RCG street stall against Universal Credit

Fight Racism! Fight Imperialism! 268 February/March 2019

Universal Credit (UC) is a new system of benefit payment which is being rolled out to millions of claimants at the same time as cuts in welfare payments are taking place. 75% of benefit cuts set out in the 2016 Budget have yet to take place, according to the Institute of Fiscal Studies. UC will drastically cut payments to single parents, carers and the disabled in particular. Job Centre workers are now called ‘job coaches’ because UC is designed to move all unemployed claimants into work. It is supposed to save the Treasury £7bn a year.

Susan Davidson and Leo Latour report.

Who is hit by Universal Credit?

The working poor, 600,000 single parents and nearly 750,000 households on disability benefit are the prime targets for UC. Under UC, two in five households will lose an average of £52 a week. The Child Poverty Action Group says single parents and families with three children will lose an average £200 a month.

In January, four single mothers won a High Court Appeal against the Department of Work and Pensions (DWP). Two High Court judges ruled that the DWP was wrongly interpreting UC regulations. The women showed that a ‘fundamental problem’ with the scheme meant their monthly payments varied enormously and they had ended up out of pocket, a problem their lawyers said was likely to affect tens of thousands of people. Another High Court Appeal by the mother of a disabled child fighting a £2,000 per year cut in benefit payment and a male claimant on Employment and Support Allowance (ESA) is taking place as we go to press.

What is Universal Credit for?

Universal Credit replaces six current benefits and tax credits: Housing Benefit, Child Tax Credit, Income Support, Working Tax Credit, Income-based Jobseeker’s Allowance, and Income-related Employment and Support Allowance. The DWP now calls these means-related payments ‘legacy benefits’. They are to be rolled into one to ‘simplify’ the system. In reality, individual and family circumstances fluctuate constantly, with changes in address, rent, increases in water, gas and electricity bills, travel expenses and hours worked, so it is impossible to reduce every month to an algorithm. Under UC, however, claimants must constantly update their information with the slightest change in their income or risk sanctions and a partial or total loss of payment. Latest figures show that 3% of UC claimants have been hit by sanctions which on average have lasted 31 days.

UC stall SL

Passers-by make their views on austerity clear at an RCG stall in South London

The Welfare Reform Act of 2012 which set up UC was introduced by then Secretary of State for Work and Pensions Iain Duncan Smith as a ‘once in generations’ reform that ‘would make the social security system fairer’ because a key feature of the proposed new benefit is that payments would taper off gradually as the recipient moves into work, not suddenly stop as at present. The stated intention of UC is to end the situation where earnings from work can be less than income from state benefits. This is often the case in the real world where childcare costs, travel expenses, taxation and very low wages combine to make work an impossible choice for many who would like a job. The government will of course not solve this by increasing wages: it is determined to drive people into the low-pay job market of zero hours employment, so-called ‘self-employment’ and short-term contract work. Over half of those in poverty now are the working poor and this is set to increase drastically. Further punitive aspects of UC hit carers: if they are not seeking work, they will not be able to claim UC. The poorest pensioners are also hit: they will lose pension credit if one half of the couple has not reached state pension age and has to apply for UC – this may cost them as much as £7,000 a year.

The application process

UC is of necessity a digital project. Applications, updating and decisions are all designed to be an online process. Communication is via computer or phone. The DWP website advises that ‘If you don’t have access to a computer at home, you might be able to use one for free at your local Jobcentre, library, Citizens Advice or council. If you’re new to computers or haven’t felt confident about using them in the past, now is a good time to learn or get up to speed.’ Behind this ‘advice’ we see the grim determination of the government to drive the system forward and both monitor and enforce compliance by all claimants.

The scheme was originally planned to begin in April 2013 in four local authorities – Thameside, Oldham, Wigan and Warrington, with payments being handled by the DWP Bolton Benefit Centre – but was later reduced to a single area, Ashton, with the others due to join in July. The pilot would initially cover only about 300 claims per month for the simplest cases – single people with no dependent children – and was to extend nationally for new claimants with the same circumstances by October, with a phased transition to be complete by 2017. As a sign of the problems to come, final calculations of UC payments had to be made manually on spreadsheets, with the IT system being limited to booking appointments and storing personal details. The first online forms had no ‘save’ function. A long series of IT blunders and design faults mean UC is at least five years behind schedule. Implementation costs, initially forecast to be around £2bn, have grown to over £12bn.

What happens when you transfer to Universal Credit?

The government website gives clear warning that there will be a five-week delay after transfer to UC when claimants will get no money. As a ‘top tip’ the website adds: ‘you can request an advance payment from your work coach or by calling the free Universal Credit helpline. You will have to pay this money back within 12 months and the first repayment is usually taken from your first Universal Credit payment.’ These loans will be charged at the usurious rate of 30-40%.

Housing Benefit will no longer be paid directly to the landlord but to the claimant, who will then pass on the rent (in Scotland and the north of Ireland claimants can choose to pay the landlord directly or to continue with the previous arrangement). The five-week wait for payment rapidly leads many tenants into rent arrears, borrowing and debt. Figures obtained by the BBC show that UC claimants owe on average £662 in rent arrears, compared to £262 for those on old housing benefit. Many landlords (private, council and Housing Association) are refusing to accept or continue with tenants on UC since they no longer have their automatic pay-off from the local authority. The result? The rate of evictions and homelessness has risen dramatically in areas where UC has been rolled out – for example, by 55% in Flintshire. New Work and Pensions Secretary Amber Rudd has announced that UC will be reformed to allow payment directly to landlords.

The complexity of UC payments is such that a sliding scale of payment operates at every stage. A work allowance (supplementing low wages) is payable for those responsible for dependent children, and/or unable to work full time because of illness or disability. The DWP website explains that ‘if entitled to the work allowance, you can earn up to the threshold for your circumstances. Your Universal Credit payment will then go down by 63p for every £1 you earn above this amount. This is called the earnings taper. If you don’t qualify for the work allowance, your Universal Credit payment will go down by 63p for every £1 on all your earnings. Employer-paid benefits, such as Statutory Maternity, Paternity, Adoption and Sick Pay are treated as earnings and are affected by the taper.’

The ‘customer’ experience

Reports of the trauma of applying for UC are to be found everywhere, on the streets, in doctors’ surgeries and on social media. It is horrendous because the process never ends, the chances of making a wrong computer data entry are high, and can result in immediate sanction and the implication of fraud. Each local council is supposed to have a ‘Landlord Portal’ to be used to check on residence and payment of Housing Benefit. Many have been found to hold inaccurate information and anyway still do not exist in many areas of the country.

As one claimant explains, ‘every time the system has some bit of information that it wants to update it will text your phone, but for some reason it does not do this when you have a new statement so you are left in the dark about payments due’. Further, savings of up to £6,000 and ‘unearned income’ like new-style Jobseeker’s Allowance (JSA) and new-style ESA as well as pension income are deductible from the maximum amount and any imprecision or unnotified changes to any of these will mean an immediate sanction and subsequent reapplication process. Payment of UC is made into one bank account per family each month taking control of Child Benefit away from the mother. The new system can make women totally dependent on an abusive partner.

A rising tide of criticism of UC comes from many directions. MPs, including Tories, have been inundated by constituents who have no money. Charities like the Trussell Trust, Shelter and poverty campaigners have warned that people are being pushed to the brink of destitution. Rudd now says that she wants to make some changes to ‘the managed migration’ to the new benefit system. A parliamentary vote to move the next three million onto the system in 2019 will now be postponed and approval sought for 10,000 closely monitored claimants to be put on a pilot study over the summer. Rudd has made two changes: plans to give private landlords new powers to request payment from tenants directly; and scrapping the two-child limit for families for households who had a third child before the new policy came into effect.

The Labour Party

Labour has long supported UC ‘in principle’. In January 2015 Shadow Employment Minister Stephen Timms wrote to the DWP mocking the government for the slow progress of the programme because less than 3% of Duncan Smith’s original forecast of one million people were on the system. In August 2018 London Mayor Sadiq Khan called for an immediate pause of UC and said that it would result in a £250m loss for claimants in London by 2020/21 and was driving Londoners into destitution.

Some local Momentum branches claim that the Labour Party will end UC but there is no sign of that. In October Shadow Chancellor John McDonnell said a ‘root and branch examination of how we can go forward’ was required but that ‘the principle of bringing together benefits in one so it’s a much simpler system is something we all support, but this hasn’t done that’. Since the implementation of UC depends on the cooperation of local councils to transfer information about housing benefit to the DWP it will be easy to see which, if any, local councils refuse to implement UC. There is no sign yet of any practical resistance from Labour councils.

Stop it and scrap it

We must not allow the government, any government, to get away with such a blatant attack on the working class, and the cruelty of targeting single mothers and the disabled in particular. Millions are being thrown into poverty and debt with the collusion of councils, employers and landlords and no sign of fightback from trades unions or political parties. On this issue we will have to stand together and fight together for a decent standard of living, care for the needy and support for the least able.


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