In the last month there has been mounting evidence that the government’s flagship social security programme, universal credit, is not fit for purpose – and Labour believes the budget is a chance to fix it.
The original objectives of universal credit (UC) were to simplify social security support while ensuring that work always pays, and fundamentally to reduce child poverty. Labour supported these key commitments then, and we support them now.
But UC is failing to deliver on its objectives, as we have heard from respected charities including Child Poverty Action Group, Trussell Trust, Citizens Advice and Gingerbread. Even former government advisers, civil servants and UC’s own architects are now critical of the scheme.
The government’s social security reforms were meant to respond to the changing world of work, where labour markets are increasingly “flexible” and jobs insecure. According to the TUC, one in 10 people in the UK are in jobs that are poorly paid, precarious and short, the “low pay, no pay” cycle. In spite of the government’s mantra, for millions of people work is no longer a route out of poverty: the fact is that four out of five people in low-paid work will still be in low-paid work 10 years later.
Others have seen self-employment as a route of escape, more so as this government ramped up its punitive sanctions regime: 80% of employment growth since 2008 is down to rising self-employment. Now nearly 5 million people are registered as self-employed, 15% of the workforce; and as the Office for National Statistics recently revealed, nearly two-thirds paid themselves less than £300 a week in 2015/16.
As a consequence we have seen in-work poverty climb to record levels. Today there are 7.4 million people living in poverty from working households, over half of all those below the breadline. More than two-thirds of the 4 million children in poverty are in working families.
But instead of the government addressing these labour market issues through universal credit, it has compounded the problems. UC’s serious design flaws – the lack of capacity and functionality in the system – was made worse by the monstrous cuts made to its funding in 2015.
As it is being rolled out, universal credit is pushing people into debt and rent arrears, with many people in social and private rented housing being served eviction notices.
The six-week wait for the first payment built into the design has been shown to be the key driver of this debt, even in households that weren’t in debt previously. In Greater Manchester, where universal credit was first piloted, the average arrears are now £824, compared with £451 for non-UC tenants. No wonder the Trussell Trust is reporting that demand for emergency food parcels is 30% higher in areas where universal credit is being rolled out; more people are turning to food banks to bridge the gap.
The monthly payment in arrears is another issue. The government argues that this reflects how people are paid in employment. Yet analysis by the Resolution Foundation shows that 58% of those moving on to the UC system work were paid weekly or fortnightly.
This also means that because there are five paydays in December for workers paid weekly, 67,000 people will have a total monthly income that’s too high to get the same or some universal credit payment. Their benefit will be significantly reduced or stopped altogether and some may have to reapply.
For the self-employed the system is no more responsive. Under the policy known as the minimum income floor, they are assumed to be earning the minimum wage for 35 hours every week, with social security support only kicking in thereafter.
The problem is that this is assessed on a monthly basis, with no discretion for the natural peaks and troughs of self-employed work, or indeed for the niceties of the occasional holiday. Should they take a Christmas break, many self-employed people may suddenly find they have not met the DWP’s work requirements, and be sanctioned as a result.
If you’re thinking this doesn’t affect you, I’m sorry to say that might change, with the government planning to roll out “in-work conditionality”. This would require people who are working to report to the jobcentre and demonstrate they are seeking more hours, or face their UC support being cut.
Estimates suggest that a million more working people will be expected to report. But despite the extra resources this will require, the government is closing one in 10 jobcentres under its incoherent austerity plans.
As bad as the design and implementation issues are, they pale in comparison with the cuts to UC. Slashing the amount that you can earn before UC is withdrawn means that 3 million families will lose up to £2,600 a year.
Last week the Child Poverty Action Group reported that the cuts to UC alone will push a million more children into poverty by 2022 – 300,000 of whom will be under five – accompanied by 900,000 working-age adults. For this to happen in the fifth richest country in the world shames us all.
With a million people due to be moved on to UC over the winter, Labour is calling on the government to pause this schedule while the programme is made fit for our modern labour market.
The chancellor can make a start to this fix in his budget this week. This is what Philip Hammond must do: first reduce the six-week wait for payment, so that it lines up with the way people are paid, with all applicants to receive fortnightly payments if they so choose.
Second, ensure everyone has the opportunity to have their rent paid directly to the landlord, to stop the spate of pre-emptive eviction notices that we are now seeing.
Third, allow households to have split payments instead of just one going predominantly to the male, so setting back women’s financial autonomy.
Fourth, change the monthly assessment for self-employed workers to a yearly one, to account for volatile working patterns.
And finally, restore the work allowances slashed from UC in 2015. Hammond should also end the freeze in social security payments, and ensure all children are supported through UC, not just the first two.
Anything less won’t make UC fit for today’s labour market. Anything less will sentence a million more children to be brought up in poverty. Anything less will mean that this prime minister’s promise to tackle “burning injustices” is no more than empty rhetoric.
**This article originally appeared in the Guardian**