All posts from: May 2012
Sixteen months from now, the first claimants will start receiving Universal Credit.
A brand new office in Warrington will efficiently handle 5,000 claims every day and a state of the art computer system will provide a real-time link up between HMRC and DWP, allowing claimants to manage their claims on line and see exactly where they stand. Households will receive their universal credit monthly in arrears and will manage their income just like you and me, paying their bills and their housing costs and leaving a little over for luxuries and savings. Job Centres and Housing Benfit offices will disappear, or take on new roles. By 2017 the Universal Credit system will apply to all claimants.
Well, that is the theory. But what happens in reality will largely depend upon the government’s fabled new IT system being up and running by October next year. The prospects are not looking great.
The DWP says that every applicant for Universal Credit will have an online account “through which they will be able to access information about their claim and Universal Credit payments, much like the options that online banking services currently offer. The financial rewards from work will also be made clearer, with recipients able to view online the positive effect of increased earnings on their household income.”
The new IT system depends upon a “Real-Time” link-up with HMRC allowing employers to update tax and national insurance contributions monthly, rather than at the end of the tax year, so that the DWP can then work out entitlement to Universal Credit. The £1 billion contract for the IT systems were awarded to Accenture and IBM last December, but they have already sub-contracted some of the work to India, despite government promises that major IT contracts would stay in the UK.
We all know that government has a poor track record on big IT deals. Failures in the National Health Service, Fire Control Centres, ID cards, the Child Support Agency and the UK Border Agency all led to billions of pounds of public money being wasted. Will Universal Credit be any different?
Last year the government was lambasted by the Public Administration Committee over its approach to big IT projects. The report stated that the relationship between government and its main suppliers amounted to an oligopoly or even a cartel, with 80 percent of government IT work being carried out by just 18 suppliers. The committee recommended that future contracts should be set at a cap of £100 million to encourage competition. The Committee also found that many government departments were spending £3,500 on simple desktop PCs that could be bought in the High Street for less than £500.
Systems thinker Professor John Seddon thinks that Universal Credit is doomed to fail and that the government has confused reductions in transaction costs delivered by integrated IT systems with the actual number of steps that it takes to get a service. He says the new system will generate huge amounts of failure demand - i.e failure to get things right first time leading to higher demand. Even if the Warrington centre failed to deal with 100 of its 5,000 cases every day it is not hard to imagine that a serious backlog would soon develop.
Meanwhile, down on the ground, do tenants really know what the new system involves? The government expects that 80 percent of all claims will be dealt with on-line once universal credit is up and running. Do housing providers know how many of their tenants have access to the internet and, more importantly, how many of them could handle the equivalent of an online bank account? If not, I think we need to find out pretty quickly! I know the underlying aim of welfare reform is to change behaviour and end dependency, but the target of 80 percent seems overly ambitious to me.
Meanwhile, it will be interesting to see how the local authority-led pilot projects proceed. I think there is still a long way to go before we see Universal Credit in place.
Recent revelations in The Guardian and elsewhere about people living in sheds and a walk-in freezer (a phenomenon that is bound to increase as the housing crisis deepens) are building up pressure on the government to regulate the private rented sector.
The government is resistant to any notion of added regulation, fearing that it will drive landlords out of the rental market: “Over-regulation would reduce the number of properties to rent and wouldn’t help tenants or landlords” says the CLG. The government seems to believe that existing voluntary schemes are sufficient. They are not, and the clamour for regulation is bound to increase as further revelations about the seedy recesses of the private rental sector emerge.
Trade bodies within the sector want regulation, tenants want it and the public will increasingly want it when they see the scale of the problem. Last November I wrote here that we are creating a housing underclass and that we would see more of this kind of thing in the future. As Hannah Fearn in The Guardian points out, “money always follows a market”. The raising of the room rate to 35 and other changes to the benefits system are bound to increase the pressure on the lower reaches of the private rented sector. My prediction is that an individual will shortly emerge to replace Peter Rachman in public mythology as the slum landlord of our times.
The key requirement is that any system of regulation or licensing should be simple, subtle, supported by both tenants and a majority of landlords and easy to administer. It should not penalise the vast majority of good landlords for the sake of a few rogue elements. I was lying awake in the night and it came to me that local authorities already operate a number of licensing schemes that are simple, easy to understand, self-funding and have widespread public support. The system for licensed premises is an example.
It is illegal to sell alcohol in this country without a licence. You need both a personal licence and a premises licence that have to be displayed prominently in the property. The individual licensee has to be of good character. In England there are around 166,000 licensed premises and fees range from £100 to £635 for a new application and between £70 and £350 for the annual renewal of the licence. The beauty of this system is its simplicity. Everyone understands the notion of licensed premises and licences are usually renewed without any fuss. It is only where there have been complaints from neighbours or the police that licensing authorities will consider non-renewal of a licence to drive out the rogue elements. Is there any reason why the same principles could not be applied to the rental market?
Imagine a similar scheme applied to the private rented sector. The licensee would either be the landlord or a reputable letting agent who would be required to meet basic requirements relating to decent standards, deposits, safety and tenancy management. An annual fee of £100 (a mere £2 a week on the rent) would yield an income of around £400 million across England. That’s an average of over £1 million for every local authority – enough to fund a significant team of licensing and enforcement staff. Every self-contained let property would have to display a licence and tenants would have the comfort of protection under the scheme. As with licensed premises, the vast majority of licensing activity would focus on rogue landlords, following up complaints from neighbours and others, whilst the vast majority of properties would see their licences renewed annually without any fuss. Of course, it could lead to a slight reduction in the number of properties available across the country as sheds and other illegal and unsatisfactory premises were driven out of the sector, but that is a good thing surely? Conversely, it could also attract new landlords who were attracted by the simplicity and reliability of the scheme.
I can’t see any flaws with this system. Can you?