Universal credit shouldn’t be scrapped – it is worth salvaging

Merging six benefits into one should eventually make the system simpler and more efficient. The best thing that Philip Hammond could do in his Budget would be to raise the work allowance – the amount people can earn before they start to lose universal credit

Some believe that universal credit, plagued by delays and the usual government IT problems, is unfit for purpose (Reuters)

The House of Commons has voted unanimously for the six-week period people must wait for their first universal credit payment to one month. Although Theresa May’s minority government has developed a worrying habit of ignoring such votes, this is one that it will have to act on. Not out of pre-Christmas generosity, but simply because there are enough Conservative MPs anxious about the roll-out of the controversial benefit to inflict a humiliating defeat on the Government.

The six-week waiting time appears to have driven more families to food banks and, as Jeremy Corbyn revealed on Wednesday, resulted in some being put on notice of eviction due to potential rent arrears. Expecting claimants to wait for such a long period is the ultimate proof that the man in Whitehall does not know best. He will, of course, be paid monthly – unlike people relying on universal credit. Six in 10 of those claiming it after leaving work will have been paid either weekly or fortnightly, and only 28 per cent monthly.

A climbdown by ministers is coming: it appears that the announcement is pencilled into the media “grid” for the run-up to next Wednesday’s Budget.

Some believe that universal credit, plagued by delays and the usual government IT problems, is so unfit for purpose that it should be scrapped. Indeed, it was designed for the era after the 2008 financial crisis when worklessness was the problem. Unemployment has now fallen, although many low-paid people juggle more than one part-time job or casual work. The new scourge is in-work poverty. So universal credit needs to be made fit to address today’s problems.

Unfortunately, the Conservatives have moved in the wrong direction: cuts to benefits under their austerity programme will leave working families worse off than under the much-maligned tax credits introduced by Gordon Brown. Families will be £625 a year worse off, with single parents the biggest losers.

Yet there is still something worth salvaging. Merging six benefits into one should eventually make the system simpler and more efficient. Indeed, the Labour opposition’s alternative Budget rightly calls for a “pause and fix” rather than abolition.

The six-week waiting time is only one part of the problem. The more fundamental issue is to ensure universal credit does what is says on the tin and “makes work pay”, as its architect Iain Duncan Smith envisaged before his scheme was diluted by the Treasury.

The best thing that Philip Hammond could do in his Budget would be to raise the work allowance – the amount people can earn before they start to lose universal credit. A year ago, the Chancellor got the message by reducing the taper from 65p to 63p, which means that people keep up to 37p of every extra pound they earn. But Mr Duncan Smith intended the taper to be 55p. At present, workers paying tax can sometimes retain only 25p of an additional pound earned – and much less when childcare costs are taken into account.

Mr Hammond has many other Budget demands in his in-tray and not much money to play with. His political imperative will be to appeal to under-40s, a group that swung to Labour at the June election. According to the Resolution Foundation think tank, reducing the taper to 60 per cent at a cost of £1.2bn would ensure 62 per cent of the gains went to millennials. Raising work allowances and ending the four-year freeze on working-age benefits would help the same group.

If Ms May is serious about helping the “just about managing”, she would tell her Chancellor to find the money, even if it means easing up on austerity.