Universal credit – panacea or problem?

Published on 4 November 2010

The benefits system is to undergo its biggest overhaul for a generation, with many existing tax credits and benefits being replaced by a ‘Universal Credit’. Whilst we broadly welcome the initiative, there is as yet insufficient detail to tell whether it will address all of the existing system’s problems. We urge the Government to tread carefully, postponing major reform until the law is in place, the systems are ready and tested and all of the practical issues have been fully thought through.

Many problems that claimants face in the current tax, tax credit and benefit systems stem from the way the systems interact with one another. Other problems arise from the complexity of the systems that make administration difficult.

The consultation document acknowledged this, and although we support the Government’s intention to address these issues, we have many concerns about their proposed solution. 
à link

For example:

  • Some important groups such as the self-employed, people with disabilities, pensioners and second adults in couples are mentioned only very briefly.
  • We are sceptical about the claim that IT changes would not require a major project, particularly if run in tandem with the reforms to the PAYE system currently proposed by HMRC. The systems should only be launched once they have been fully and rigorously tested.
  • The cornerstone of reform seems to be the aim to ‘make work pay’. The Government have acknowledged that benefits sometimes pay more than work, and Universal Credit seeks to address that. However, for many claimants, it is not the main benefits themselves which make the difference but the passported benefits to which receipt of the main benefits automatically entitles them. The most common and valuable of these passported benefits is free school meals, and it is often the loss of such benefits which, when added to travel and other costs of working, make people worse off in work.

We are now going into a long period of debate and further consultation. We hope that the views of those who deal with individual claimants on a daily basis have the opportunity to influence the final design.

Our concerns are set out in full in our response to the consultation document.

(04-11-2010)

Contact: Victoria Todd (Tel: 0844 579 6700 Fax 0844 579 6701)