What's Universal Credit and why has it been controversial?


A new system of payments to low-income citizens is causing controversy in the UK. It’s called Universal Credit (UC). UC aims to simplify benefits and also experiment with the concept of giving those on the cusp of poverty a basic living while encouraging them back to work. 

Universal Basic Income, an unconditional payment given to all citizens with no strings attached, is backed by people from all political spectrums, from inventor and Pay-Pal co-founder Elon Musk to executive director of think-tank Adam Smith Institute, Sam Bowman. An unconditional basic income for the unemployed is being trialed in Finland in a two-year experiment costing the Finnish government €20 million.

But in Britain, basic income is a long way off, and the steps towards simplifying a benefts system have been fraught with often hostile debate. Britain is one of the top ten wealthiest countries in the world, according to fact-checking organization Full Fact. But millions of citizens  still have to rely on social benefits from the state to get by.

The government has come under scrutiny before a rollout of its  UC scheme to more low-income or unemployed citizens. This is in light of reports that some impoverished families were being pushed further into financial hardship because of problems with the scheme.

Though UC was implemented with cross-party backing, opposition politicians and charities have been fighting for the rollout to be paused. But employment minister Damian Hinds insists the scheme will proceed.

Universal Credit, other state benefits, and trials of universal basic income, are a result of policymakers finding new ways to give people a guaranteed, basic level of support, as labor markets change and unemployment rates fluctuate.

Many people in the UK who are out of work or on a low income are eligible for state payments in the form of Universal Credit. According to Citizens Advice Bureaux research, more than seven million households will be receiving it by 2022. Over half of them will be in work.

Universal Credit – initially introduced in the UK with cross-party backing during the 2010-2015 coalition government‘s wide-ranging welfare reforms – is the biggest change ever made to the benefits system, says Citizens Advice. But it also warns that seven million households face financial risk if UC is not paused.

The scheme was designed to make the system simpler and provide greater incentives to find a job to prevent people being better off financially claiming benefits rather than working.

UC was announced in 2010 and was gradually rolled out to Job Centres in the UK in 2013. As of mid-September 2017, 610,000 people were on UC, according to official government statistics.

But this year’s rollout of Universal Credit has caused reports that it is putting households under further financial strain.

How is it different from previous state benefits?

Universal Credit wraps six state benefits, such as unemployment benefits like Jobseeker’s Allowance (JSA), housing benefit and income support, into one.

Instead of being paid multiple, separate payments weekly or fortnightly, receivers of UC collect one single monthly payment, or twice a month for some people in Scotland.

The government said in 2016 that the new system aims to reduce poverty and helps claimants get closer to the workplace. The Department for Work and Pensions said the latest statistics (2016) showed that people on UC were finding work faster and earning more money.

But UC is a burden for some, and is provoking further financial insecurity, reports The Guardian, as it can take up to six weeks to receive the first payment. UC is paid in arrears.

The government states on its website that those who don’t have enough to live on, buy food or pay rent while they await their first payment can ask for an advance while their claim is processed. Those who receive an advance need to pay it back in instalments from their future UC payments.

Advances are available for people who have received UC or benefits for six months or more, earned less than £2,600 in the past six months and paid off any previous advances.

However some vulnerable people are still slipping through the economic safety net, and have been forced to take out loans while they wait for their first instalment, driving many into debt.

What is the impact on society’s vulnerable people?

A woman receiving UC interviewed by the BBC (video) said she didn’t have any money. “Not even 4p to my name,” Kelly Shipsey said. She is relying on food banks until she receives her first payout.

The alleged problems with Universal Credit were epitomized when a man from Somerset died awaiting his UC payment, according to ITV News. The broadcaster reported that Chris Gold died days after it aired an interview with him about delays in receiving his payout. Gold’s sister told ITV News he died hungry, and in fear of losing his house, according to the report.

Poverty charity Trussell Trust says that Universal Credit is increasing the number of people needing emergency food. Food banks have seen a sharp rise in referrals since UC’s introduction, according to the Financial Times.

Universal Credit can only be applied for online, posing a further difficulty to claimants who might not have a computer or personal access to the internet.

Latest developments

A rollout of Universal Credit to more people on benefits was due to accelerate from October 2017.

But the Labour Party tabled a motion to pause the process, which was debated in the House of Commons on October 18, in light of the problems reported.

While most Labour MPs and many from other opposition parties including the Scottish National Party were in attendance, very few Conservative Party MPs were present and most abstained from the vote due to a three-line whip imposed on the party. The motion passed successfully with 299 to zero votes.

Prime Minister Theresa May imposed a three-line whip on Conservatives, instructing them to abstain from the vote.

Senior Tory, Sarah Wollaston, chairwoman of the Health Committee, went against the three-line whip imposed on the Conservative Party and joined Labour in supporting the motion. She was the only Conservative MP to do so.

 

But the vote is not binding on the government.

An emergency debate on UC was held on October 24 after Commons voted for the motion, where employment minister Damian Hinds defended Universal Credit.

“Already, Universal Credit is transforming lives and we want more families to benefit from the satisfaction, the self-esteem and the financial security that comes from progressing to a job, to a better job and to a career,” he said.

What do the papers say?

  • The New Statesman published a piece on the reasons why UC is not fit for purpose.
  • Independent left-wing magazine Red Pepper wrote in an editorial that UC is not about saving money, but about “disciplining unemployed people”.
  • A poll by BMG Research for The Independent newspaper found that 74 percent of those surveyed in the UK (including, it is stated, a majority of Conservative voters) would like the waiting time cut.
  • The Economist wrote last June about the ways Universal Credit is stretching the poor with “painful” cuts to benefits. They called the scheme “regressive”.
  • The Times reported that Iain Duncan Smith “blames” former chancellor George Osborne for delays in UC payments.
  • According to The Telegraph, Prime Minister Theresa May is on the verge of a climbdown on Universal Credit, having been warned it could become her “poll tax”, the tax instituted in 1989 by Margaret Thatcher’s government to fund local government.
  • Sources

    This piece was produced in collaboration with community member Vlad Bourceanu via the story’s TALK page.

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