Universal credit: Failure or innovation?

Much controversy has surrounded universal credit, the flagship welfare reform of the Coalition government that comes into operation nationwide this October. The brainchild of Iain Duncan Smith, universal credit is designed to replace most existing welfare payments with a single benefit, and theoretically reduce poverty traps by enabling recipients to keep more of their money when making the transition to work.

Nonetheless, there exists strong evidence against the feasibility of universal credit as an effective anti-poverty measure. Because it will be paid monthly, instead of fortnightly like current benefits, this will make it harder for low-income households to manage their budgets, as they depend on more frequent incomes to make ends meet.

The changes will hit ordinary families the hardest. Family Action notes that disabled children would lose half of their financial support, while Save the Children estimates that 1.1 million families with children would witness a further squeeze in their living standards. The Joseph Rowntree Foundation found that any reductions in poverty as a result of the new scheme would, perversely, be cancelled out due to planned changes to both taxation and benefits indexation.

This welfare reform is therefore one that will have a major impact on the living standards of residents in my home city of Brighton and Hove. It is estimated that 25,610 people will be affected by the introduction of universal credit, not including those who receive working tax credits to top up their incomes.

Numerous measures related to welfare and taxation introduced by the Coalition will diminish the ability of universal credit to tackle poverty. For instance the replacement of council tax benefit with the council tax reduction scheme has now made 10,000 people liable to pay council tax of up to £3 per week whereas previously they would have been exempt.

The controversial bedroom tax, which reduces housing benefit for social housing tenants who are seen as ‘under-occupying’ their properties, will affect an estimated 1,500 council and housing association tenants here in Brighton and Hove. In addition, the loss of our Citizens Advice Bureau as a result of legal aid cuts will also deprive hundreds of people of essential specialist advice on welfare and debt service that they once relied on.

Such findings serve as an indictment both of universal credit and of the Coalition’s social agenda in general.

If the Coalition is serious about alleviating hardship and making work pay, it should tackle the twin problems of low pay and expensive child care. The introduction of a living wage of £7.45 and a higher level of reimbursement for child care costs would be steps in the right direction. The government should also extend eligibility for free school meals and incorporate existing pilot schemes providing free school breakfasts into a national scheme. This would both tackle childhood hunger and improve educational outcomes.

Only then we will see a major breakthrough in the fight against the scourge of poverty. In its current form, universal credit is not part of the solution, but a contribution to the problem.