Wednesday, 25 November 2015

Runaway train

From: Inside edge

The universal credit was meant to be the great prize that would make up for all the pain of welfare cuts but what if it just adds to it?

A range of evidence about the past, present and future of welfare is published today and the results suggest a system that is cracking under the strain even before the big wave of cuts due next April and the phased introduction of the universal credit starting at the same time.

The National Housing Federation (NHF) is highlighting the impact of the first wave of cuts on the number of homeless families living in bed and breakfast. The 44 per cent increase has come in the year since the caps on local housing allowance began.

However, the latest Social Attitudes survey out today suggests welfare reform still enjoys broad public support and that there is less sympathy for the unemployed now than at any time over the last 30 years.

The proportion of people saying that if benefits were less generous people would stand on their own two feet has doubled from 26 per cent in 1991 to 54 per cent in 2011. In previous downturns, public support for more spending on welfare benefits has grown but this time around support is down from 43 per cent in 2001 to just 28 per cent in 2011.

The report suggests that this shift in opinion was nurtured by a tougher stance towards welfare under the last Labour government and has continued under the coalition. 

In that context, the universal credit was meant to be the big reform of the system: a new benefit that would make work pay and give claimants a new sense of personal financial responsibility. 

The cracks in that façade have been deepening over the last few weeks:

  • Divisions have appeared within the government, with a failed attempt to move Iain Duncan Smith from the DWP in the reshuffle and cabinet secretary Sir Jeremy Heywood apparently expressing scepticism about the policy.
  • Responses to the detail from councils, charities and other groups have raised a whole host of concerns about implementation. 
  • Labour is calling for the whole thing to be delayed by a year amid concern about whether the complex computer system will actually work.
  • The Social Security Advisory Committee is reported to be warning IDS that the reforms will be ‘unworkable and unfair’. 
  • And, most spectacularly, Frank Field, the government’s welfare reform tsar, says the universal credit will be a ‘disaster’ that will ‘rot the soul of the low paid’.

Now a report from the Social Market Foundation (SMF) warns that the universal credit will backfire without significant improvements and undermine the government’s aim of boosting people’s sense of personal responsibility by pushing them into debt.

The results are all the more startling coming from a think-tank that has been supportive of the broad thrust of welfare reform and because the research is based on detailed interviews with claimants themselves about how the universal credit will work.

On the credit in general, the SMF warns that moving to a single monthly payment for all benefits will remove the markers and aids that families rely on to budget effectively with little evidence that it will prepare them for going into work.

‘Our research shows this will throw people in at the deep end leaving them to either sink or swim,’ says SMF deputy director Nigel Keohane. And the impact will be felt not just by the families themselves but by those they will end up owning money to, including social landlords.

The report finds widespread mystification about the key housing reforms including the one that has most exercised landlords: the direct payment of money to cover the rent to claimants.  As one claimant put it: ‘I just think, it’s not your money is it? So why does it have to pass through your hands if it’s not your money? You haven’t earned it, you haven’t done anything for it.’

Some people worried about the effect on them personally whole others worried about the effect on other claimants if ‘everyone is going to be in arrears’. The SMF comments that: ‘More generally, the proposal was met with considerable surprise and many were unable to understand what would motivate such a change.’

Where claimants did identify responsibility as an issue, they saw it in terms of the government trying to avoid the administrative work of processing payments rather than trying to boost personal responsibility. Most thought it would just put them under even greater pressure and risk of hardship and debt.

The SMF says that the research results, plus the experience of private landlords and tenants under the local housing allowance, ‘suggest that it will be extremely hard to make the existing universal credit proposal work’ and that it risks undermining the finances of social landlords.

The report proposes that there should be an online budgeting portal. The idea is that claimants would be able to opt in to it and make changes to the way their benefit money was directed before it came into their bank account. That would mean they could choose to have their rent direct paid direct to their landlord and choose to get their benefit weekly rather than monthly.

Iain Duncan Smith and the DWP will no doubt continue to resist calls for changes and stick to their line that the universal credit will make work pay and boost personal responsibility. However, the reform is looking increasingly like a slow motion train crash that everyone else can see is going to happen.

Benefit cuts are already biting and are set to affect far more families from next April with the bedroom tax and benefit cap. The danger is that IDS’s flagship reform will make things worse rather than better. There is still time to stop the train before it is too late. 

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