Is the Budget enough to save Universal Credit?
The budget delivered two tranches of extra money for Universal Credit (UC) – £1.7bn to improve Work Allowances and £1bn to help people moving onto UC from the old system. While the numbers are large they are not sufficient to reverse even the 2015 cuts -never mind the much larger cuts imposed since 2012. The net result is positive but a long way from providing the opportunity for the huge transformative change that Universal Credit needs.
What are Universal Credit Work Allowances?
Universal Credit takes away 63p of benefit for every pound earned. For single childless people this happens as soon as you start earning. If you are receiving UC because of disability or if you have children you are allowed to keep some earnings before the benefit begins to be taken away. These are called Work Allowances.
£1.7bn more for Work Allowances in context.
The Chancellor has increased Work Allowances at a cost of £1.7bn a year (by 2022 when it is hoped the UC roll-out will be near complete). That sounds and is a lot of money, but it needs a context.
Firstly while new money is slowly being put in, new cuts will continue to take out money. Next year alone the benefit freeze will cut £1.5bn from support going to working age families and children, and yet more the year after. While the Government is indicating that austerity is coming to an end – and in some areas of public spending that claim is justified – for those on benefits, cuts are rolling ahead at pace.
Secondly in 2015 Work Allowances were cut, taking away £3.2bn per year. This budget gave Work Allowances a £1.7Bn a year boost. That means that just over half of that one of the 2015 cuts has been reversed. The total cuts package introduced in 2015 was planned to be £12bn. However, because benefits are frozen but inflation has risen faster than expected, the cuts will actually be around £13.9Bn by 2022.
A further context is that working age benefits will see an overall reduction of £47bn between 2010 and 2022. These cuts have left huge holes to fill, and £1.7bn, while welcome, is simply not enough for the task.  All numbers estimates from table 4 at [https://beta.gov.scot/publications/welfare-reform-further-provision-scotland-act-2012-annual-report-2017/]
£1bn of support for the move to Universal Credit
The numbers above are changes to the long term annual budget of Universal Credit, whereas this £1bn is one-off spending on measures to help people on existing benefits as they move to Universal Credit. The details are outlined in the Budget’s supporting documents, and appear well judged. Extremely welcome is a 2 week run on of benefit for those transferring – this means that as a one-time offer to this group, the dreaded 5 week wait is reduced to a 3 week wait.
Other changes include allowing all self-employed people moving over to UC a year’s reprieve from the Minimum Income Floor rule. This rule reduces UC payments of self-employed people as if they earn the equivalent of working full time at minimum wage, even if they earn less (while reducing them by more if they earn more). While very technical, the rule is expected to cause some families huge and unpredictable losses – so it is welcome that families will be spared it for a while at least.
More than money needs to change
Universal Credit is better today than it was the day before the Budget. The important question is whether Universal Credit provides families with a stable financial platform on which they can build their lives – often in the most difficult circumstances?
The answer is still a resounding no. As was argued in a previous blog, Universal Credit needs to be re-purposed into a benefit that aims to tackle hunger and hardship, rather than simply incentivising work. More money makes this flaw less obvious and less painful, but does not solve it.
More money is almost certainly needed, but that must go hand in hand with including those who experience poverty in the decisions about how to spend it. It must go hand in hand with being appalled at the injustice of seeing people hungry and being brave enough to admit it is all of us who must change, and not just the poor. It is possible and it has happened before – but it will take more than one budget.
|↑1||All numbers estimates from table 4 at [https://beta.gov.scot/publications/welfare-reform-further-provision-scotland-act-2012-annual-report-2017/]|