Skip to Content

Coffee House

Briefing: Universal Credit

11 September 2012

1:45 PM

11 September 2012

1:45 PM

MPs are due to debate the government’s plans for universal credit in the House of Commons this afternoon. The Opposition Day motion questions whether ministers have ‘failed to properly account for numerous basic details of how the scheme will work’, and calls for them to address ‘deep flaws’ in the project. So where is the project at the moment, and what are those deep problems?

The background

Work and Pensions Secretary Iain Duncan Smith unveiled the universal credit at the Conservative party conference in 2010. It was based on the work that his think tank, the Centre for Social Justice had carried out when Duncan Smith was in opposition, and led to the publication of a white paper called ‘Universal Credit: welfare that works’ in November 2010. It was enabled by the Welfare Reform Act, which became law in March 2012. The universal credit introduces a single payment of all a claimant’s benefit entitlements, and is designed to smooth the transition back into work. It will offer a single taper rate as a single payment when someone starts a job, rather than all benefits tapering off at different rates. This is designed to help claimants work out whether they will be better off in work or on benefits.

The timetable

Pathfinders of the credit are due to launch in April 2013, with the national launch date set for October of the same year. The plan was that all new benefit claims would go into the universal credit system from that date, with Iain Duncan Smith saying in December 2010:

‘From October 2013 all new claims for out-of-work support will be treated as claims for Universal Credit. And from April 2014 to October 2017 we will work through existing cases. This will be given the highest priority in my Department, and we are already deploying a strong management team and our most capable and experienced people onto the programme.’


Public Accounts Committee chair Margaret Hodge said in June 2011 that the project ‘feels like a train crash waiting to happen; there is too much going on’. A report leaked to the Observer in the same month suggested government IT suppliers were concerned the deadlines for delivering the computer system were unattainable. In September 2011, the universal credit moved to the top of George Osborne’s ‘watch list’ of projects that were in danger of failing because of concerns over how well HM Revenue and Customs could administer the computer system. The DWP’s own newsletter accepted in June 2012 that launch for new claimants would not take place until the following April, saying:

‘Working with HMRC and local authorities, DWP has agreed that universal credit will be introduced in one district per region in October 2013 and then be rolled out to the remaining districts. By mid 2014 all new benefit claims for those in and out of work will be for universal credit.’

The money

The Office for Budget Responsibility forecast that the new credit would cost £3.1 billion on top of the existing benefits bill, but the department continues to stick to a figure of £2.5 billion. Meanwhile, the computer system administering the whole credit will cost £2 billion, but an answer to a parliamentary question from Labour in June suggested this would be closer to £2.1 billion.

Critics

Frank Field is the latest MP to step out and criticise the reform. While a Labour MP slamming the government’s welfare reforms isn’t exactly a man-bites-dog story, Field’s position is more interesting because he has advised David Cameron on tackling poverty. In a piece in today’s Guardian, he names a new problem with the credit that the impact assessment failed to spot: that it ‘rots the soul’. He criticises the way the new benefit will be structured, but also raises doubts about whether it can be implemented:

I disagree. Means-testing only encourages dependency, and the universal credit is, in one sense, the ultimate form of means-testing. It obviously gets extra money to hard-working families who earn low wages, but in doing so it rots the soul. Recipients have to be saints not to take the loss of credit payments into account when deciding whether to work longer or to train for a more highly paid job. At present, claimants can lose more than 90p for every extra pound in earnings. Under universal credit people can still lose about 65p of every extra, hard-earned pound – 20p more than the highest rate of tax.

I am, therefore, against universal credit in principle, but also fear the programme is practically unachievable. Rumour has it that the prime minister does too, hence the attempt to move IDS to the justice department in the reshuffle so that the plans could be shelved.

It’s also worth reading the evidence submitted so far to the Work and Pensions select committee’s inquiry into the implementation of the credit.

What Iain Duncan Smith says

At Work and Pensions questions yesterday in the Commons, Duncan Smith said this:

‘There is absolutely nothing to hide. No, no. We are committed to the £2.5 billion all the way through and we will deliver universal credit on time, as it is and on budget. Any time he would like, he is welcome to come into the office and look through some of our business matters, as is his colleague, the right hon. Member for East Ham. I will show him how we are on time, on target and on budget.’

Today’s motion

MPs will debate this motion, tabled by Ed Miliband, Liam Byrne, Stephen Twigg, Hilary Benn, Stephen Timms and Rosie Winterton, later this afternoon:

That this house notes that the universal credit is late and over budget; recognises that there is widespread unease surrounding the implementation of the £2 billion scheme’s IT system; further notes that the project is so badly designed that it is set to reduce work incentives for over two million people and hurt small businesses and the self-employed; believes that ministers have failed to properly account for numerous basic details of how the scheme will work, such as its interaction with free school meals or what is to be done with 20,000 housing benefit staff; further believes that the project is poorly-thought through and is now at risk of descending into chaos; and calls on the government to publish the business case, so that the House can see a detailed plan of implementation, and urgently to set out a plan to address these deep flaws before it is too late.


Show comments
Close