markets work for people on low incomes, and to improve the nature of jobs at the bottom end of the labour market and the opportunities for low-paid workers to move into better jobs.
Delivering Universal Credit is a big job, but it is only one part of the task that should be at the heart of all government departments, and must also be led by employers, business, and voluntary and community organisations.