Should Universal Credit be scrapped?

On Sunday, Labour’s Shadow Chancellor John McDonnell, suggested that Universal Credit (UC) could be scrapped under a Labour government. He is the most senior politician yet to put forward the idea that UC should be stopped entirely, as “it is just not sustainable”. Following reports that Esther McVey has said that many UC claimants will be worse off by £200 per month, this is a crucial intervention. It makes the unravelling of universal Credit a definite possibility. For years people have asked me if UC will really happen (before it really got going) or if it will be rolled back (in more recent years) and I’ve always said that it will keep going as long as all political parties support it.

Since it’s inception all the main parties, major national charities and associated industries have supported the idea of Universal Credit in principle. They may have had concerns around some aspects of the programme but, overall, it has had wide support from the start. If the Labour Party are now suggesting that it may “have to go” then UC may not have the long term future that we thought.

Why has Universal Credit had such support?

Some of the problems inherent in UC have been apparent since the beginning, so why has it had such support? I think the political arguments have been framed in such a way that it’s been difficult to support the benefits system as anything other than a means to get people into work. Organisations have been afraid to appear to be on the side of the ‘shirkers’ against the ‘workers’.

Universal Credit has always been portrayed as a system that makes claiming benefits seem more like a job. It’s paid monthly (like a wage), it goes into your bank account in one lump sum (like a wage), the more hours you work the better off you are (like a wage). In order to claim it you have to be able to complete an online claim form and manage your account online. Leaning how to go online helps you to search for jobs. Dealing with your monthly payment (including money for your own living costs, your children’s living costs and your rent) means you have to learn to budget – a skill that will help when you are in a job.

This framing makes it seem that UC is uniquely positioned to support workers and to make life difficult for those who want something for nothing. It’s enticing to politicians who want to support “hard working families” and makes it difficult to argue against. 

However, what this doesn’t take into account is that the large majority of benefit claimants are not required to look for a job. They may be sick or disabled and not required to work. They may be carers, either of young children or of disabled adults. They may already be working. 

Of the more than 7 million claims that are eventually due to be made to Universal Credit, less than 1 million will be for people who are classed as work seekers. So, why is the system designed with just these people in mind, when they are a small cohort of the whole? An argument can be made that designing a system that prepares people for working life is helpful (although I don’t believe that UC adequately does this in its current form) but bringing that system in for all claimants when it is not relevant to them makes life unnecessarily difficult for the majority.

Should any of Universal Credit be saved?

Universal Credit as it currently stands is unworkable. Substantially more people are worse off under UC than better off, compared to the old benefit system. This is especially true of lone parents and disabled people. The admin is much more complicated for claimants and the penalties for non-compliance are much harsher. Is anything of UC worth saving?

Last year, I laid out some thoughts for the Learning and Work Institute on where we could go next with Universal Credit. Without going through the same arguments, the key benefit of UC is that it makes the progression from out of work benefits to in-work benefits smoother. Universal Credit is more generous than Jobseeker’s Allowance. It is easier to claim than Working Tax Credit. Replacing these two benefits could be the new aim for UC. A system where you claim when you are out of work and which continues to support you through low paid work, without cliff edges, would be valuable. It needs to be more generous than the current version of UC. The payment system, claim process and conditionality should all be reviewed. It should be separate from support for children and housing and, perhaps, disabilities. These are major changes but the basic framework to get people from unemployment in to work and then progress in work could all be saved.

As things stand, the majority of existing UC claimants are out of work and do not have complicated claims. Taking benefits for children, housing and disabilities out of UC would not be too difficult. It would not be hard to amend payments from monthly lump sums to a simpler fortnightly cycle. It would be easy to change the Jobcentre to a place of work support for those who want it, not of sanctions. 

Universal Credit could have a future but it should be a limited one. It can work for some people but for the majority it does not help and may actively hinder them. We should stop trying to fit the whole of the benefit system into the work seeking paradigm. Universal Credit should be revised to provide the help for those work seekers who need it, and scrapped for everyone else.