Universal Credit, a giant effort to weave together all the fraying strands of welfare policy, is now unravelling fast.

It all seemed so simple and intuitive when the idea was floated. Pay people more when in work than when on benefits, roll the myriad of benefits and tax credits into a single benefit, reduce the colossal claims process for individuals; and unearth some administrative efficiencies to boot. So intuitive, in fact, that the Opposition supported the underlying principles of the Universal Credit.

Recent debate suggests that achieving this simplicity is proving ferociously complex. However, new Social Market Foundation research with low income families has found that while the Universal Credit is in grave danger of backfiring, additional policy reforms could get it back on track. Some cause for hope, therefore, as Iain Duncan Smith prepares to be interrogated in the committee rooms today.

The Government’s overarching ambitions are right: to help people into work; to promote personal responsibility; and to increase the financial resilience of those on benefits.

In particular, aspects of the new ‘simpler’ system are to be welcomed. Families broadly supported changes that would make accessing benefits simpler and were in favour of receiving money in a single payment rather than multiple lots. Fewer forms would mean less hassle and less concern about taking on a short-term job. All good.

However, elsewhere, simplicity has coupled with rigidity to create a situation where one year from now many of the eight million households claiming Universal Credit will be left high and dry. Most significantly, our research showed strong antipathy towards the idea that all claimants should have to receive monthly payments as standard, and to manage their housing benefit money. Many were fearful that they would run out of money, be pushed into debt and rent arrears, or even be evicted. Such concerns are not marginal: DWP’s own survey data suggests four in ten could be negatively affected by the shift to a monthly payment. Meanwhile, the new ‘fixed’ monthly assessment could consign someone losing their job to a month without any income at all.

Therefore, there is a strong prospect of the Universal Credit running directly counter to the Government’s aims and undermining the financial resilience of households. This is in nobody’s interest, least of all Mr Duncan Smith’s.

So, what should be done?

First, SMF’s research shows that a number of assumptions that lie behind the scheme need to be revisited: that all claimants need a prod to look after their money, when many don’t; that all households will respond positively to the payment changes, when many won’t; and that all those in work are paid their earnings monthly, when many aren’t.

Second, the Government should keep things simple, but move away from treating every household the same and away from central control. Where there are exceptional cases, the Government currently intends to identify each household from the centre. But evidence of previous such policies suggests that this risks picking up vulnerable people long after they have fallen into trouble or simply missing many who need help entirely. We need a more proactive approach.

To square this circle, SMF’s report has proposed a new budgeting tool that would sit alongside Universal Credit. Those who feared the implications of the standard monthly lump payment could opt into a budgeting tool. This would allow them to decide how frequently they receive their payments and whether any should be directed to third parties such as a landlord or childcare provider. Households could also divert cash off at source to a savings account to help them through their next problem.

Overnight, this won’t make the computer work, but it would instil confidence that the Government can design a benefits system that works with the pattern of people’s lives, and that helps people to help themselves, rather than leaving them to sink or swim.

Nigel Keohane is deputy director of the Social Market Foundation.

Tags: Iain Duncan Smith, UK politics, Welfare