The introduction of Universal Credit is one of the most significant social security reforms in recent decades. Universal Credit combines six benefits and is expected to cover around 7 million people once rolled out, making it a huge means-tested scheme.
The benefit was brought in by the Conservative and Liberal Democrat coalition government via the Welfare Reform Act 2012 and introduced from 2013 onwards. The government stated that in bringing together these benefits, Universal Credit would:
As of June 2022, around 5.6 million people are on Universal Credit, an increase of around 90 per cent since the pandemic began.
At TUC Congress 2018, Congress passed a motion calling on the government to ‘Stop and Scrap Universal Credit’.
The TUC believes the policy and design of Universal Credit are fundamentally flawed. In line with our motion, we believe we need a replacement for Universal Credit. The TUC set up an informal working group of union representatives and experts to examine what a replacement for the Universal Credit system could look like.
The working group agreed a set of principles that any reform of the benefits system should be trying to achieve:
Achieving these principles requires many more changes to our current social security system than simply replacing Universal Credit. In particular, it is difficult to fully achieve these aims within a predominantly means-tested system of social security. Means-tested benefits are a major part of the social security system in the UK. Around 60 per cent of all working-age benefits are now means tested.
In this report we look at the issues with Universal Credit which form our critical opinion of the new system. We also highlight potential solutions within each area.
Solution: The Universal Credit taper rate can be reduced further, and options of different taper rates for different groups of people should be examined. To ensure that work pays, work allowances also need to be increased, and extended to those not currently entitled to them. The second earner should have their own independent work allowance too.
Solution: To improve the adequacy of benefits, the TUC has called for the basic level of Universal Credit and legacy benefits, including jobseekers allowance and employment and support allowance, to be raised to at least 80 per cent of the national living wage (£260 per week).
Solution: No one should lose out financially in Universal Credit; we need to look beyond transitional protection to ensure that disabled claimants are getting at least the amount they would have done in the legacy system.
Solution: The older partner of a mixed age couple when reaching State Pension Age (SPA) should entitle the couple to claim pension credit.
Solution: There is no justification for the five week wait for a first payment of Universal Credit. In the short term this can be replaced immediately with non-repayable grants. The amount can be estimated on the first monthly payment like the advance.
Solution: The punitive MIF should be removed permanently, with self-employed people only subject to the ‘gainful self-employment test’ already used by the DWP to ensure that a business is genuine.
Solution: The punitive sanctions scheme must be scrapped. Employment support must be designed to genuinely help people into decent work.
Solution: Proposals to introduce in-work conditionality should be dropped. The TUC supports and encourages genuine progress in the workplace by investment in training and development, rather than wielding the stick of conditionality and sanctions.
Solution: More options for claiming the benefit, including widely available access to Jobcentres for those not comfortable with IT or who do not have access to IT facilities.
The process of “managed migration” to universal credit has also just begun, without a full trial and evaluation.
Solution: Responsibility for the process of managed migration should be on the Secretary of State (rather than claimants), who should ensure that the termination of existing benefits will not cause undue or unnecessary hardship.
And the managed migration process needs to be trialled first and then evaluated.
Solution: No one should lose out when moving over to a new benefits system. The process of migration needs more thought. Along with ensuring the uprating of transitional protection.
Solution: Large scale employment drive in jobcentres and service centres to reduce workloads for work coaches in order to achieve better outcomes for claimants. And reduced reliance on digital only services and expansion of jobcentre network: Flexibility in delivery that empowers the claimant.
Solution: Short Term - introduce earnings disregard into Universal Credit so that income can increase a certain amount without affecting the award.
The legal challenge win on the assessment period which caused fluctuating incomes for those in work only applies to claimants who are paid on a regular monthly basis, and not those who are paid on a four-weekly, weekly or fortnightly basis. This needs to be extended to these workers too.
Long Term - A three -to-six-month assessment period to reduce fluctuations and provide stability for claimants. If circumstances change then claimants should be able to report this and request for their circumstances to be reassessed.
Solution: Employees should be compensated for any errors by employers to do with Real Time Information that affects their Universal Credit award adversely.
Solution: Short term - Free school meals should be available to all those on Universal Credit, there should be no cliff edge. For other support, a longer assessment period could be used, to smooth out fluctuating incomes.
Long term - In the long term every child in compulsory education should be provided with free school meals.
Solution: Claimants should have options to be paid Universal Credit twice or four times per month to allow them to budget to suit their circumstances, rather than these being exceptional temporary discretionary arrangements as in most of the UK. And to have a similar option of the housing costs element of Universal Credit being paid directly to the landlord more automatically in the whole of the UK.
Solution: Short term – examine further the best way (s) in which to respond to calls for ensuring access to some universal credit for both partners and the prevention of financial coercion.
Long term - beyond this there is a need to look further into the individualisation of social security payments.
Solution: Short term - The childcare payment system needs to be redesigned to allow the childcare payment to be made upfront and paid directly to the provider.
Long term - Universal childcare needs to be free at the point of use.
Solution: Support with childcare costs to be taken out of Universal Credit. And look into which other elements can be taken out of Universal Credit.
This report recognises that some solutions are far more complex than others. Changes to the monthly assessment periods, payments to partners in couples, and integration of benefits are seen as the most complicated areas and would be considered as fundamental reforms to Universal Credit.
We also wanted claimant involvement in our report by hearing directly from those receiving Universal Credit. From the small number of in-depth conversations, adequacy of income was the key issue which came out for claimants, even though the study was not focussing on adequacy but instead the design and structure of Universal Credit.
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