Universal Credit: An Absolute Beginners’ Guide

Everything you need to know about the Department for Work and Pensions’ new benefit in Plain English

For several years, some sections of the general public have yearned for a more simplistic social security system. Some may argue that claiming three or more different social security benefits is a bit confusing. At one time, claiming Child Benefit meant queuing in a Post Office to claim their money. Unemployed citizens would at one time queue at a separate DHSS Office and visit their local Job Centre to seek employment. They would go to the former to claim their Unemployment Benefit (cash-in-hand from behind a glass or mesh screened counter).

Today, with social security payments being credited into claimants’ bank accounts, it is less confusing. In spite of this convenience, it was a death knell to a fair number of Post Offices (Dukinfield’s have halved since 2008 for example). Payments were still made into bank accounts at the same frequency as before.

However, Iain Duncan-Smith’s Welfare Reform Bill might upset that rhythm. For example, Jobseekers’ Allowance and its successor (more on that later) will be paid monthly instead of fortnightly. This will be the case throughout Britain this October with new claimants. It is scheduled to be completed by 2017.

Since the start of April, this has been de rigeur for Droylsden, Dukinfield and Ashton based claimants. The OL6, OL7, M43 and SK16 postcodes were selected as Pathfinder areas, with WN1 – WN3, WN5 and WN6 (Wigan) following suit today [01 July]. In the aforementioned areas, it is a replacement for Income-Based Jobseekers’ Allowance, and includes components for five other means-tested social security benefits.

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Before 2010

In the very beginning, there was the Poor Law. It was a rudimentary version of today’s post-Beveridge era Social Security payment, albeit with a coercive nature. After a certain period of time, you would be sent to a Workhouse if you fell on hard times. Conditions were harsh: unpaid work in lieu of food and lodging was legion. Poor Law Dole rates varied according to regions, which was set by Poor Law Guardians. Each area would come under a Poor Law Union.

The first semblance towards the modern day system was the 1911 National Insurance Act. This modest provision introduced relief for ill persons. Unemployment Benefit (or Dole) came after, thanks to the Unemployment Insurance Act. Both benefits were contributory, with the latter one time-limited (like today’s Contribution Based Jobseekers’ Allowance).

By 1942, it was the Beveridge Report which led to the Post-Second World War consensus of socialised healthcare (the formation of the National Health Service on the 05 July 1948) and the Welfare State as a real safety net. Universal provision was a major tenet.

But the party was spoiled when a commitment to full employment and an inclusive society was eschewed in favour of monetarism. Out went Keynesianism and in went the teachings of Milton Friedman and Hayek. Unemployment became ‘a price worth paying’ for inflation, and a stigma. The Post-War consensus was – and is – being whittled away. The ‘Strivers versus Scroungers’ rhetoric advocated by present company is trying to make Social Security something to be ashamed of, rather than a viable safety net.

So far, it seems as if the safety net is being replaced by a reinforced concrete floor. Yet, some sources think the Coalition Government is doing the right thing with Universal Credit and other pernicious aspects of the 2012 Welfare Reform Bill.

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About Universal Credit

  • One monthly payment comprising of up to six different benefits;
  • Online applications only;
  • Payable into Bank, Building Society or Post Office accounts.

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One monthly payment: Universal Credit comprises of a single monthly payment covering all benefits which the claimant is entitled to. This includes:

  • Income-Based Jobseekers’ Allowance;
  • Income Support;
  • Income-Based Employment and Support Allowance;
  • Child Tax Benefit;
  • Working Tax Credit;
  • Housing Benefit.

Under the previous system, the Department for Work and Pensions funded Housing Benefit. Since April of this year, the DWP’s responsibilities for the said benefit have transferred to local councils.

Suppose we have an individual claimant (37 years of age) living on Wellington Parade, he or she would get whatever their JSA was and whatever Housing Benefit they were entitled to over a monthly period. The latter would be used by the claimant to pay New Charter Housing Trust. Supposing their maisonette had two bedrooms (which at current rates is £76.36 per week), he or she would have to find another £10.69 per week (unfunded from their Housing Benefit) from the ‘Bedroom Tax’. Therefore, weekly expenditure would be:

Credit:

  • Jobseekers’ Allowance Component: £71.70;
  • Housing Benefit: £76.36 (maximum rate for two bedroom dwelling, £103.85);
  • Total: £148.06 (£592.24 over four weeks).

Debit:

  • Rent: £76.36;
  • Bedroom Tax: £10.69.

Total: £70.01

He or she would have the princely sum of £70.01 per week, and from that, their home has to be heated. Food has to be bought. None of these come cheap, considering he or she may be unable to afford the taxi back from ASDA nor a pint of milk from the Co-op on Astley Street. Supposing they have a prepaid electricity meter, we’d be looking at a few days without heating to pay for the big shop.

Before April, our resident in Wellington Parade would have had an extra £15.00 to play with, thanks to a ‘top up’ benefit on rents below the maximum weekly rate. He or she is £25.69 worse off: an amount trifling for the Right Honourable Member for Chingford, but one which would have meant a 33% increase in spending power.

For persons under 35, the figures are worse. People aged between 25 – 35 are only entitled to the Shared Room Rate, making staying at home with Mum and Dad more viable. Supposing our second claimant is a 28 year old male, resident on Lyne Edge Road, his weekly expenditure would be as follows:

Credit:

  • Jobseekers’ Allowance Component: £71.70;
  • Housing Benefit: £56.69 (Shared Room Rate: £18.67 worse off);
  • Total: £128.39 (£513.56 over four weeks).

Debit:

  • Rent: £76.36;
  • Bedroom Tax: £10.69.

Total: £41.34.

Our 28 year old male fares much worse than the person aged 37 thanks to the Shared Room Rate affecting him. From £41.34, he has the dilemma between eating and heating. A trip to the Co-op may mean a short walk saving him bus fares, but he wont have access to cheaper food at the Morrisons store on Foundry Street. A single operator season ticket would cost him £12, which accounts for 24% of his remaining income post Bedroom Tax and rent. A trip to his nearest Job Centre would be £4.00 on a single operator day rover ticket on the 41 route.

Both claimants would also have to find Council Tax bills. As funding for rebates have transferred to local government (Tameside MBC in this case of course), they will be given an 80% discount for their Band A properties. Therefore, their Council Tax would be £188.88 per annum, which would be £3.63 per week. At present, they still have access to free NHS prescriptions and dental care.

What makes the two persons’ lives insecure is that he or she would also have to jump through hoops to retain their Universal Credit payments. Supposing they fall foul of their mandate to seek work, they could be out of pocket for three weeks at the very least.

The Claimant Commitment

Ever since the introduction of unemployment benefits, there has been a degree of conditionality for jobseekers. On signing on days, claimants have to prove they’ve been searching for work.

At one time, they could accept a simple ‘yes’, unless sufficient evidence states otherwise. This would take the form of DHSS investigators (known informally as ‘sniffers’ by some), home visits and telephone calls. After the 1988 Social Security and 1996 Employment Acts, conditionality has been enshrined into law. The latter would see the imposition of sanctions for non-compliance.

At one time, claimants would have to prove they were looking for work by means of written evidence (such as the DSS’ ‘Looking For Work’ diaries). This would be underpinned by a Jobseekers’ Agreement, negotiated between claimant and Job Centre advisor.

Under Universal Credit, the Jobseekers’ Agreement is now rebranded the ‘Claimant Commitment’. This also extends the conditionality experienced by jobseekers onto all Universal Credit claimants. Therefore, a person claiming the Child Tax Credit and Income Support components could be privy to the same conditions as unemployed citizens. Like unemployed persons they would also be required to attend interviews with their advisor, prepare a CV, or participate in training courses. This could be problematic if the claimant has childcare commitments or an elderly relative to look after.

Sanctions could also be imposed on part time workers for not mithering their employer enough for more hours. Some people may only be able to work part time for a reason. They may have childcare commitments, might be on the autism spectrum and find anything longer than 30 hours overloading.

Sanctions:

  • Higher Level: from 3 months to 6 months and 3 years. Imposed if he or she leaves a job voluntarily);
  • Intermediate Level: from 4 weeks to 3 months (for subsequent non-compliance over a year). Imposed if he or she is unavailable for work, nor actively seeking employment;
  • Lower Level: from a month to 3 months (for subsequent non-compliance over a year). Imposed if he or she fails to attend an advisor interview without good reason.

Before October 2012, sanctions were a third of the present length. Even with their loss of Universal Credit, they would still have to fulfil appointments and signing-on sessions as normal.

Prior to April 2013, claimants facing hardship could apply to the Social Fund for a Hardship Payment. Originally a grant, this after the 07 October 1996 became a loan. Today, our already stretched local authorities have to provide hardship payments of some description. Increasingly, claimants have been referred to other sources for in-kind relief such as Foodbanks.

Claiming Universal Credit

Iain Duncan-Smith’s flagship Social Security reform trumpets itself as being more suitable for the online age. Irrespective of computer literacy levels, it has been made the sole method of application. It also discriminates against people without access to the internet. Even with online application, he or she still needs to discuss their claim with an advisor (which could have been done just as effectively by presenting their claim on paper). Therefore, Universal as in UC is not quite as universal as the Steven Spielberg classic seen at the former cinema opposite Ashton-under-Lyne Job Centre, owing to the lack of a dead tree form.

Much has been made over the lack of security on its system, not only on what is termed the ‘The Claim Journey’, but also its online jobs site, Universal Jobsearch. The former isn’t hosted on a secure domain like online shopping sites, and details of their claim cannot be saved for continuing (it has to be done in one go!). Furthermore, this poses security issues if he or she uses a public computer, in a local library or their Job Centre.

The date of the claim will correspond with the date of one’s submission. As was the case with JSA before then, the claimant is called then asked to confirm their identity. He or she would need to produce supporting documents like Bank Statements, Driving Licences and Passports. Then, he or she would have to attend an interview with a Job Centre advisor. If they refuse to accept their Claimant Commitment, their claim would be closed.

For employed persons claiming the Income Support or Working Families Tax Credit based components of Universal Credit, their monthly payment would be determined by wages. These would be linked to the UC system through a real time version of PAYE. Persons employed by companies without Real Time PAYE would have to report take-home pay themselves.

One Payment Per Household

Supposing we have a four person household, Person A could claim Child Benefit for their five year old twins, whereas Person B could claim Jobseekers’ Allowance. Person A’s claim could go in to their bank account, likewise with Person B’s claim.

Instead, Universal Credit is paid into one bank account, either Person A’s or Person B’s. Therefore, the account holder would have to determine which part of their Social Security payment to allocate, or share it equally among the family group. While it may save administrative costs, it may cause no end of confusion or squabbling. Worse, if the whole household is sanctioned, Person A cannot turn to Person B for help or vice versa.

When one person applies for Universal Credit, other family members’ benefits under the previous separate system will transfer to the UC ecosystem. This might amount to a delay during transition and leave whole households instead of individuals out of pocket. Plans to extend the claim buffer zone (as per last Wednesday’s Spending Review statement by George Osborne) from three to seven days will exacerbate this.

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Conclusion

Is Universal Credit closer to the ‘one size fits all’ benefit some people have yearned for over several years? Almost. In future years, it is hoped that contributory benefits (i.e. State Pensions or Contribution-Based Jobseekers’ Allowance) would come under a similar system. However this depends on the success of the Universal Credit system.

Universal Credit is developed by means of an IT system known as Agile Software Development. Improvements and upgrades are continuous, but bugs and glitches may arise rendering the system as faulty. Agile Software Development should only be used on projects of a less critical nature. However, the security of claimants’ data is a most critical one, so personal details could go missing or end up in the wrong hands. This would not only compromise their security and bank account details, but also result in some claimants being unnecessarily handed sanctions (if their job search data has been hacked).

Therefore, using the Agile Software Development process was probably the wrong thing to do. Ditto the above with claimants having to make a claim on an unsecured web domain. By October 2013 leading up to 2017, Universal Credit claimants would be guinea pigs for a system defective by design. Amazon, Facebook and Twitter users purchase or update their statuses under secure domains, so why not recipients of Social Security payments?

Apart from the security issues, a chance to simplify all state benefits without monetary loss in its transitionary period and a degree of fairness have been squandered. The change to a monthly system (which Iain Duncan-Smith says is in line with most people being paid monthly) will prove costlier to claimants. Particularly so when making a new claim (no money for a month), or after being sanctioned. The emphasis on households rather than individual claimants may be finicky if one of them wishes to claim free NHS dental treatment or prescriptions.

Universal Credit had potential to be a fair system, ideally based on the Citizens’ Income policies advocated by the Green Party of England and Wales. Instead, it is a benefit cut cunningly disguised as a progressive measure. There should have been a more seamless transition to a monthly structure for existing claimants. Furthermore, claimants should have been given the choice of weekly and fortnightly payments as well as monthly. The transfer of payments to a monthly timetable is also congruent with the tripling of sanctions periods. Also, the government pays less in bank charges by going monthly compared with fortnightly.

The addition of working poor social security claimants to the present outgoing JSA ecosystem will impoverish households affected by sanctions. As seen in the earlier case studies, the transfer to Universal Credit and ancillary changes to the social security systems has seen our two persons out of pocket. This is bad enough in Tameside, but the effects will be much greater in affluent areas when the weekly benefit cap is imposed. Not only in Hale, Hillingdon and Witney, but possibly parts of Saddleworth.

Coercing Universal Credit claimants – particularly the working poor – to fulfil conditions expected of unemployed persons could cause unnecessary tension in the household. For example, if Person A had childcare commitments and received a sanction, Person B could be angry over their loss of benefit. A and B would be set against each other: divide and rule reaches the household!

So far, Lord Freud has deemed the Pathfinder experiment in Ashton-under-Lyne, Droylsden and Dukinfield a success. Nine tenths of applications according to his sources were made wholly online. We shall see how successful it is by October this year, when it is rolled out beyond the pilot areas.

And I will be surprised if we don’t hear any stories of claimants’ data being harvested to underground networks. Or a repeat performance of Monster.com’s security alert. The principle behind Universal Credit is all right, but its execution is diabolical and ideologically designed to fail.

S.V., 02 July 2013.

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2 thoughts on “Universal Credit: An Absolute Beginners’ Guide

Add yours

  1. When will successive governments ever learn that a cost saving is only a cost saving if the cost is permanently removed from the system. In most cases reducing costs here merely results in them increasing elsewhere. To see how this works blow up a balloon – a long one is best. Now squeeze it – what happens is that it goes in where you are squeezing but bulges out where you not. So where will the dis-benefits bulging be?

    First, people who are not warm and well fed become sick. Expect local GP’s and A&E to have to deal with the costs there. Expect a rise in shop lifting if the choice is feeding the kids or not. Baby buggies come equipped with handy nooks and crannies. Supermarkets will pick up the cost in shrinkage and security whilst the police and courts pick up the pieces.

    Ask your local Samaritans, if they are seeing a boost in the numbers calling them? Ask Social Services if the number of children taken into care is rising. Is this a result of what might look like neglect but is in fact deprivation? Ask TfGM, if the number of fare dodgers is rising in Tameside? Ask local teachers about children, who come to school hungry, tired or poorly dressed? They and their classmates pay for this. Ask your friends how much sofa surfing is going on – is anybody counting?

    Cutting costs is like medicine – although you can treat symptoms and suppress them, it is far better to treat causes. As both a Liberal and a Tory, Winston Churchill knew “There is no finer investment for any community than putting milk into babies”.

    Draw a face of your balloon – give it a name – let’s say, Ian or Duncan or both. Take a pin (or a vote) – prick his balloon.

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    1. Hi Mwmbwls,

      Excellent point about negative demand. Reduced financial means would also lead to, as you say, increased shoplifting. Communities would be less safer as a result, as the underground economy or theft becomes a more attractive means to an end.

      And of course, this doesn’t just affect the claimant(s), but also their communities. Notice the pub closures, the dilution of quality in retail premises, the learning environment. There is also no stimulus to encourage people to participate in civic life. Therefore, demand for travel and leisure facilities a short bus/tram/train journey away falls. Take for example spending cuts in local government, static or falling wages. I doubt as if Lord Freud would see the holistic side given his privileged background.

      By imposing certain conditions on the low paid as well as unemployed persons, we are also draining intellectual capital. Being forced to look for work for a given number of hours per week creates a disincentive for them to participate in social activities or college courses. More than anything, they would need a trip to the nearest art gallery, library or park as a distraction or break from job seeking. Plus it looks better on the CV if he or she has hobbies and interests which makes for a more rounded potential employee.

      Instead of looking at the affects of the Social Security reforms holistically, present company seems to base its policies on the one-tenth truths from the right-wing press. The problem is, some people believe what is said in the newspapers or on the television news bulletins.

      Warmly,

      Stuart.

      Like

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