The universal credit crunch

28 October 2017

9:00 AM

28 October 2017

9:00 AM

It only dawned on me in late summer just how terrible our new benefits system, universal credit, might be both for the poor souls who depend on it and for the bedraggled Conservative party.

An old friend, Terry, alerted me to the depth of the problem. Terry is 70-odd and has learning difficulties, though he’s astute in many ways and quite startlingly kind. He has a room in a shared house, but like many in precarious or temporary housing, he’s a regular on the homeless scene: part of a growing drift of men and women who move around London morning till night, from the St Martin-in-the-Fields day centre to the Hare Krishna food vans in Lincoln’s Inn Fields.

Here’s a measure of Terry’s generosity: in 2008 he decided not to collect his pension so as to help alleviate our national debt. We’ve all got to do our bit, he said, then it’ll add up. When I bumped into him this summer he mentioned that he was on his uppers, lending his pension every month to desperate friends.

Why? Because, he said, of universal credit. Terry has pals in Hammersmith and Fulham, one of the first London councils to adopt the UC system. Built into the design of universal credit is a new six-week wait for payment, which is made in arrears. In practice though, Terry told me, the wait can be even longer. Terry’s friends aren’t scroungers but they are vulnerable, often not employable. They don’t have savings and so six weeks without cash can be catastrophic. Terry tides them over as best he can.

Last Wednesday, the Work and Pensions Committee heard evidence from Secretary of State David Gauke on the subject of universal credit and this six-week wait. The implacable Gauke dug in his toes. He insisted that ‘customers’ received an acceptable level of service, and that it was safe to accelerate the nationwide rollout of universal credit due for the coming year. Any problems, he said, were teething problems. I only wish that Terry had been there to eyeball him.

How did it come to pass that a destitute pensioner is left plugging the gaps left by government? Universal credit began with such lofty aims. Seven years ago, when Cameron first announced it, there was cross-party support. Far too many working-age adults were on the social, often because it just didn’t make sense to work. What was the point in slaving away if you ended up making less than you could claim? This was what Iain Duncan Smith called the ‘benefit trap’, and The Spectator was right behind him in trying to fix it. Universal credit was designed to simplify the system, collating six of the big working-age benefits into a single payment, but more importantly, to rationalise it. Benefits wouldn’t cut off abruptly the minute someone found a job, but would be tapered. It would finally pay to work, they said — which was, and remains, a great idea.

But as UC trundles on, it becomes clear that what’s happened in practice is that a plan designed to spring the benefit trap has created a different trap, one that’s catching not just the vulnerable and largely unemployable like Terry, but the willing workers it was specially designed to help. Whatever the imperturbable Gauke says, thousands are suffering and, as UC rolls out across the country, thousands more will follow.

The new trap has two working parts. First there’s the dreaded six (or more) weeks to wait for money, which so often pushes people into debt, but there’s another botched component of universal credit too. Housing benefit (for those renting private properties) is not delivered to a landlord any more; it goes straight into a claimant’s account instead. But because so much debt builds up during the wait, when the cash finally arrives it all goes to service the debt. No money for rent. Cue furious landlords, who are increasingly reluctant to house anyone on benefits. Cue a potential new homelessness crisis, just in time for Christmas. The National Audit Office recently noted that ‘the ending of private sector tenancies has overtaken all other causes to become the biggest single driver of statutory homelessness in England’.

The Guardian’s Amelia Gentleman reported last week from Inverness, where UC has been around since 2013. All manner of people in low-paid work have been pushed into crisis. Some 80 per cent of the Highland Council’s 1,521 tenants receiving universal credit are now in arrears.

Perhaps UC is not so much a trap as a ladder with rotten rungs. The more resilient and employable have been helped by it, to get up and into work. Others, the ones most in need, just keep falling through. How and why did this noble plan go awry?

History might blame the well-intentioned Iain Duncan Smith, but as the UC tragedy plays out, let’s remember that the real villain is that dreadful weasel George Osborne. UC has been plagued by painful glitches. Its troubles often seem less teething and more congenital. Its own staff seem just as baffled by it as the claimants. The usual crazy Whitehall division between policy-makers and policy implementers means that no one feels responsible for failure.

But Osborne should. That six-week wait for money is by his design, imposed on the original plan for no other reason than to claw back cash from those who can least afford it. Osborne’s original hope was that he could kill off welfare reform with cuts. Instead, having slashed its budget, he sent it limping and not fit for purpose into the country. It’s just so very stupid. His cunning cuts mean that for some new UC claimants, work does not now pay at all and they now face the extra threat of debt and evictions. It will be on Osborne, more than anyone else, if UC proves to be the vehicle that delivers power to Corbyn.

As the system unfolds over the country, so will winter. It’s awful timing. People are even poorer at this time of year and thanks to both the design and the bungled delivery, they may well be literally starving, as Frank Field describes on the following page. In the areas where universal credit has been unleashed, the Trussell Trust (which runs most of our food banks) says it has seen a worrying rise in referrals — the rate of increase is double that in non-UC areas.

I’m sure all this seems unfathomable to your average Whitehall-based worker as he or she swipes through the options on Deliveroo. It seemed almost unfathomable to me until a girl from the Trussell Trust explained just how chaotic the system is. She used as an example Sarah, a single mother from Oldham who had been referred to one of the Trust’s food banks, unable to feed her three kids. Sarah has a job, so wasn’t UC helping to make work pay? The trouble for Sarah, as for many others, is that she works in retail on a zero-hours contract. She doesn’t know in advance what her hours are going to be. The UC system struggles to cope with irregular work.

Quite apart from this, last month, for no reason she could think of, Sarah’s UC payment was £400 short. She called the now notorious helpline five times and was given five separate explanations. One helpline worker told her, apologetically: ‘As far as I can see, you’ll be £400 short every month.’ Nothing to be done. In a panic, Sarah did her own calculations and research. She took her findings to the job centre, where they eventually admitted a ‘human error’.

It’s the hypocrisy that’s so galling. If you ask the architects of UC to explain the six-week wait, and the debt/rent fiasco, they’ll say it’s vital to treat claimants like grown-ups. We must get them used to the ‘world of work’ they say. But in that case, UC should be paid weekly, fortnightly or monthly. It’s a Gina Ford approach to the nanny state: let them cry it out. But if you’re going to force claimants to face the ‘real world’, you’ve really got take some notice of it yourself. Why charge up to 55p a minute for the phone line? Well, I was told, we felt there should be a disincentive to call it. But in what ‘real’ world do effective companies charge customers for a helpline?

UC application must be made online. Why didn’t anyone realise that many of the neediest people don’t have a Macbook at home? The Trussell Trust tells me it takes, on average, 45 minutes to fill out the UC application form. Those without computers hurry off to local libraries, but the online time allotted to each person is often only 30 minutes. Time ticks down in the corner of the screen, the session ends, and the poor sods have to start again. Aren’t these the sort of ‘real world’ troubles that should have been dealt with by now?

The underlying problem is that UC was supposed to operate on a test-and-learn basis. This, again, is a fine idea, but in the real world it depends on government having the wit and ability to act quickly. Since IDS, the DWP has been run by the unfortunate Stephen Crabb, silent Damian Green and now Gauke. None of them have had time to understand, let alone, fix universal credit.

Low-paid work is often seasonal. We owe our impressive unemployment figures to the rise in zero-hour contracts. So why did the men and women behind UC imagine claimants would have a fat final salary to see them through the wait for cash? The truth is, I’m not really sure they ever did. The original idea was that the online UC calculator would mimic each claimant’s separate world of work. When that proved impossible, they justified it in hindsight.

The cry now, from the left and from many on the conscience-stricken right, is for a pause in the UC schedule. But wouldn’t it be better to just fix it? With a little will and determination, it’s possible. Gauke has already announced that the expensive phone line is to be abolished. Now the six-week wait must go. Even four weeks is a push, so Terry and his vulnerable friends need more support. Rent should go straight to landlords. Work should always pay, or else what’s the point? Now more than ever, with Corbyn in the wings, the Tories are vulnerable to the old insults: that they’re just in it for themselves; that they’ll stiff the poor if they can. If they don’t repair universal credit, I’m afraid they’ll deserve every one of them.

Got something to add? Join the discussion and comment below.

You might disagree with half of it, but you’ll enjoy reading all of it. Try your first 10 weeks for just $10

Show comments