Monday, 22 September 2014

Red flags

From: Inside edge

As the slow motion train crash of welfare reform continues, the driver is ignoring a succession of people desperately waving as he passes them.

Heedless of the big red flags they are holding, Iain Duncan Smith and his conductor Lord Freud sometimes even wave back and blow the whistle of their sleekly designed train in acknowledgement of what they see as the congratulations of the crowd.

All along they have argued that the universal credit – the one genuine reform amid all the welfare cuts – will make all the pain worthwhile and ensure that work pays and nobody is worse off.

Yet the warnings are now coming thick and fast and not just from the usual doom-mongers and government IT system sceptics. As I blogged last month, the people lining the track include former welfare reform tsar Frank Field, the Social Market Foundation, the Social Security Advisory Committee and maybe even cabinet secretary Sir Jeremy Heywood as well as councils, charities and housing organisations.

Now new research for the Joseph Rowntree Foundation acknowledges the advantages of the design of the new system in terms of streamlined administration and integration of in and out of work benefits but argues that these risk being undermined by the details of implementation. In particular, it highlights the dangers of:

  • Requiring people to claim online when only 20 per cent do at the moment and only  40 per cent are ready and able to do so in future
  • Paying out monthly when most people on low incomes budget on a weekly or daily basis
  • Paying out in a lump sum to the head of the household rather than paying individual elements separately with increased risks of budgeting problems, arrears and financial exclusion.

Amy Tarr and Dan Finn of the Centre for Social and Economic Inclusion recommend a series of steps that the government could take to mitigate the risk that the new system will leave people worse off than before and trap them in poverty. Better financial support and advice, reconsideration of the impact of localising council tax benefit and the social fund and a more visible ombudsman for the whole benefit system are just some of them while the report also calls for more information on the back-up arrangements in case the IT system fails.

But are IDS and Freud listening to the key message that their sleek new train needs a few design changes and that  ‘making work pay’ has to be about more than just toughening the sanctions regime for people on benefit?

The complacent response so far from the DWP (see the standard line to the Telegraph that ‘Universal Credit will help millions of people by making them better off in work than on benefits’) and the rose-tinted view of lessons from the direct payment pilots might suggest not. However, behind the scenes there are signs of movement on some of housing’s biggest concerns about the new system.

The Northern Ireland government has won three significant concessions: housing costs will continue to be paid direct to the landlord with an opt-out for tenants, rather than the other way around; universal credit will be paid fortnightly rather than monthly; and introduction of the new system will be delayed six months from October 2013 to April 2014.

Social security minister Nelson McCausland says the concessions are a recognition of the ‘unique circumstances’ of Northern Ireland, which is presumably a reference to the politics (of the coalition) and the institutional setting (with the Northern Ireland Housing Executive) in the province.

However, all three of the concessions would go some way to addressing the criticisms of the new system in the rest of the UK too and the second and third dangers highlighted by today’s research. It’s worth noting that there also seem to be ‘unique circumstances’ throughout the UK for mortgage lenders, since mortgage interest payments will continue to go direct to banks and building societies under the new system.

So it’s not too late for ministers to take heed of the people waving red flags beside the track. Getting the detail of the universal credit right will not solve the more fundamental problems of welfare ‘reform’ – the assumptions that making work pay can be achieved by cuts in benefits alone and that work alone can raise everyone out of poverty – but it may just avoid a preventable train crash. 

Readers' comments (7)

  • Colin McCulloch

    Well said that man.

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  • Chris

    Perhaps that the flags are red is why they are hitting the Lord's blind spot - in the same way he can't see other than undeserving poor.

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  • Ernie Gray

    When the train crahses and Percy the Green engine is lying by the side of the track then the penn will drop. There is a cultural and educational issue here with many families unable to cope with the sudden step change. Maybe I am misisng something but is not rent direct the same as a standing order / direct debit as in the case of paying a mortgage.
    I am not sure many banks or building societies would be too happy if suddenly we all decided to pay in cash or maybe not at all,

    The dogma is madness and will end up with addtional resources being required by both central and local government to reduce the impact of soaring rent arrears and further pressures on familes who without support will struggle to cope.

    Universal Credit is a sensible way forward. Stopping rent direct is not.........

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  • Joe Halewood

    The overall benefit cap introduced in April 2013 will cap 171,000 families at an average of £93pw. That is a £830m cut to HB (the only benefit capped and cut) next year.

    Why is this elephant in the room not being considered in the welfare reforms? The bedroom tax is, so is direct payments and so is UC but not the OBC.

    The following year (2014/15) it will cut 273,000 or so families - a cut of £1.32bn to HB

    The year after it will cut - according to DWP figures - 376,000 or so - a cut of £1.82bn to HB

    In 3 years that is nearly £4bn cut to HB. Even more relevant for social landlords is that 44% of those to be cut are social tenants so a £1.75bn cut in HB in the SRS and of course a £1.75bn increased risk to arrears in the SRS.

    The first 3 years of the bedroom tax are expected to cut less than £1.5bn so the OBC overtakes the bedroom tax as the biggest cut and the biggest risk to social landlords.

    Each subsequent year the cut to HB increases even more - so why aren't social landlords paying attention to the OBC and the huge risk it poses to arrears?

    This is the real train crash for me

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  • If even right wing commentators like Janet Daly, writing in the right-wing Telegraph, question the whole premise of the UK Conservative Coalition Govt's policy on child benefit - surely it's time for the millionaires' Cabinet to stop and listen?

    http://blogs.telegraph.co.uk/news/janetdaley/100187034/child-benefit-cuts-illegal-or-just-immoral/

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  • Eric Blair

    Good article!!

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  • Partridge John

    good article - keep up the fight!

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