Editorial: A prudent start to the ‘welfare revolution’

The final test will be whether universal credit does indeed ‘make work pay’


As of this week, Ashton-under-Lyne’s benefits claimants – or those in uncomplicated circumstances, at least – took their place at the vanguard of Iain Duncan Smith’s overhaul of the welfare system.

For those on universal credit, there will be no jobseeker’s allowance, working tax credit, housing benefit and so on; instead, there will be a single monthly payment, managed through an online account and automatically adjusted according to hours worked.

In abstract, the plan is a good one. The welfare system’s nigh-impenetrable thicket of disbursements, credits and entitlements is at once unwieldy, difficult to navigate and costly to administer. Both the claimant and the state would gain from its being made more responsive and more straightforward.

Yet putting a simple system in place is anything but. First, there is the new technology to consider. Indeed, such are the technical complexities – not least in linking Department for Work and Pensions computers with those of the Revenue – that the universal credit pilots have already been scaled down and the plans for wider implementation delayed.

The Welfare Secretary’s critics deplore the scheme as late, over-budget and in general disarray. There is certainly cause for unease. The long history of government IT failures hardly inspires confidence; and the impact of payments missed or wrongly calculated would be devastating for many claimants. But the tweaks to the timetable should therefore be welcomed, not decried. With so tricky a task, it is surely better to take more time and get it right.

Nor are the logistical hurdles the only challenge. A bigger question is whether the new system will work better for those who use it. True, a single payment will be clearer and more predictable. But the move online will be problematic, at least until IT skills and internet access become ubiquitous even among the poorest and most vulnerable.

The plan for monthly, rather than weekly, payments is also potentially troublesome. Mr Duncan Smith may argue – reasonably enough – that those on benefits are better served by a system that parallels the world of work. Yet someone struggling to make ends meet over a week might come seriously unstuck over a month. The proposal to pay housing benefit to claimants, rather than landlords, raises similar issues: for those with the lowest incomes, it may prove impossible to balance the claims of debts, say, or feeding the family, against the need to pay the rent.

The universal credit may be a commendable shift away from state paternalism, but the risks of a rash of rent defaults, or of families running out of money with weeks to go, cannot be ignored. And although such issues need not be insurmountable over the longer term, the transition will need to be carefully managed.

The final test will be whether the scheme achieves the Government’s aim of “making work pay”. Here, the jury is out. Mr Duncan Smith claims his newly responsive system will ensure that more hours always mean a higher income, regardless of benefit cut-off points and tax credit thresholds. Without any more money to spend, however, the Welfare Secretary can only up the incentives for some by penalising others. The most likely outcome is that more people will work, but for fewer hours. Only a qualified improvement, then, if that.

The benefits system is crying out for reform and universal credit has some potential. But it is neither the panacea that Mr Duncan Smith bills it to be, nor is it guaranteed to deliver, in practice, all that is promised by the theory. Ashton-under-Lyne is a small – justifiably tentative – beginning.

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