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Universal Credit: more crackpot realism

Image: Matt Brown

It surely cannot be long before the UK government’s hated Universal Credit reforms are put on hold.  The reform, which attempts to roll six existing benefits into one, has been blamed for increases in suicide, homelessness and use of foodbanks.  To add to the government’s problems a new report from the National Audit Office says that the new system will cost £1.9bn more than the system it is replacing, but will not deliver the anticipated gains.  It is with depressed resignation that the National Audit Office states that:

“We think that there is no practical alternative to continuing with Universal Credit…

“Both we, and the Department, doubt it will ever be possible for the Department to measure whether the economic goal of increasing employment has been achieved. This, the extended timescales and the cost of running Universal Credit compared to the benefits it replaces cause us to conclude that the project is not value for money now, and that its future value for money is unproven.”

The irony is that, handled sensibly, the principle behind Universal Credit – that working should always be better paid than being out of work – is a good one.  Under the previous system, unemployed and disabled people risked losing their benefits entirely – including support with housing costs – if they worked more than a few hours per week.  Universal Credit was supposed to allow people to keep their claims open and to continue to receive some of their benefits even if they entered employment.

In this way, Universal Credit could have fitted well with the emerging economy of more temporary, low-paid, part-time, zero-hours and gig working.  However, the reform was dashed upon two very large rocks:

First, and most obviously, the Bullingdon Club Tories were the very last people anyone would choose to put in charge of anything relating to Britain’s poor and disabled.  Just a few years prior to forming the government, David Cameron, George Osbourne, Boris Johnson, et al. had spent their evenings setting fire to £50 notes in front of homeless people.  They were hardly likely to exercise compassion, still less anything bordering on generosity, when overseeing the budget allocated to introducing the new benefit system.  In the end, even the hated Iain Duncan Smith turned on George Osborne for setting a budget that made it impossible for Universal Credit to meet its aims.

The second reason for the failure of Universal Credit is far less obvious, and is another example of a theme I have raised in several recent posts – crackpot realism.  In this case, the government took the role of the aloof fantasist ignoring the legitimate concerns raised from below.  As the National Audit Office point out:

“We recognise the determination and single-mindedness with which the Department has driven the programme forward to date, through many problems. However, throughout the introduction of Universal Credit local and national organisations that represent and support claimants have raised a number of issues about the way Universal Credit works in practice. The Department has responded to simple ideas to improve the digital system but defended itself from those that it viewed as being opposed to the policy in principle. It does not accept that Universal Credit has caused hardship among claimants, because it makes advances available, and believes that if claimants take up these opportunities hardship should not occur. This has led it to often dismiss evidence of claimants’ difficulties and hardship instead of working with these bodies to establish an evidence base for what is actually happening. The result has been a dialogue of claim and counter-claim and gives the unhelpful impression of a Department that is unsympathetic to claimants.”

In short, the government – and Iain Duncan Smith in particular – attempted to introduce Universal Credit in the most complex way imaginable while refusing to listen to the lowly voices of their own people and of groups on the receiving end of the reform that the system was not working.  The result has been no less catastrophic than more obvious disasters like the ill-fated Challenger, the capsized Herald of Free Enterprise or the more recent Grenfell Tower fire where a similar refusal to listen to those considered too lowly to have an opinion resulted in tragic loss of life.  The trail of suicides and premature deaths brought about by the botched implementation of Universal Credit may be less visible, but they are far greater in number.

The most indicative element of this was the techno-utopian claim that the entire benefits system could be operated online.  The lesson for this had already been learned (and then forgotten) in the failed attempt to construct a single NHS database for medical records.  As ever, the wicked computer industry sales departments sold politicians the pipe dream of shiny new computer systems replete with bells and whistles that would make the process of operating complex public services so simple that a child – or, God help us, an economist – could do it.  Meanwhile, as always, the hard–pressed IT people who had to actually build the damned thing said from day-one that it was impossible… but nobody in a position of power ever stopped to listen.

The tragedy is that the intended outcome of Universal Credit could have been achieved in a much simpler manner via the tax system.  The working tax credits introduced by New Labour were already moving in this direction, although the idea of a “negative tax system” has been around for decades.  The tax system could have been used to phase out benefits altogether.  In their place would be a simple minimum income tied to a minimum tax threshold.  That is, anyone whose income did not reach the minimum – either because of low-paid work, ill health or disability – would receive the minimum income as a tax credit.  People in receipt of the credit could then earn up to the minimum tax threshold tax-free.  Once that point was reached, additional income would be taxed.

Crucially, much of the tax infrastructure required to operate a negative tax system is already in place.  Moreover, it has many of the perceived benefits of the various universal basic income schemes currently being proposed, but without the need to provide a payment to every citizen.

We can, of course, argue about the benefits and drawbacks to the many alternatives to the Universal Credit turkey that we are now stuck with.  However, my point is that there were simpler, easier and far cheaper ways of achieving the proposed outcomes.  Moreover, as our economy slips further in the direction of low-paid and increasingly precarious forms of employment, a much simpler system will be necessary… unless, that is, the Marie Antoinettes that run the government would prefer bread riots and guillotines.

As you made it to the end…

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