When the biggest shake-up of the welfare system in decades was introduced, there were bound to be teething troubles. But the welter of problems after the launch of universal credit – especially the five-week wait for initial payments and the harshness of the sanctions regime – led to persistent questions over whether it should be abolished. Ministerial ambition appeared to have outstripped Whitehall’s capacity for delivery.
But the relatively smooth operation of the system during the pandemic, including the administration of the £20 weekly uplift, improved its reputation. Seven million people are expected to be on UC by the end of the next parliament, and plans for the remainder of the managed migration from the old system are in place. The aim of streamlining three separate bureaucracies into one has been met, and the greater simplicity of this arrangement has brought some advantages.
But serious problems remain, both with the system’s design and, crucially, the level at which benefits are set. Labour’s 2019 manifesto committed the party to an overhaul, with a view to making the system less punitive and more supportive, while keeping the basic architecture in place. It is a shame that the party’s current policy is not closer to its old one. The case for getting rid of the two-child and overall benefit caps has never been stronger, given the obscene extent of child poverty. This week’s call by Cherie Blair for Labour to reconsider its commitment to the two-child limit should prompt serious reflection about why Sir Keir Starmer’s party is clinging to this aspect of George Osborne’s legacy. The Child Poverty Action Group says removing the cap would lift 250,000 children out of poverty.
Large families aside, new research by the Resolution Foundation shows that ill and disabled claimants have lost the most from the reforms. A single person with a long-term disability that prevents them from working is £2,800 a year worse off under UC. By contrast, working-age claimants in rented accommodation have been the main beneficiaries. Because of higher rents in London and the south-east, and increased support for private renters, UC will eventually lead to a £2.1bn transfer in benefit entitlement towards these areas – a shift that flies in the face of commitments to reduce regional inequality.
Wrongly applied sanctions have been among the system’s worst failings, and in numerous cases have been linked to deaths. Sometimes it is hard to disentangle harm caused by UC’s structure from that caused by poor administration or the fact that benefits are too low. Currently the basic rate of out-of-work support is 6.7% lower in real terms than in 2013.
Given this, and Labour’s current position, it is imperative to raise the level of benefits. The two-child limit has failed in its aim of limiting family size among claimants, or pushing non-working parents into work. Like the overall benefit cap, which was premised partly on the false notion that people could opt to move to cheaper housing, with the intended effect of bringing down rents, its main result has been to push already-poor families further into poverty. The disproportionately harsh effect of the reforms on disabled people also requires fresh attention from policymakers.
Eleven years ago, the Conservatives pushed through their vision of a more streamlined benefits system, arguing that lower benefits would incentivise work. A Labour party preparing for government should commit to rework the current system to lift people out of poverty.
