One for the money

As his Welfare Reform Bill makes its way through Parliament, Ruth Patrick asks, is Iain Duncan Smith's Universal Credit a simple or simplistic solution

We are all well acquainted with the politician’s lie or half-truth: the promises they make in their clamour to get and stay elected which turn out to contain rather more fiction than fact.

Step forward Iain Duncan Smith (IDS), Minister for the Department of Work and Pensions, who is on a reforming quest to wipe out the “sin” of worklessness. He blithely promises “there will be no losers” from his planned Universal Credit, which will roll many out-of-work benefits and in-work tax credits into one single benefit. Is this yet another instance of fiction and politically palatable
rhetoric taking precedence over the facts?

IDS’s Universal Credit will be phased in from 2013, and is due to be debated in Parliament this month as one key element of the Welfare Reform Bill. The rationale for the reforms is simple. The multitude of welfare benefits and tax credits has created an unwieldy and overly-complex system.

People struggle to identify which benefits they are entitled to, and find it even harder to work out if they would be financially better off moving into paid work.

Many benefit claimants face a punitive rate of benefit withdrawal when they do make the transition into employment – meaning that they see very little extra money from their hard work.

The Universal Credit will change all this, IDS confidently asserts. By replacing many benefits, including Employment and Support Allowance (income-based), Jobseeker’s Allowance, Housing Benefit, Working Tax Credit and Child Tax Credit, with one single payment, a meaningful simplification of benefits will be achieved. As people move into work, Universal Credit will be withdrawn at a single rate of 65%, ensuring that individuals keep 35p of every extra pound they earn.

Whilst this attempt at simplification should be welcomed, a large number of benefits will remain outside of Universal Credit – suggesting that much complexity will endure. Further, the reforms could be cynically used as a cover to drive the level of benefits down yet further, with housing benefit’s incorporation looking particularly suspect in this regard.

Fundamentally, there are two ways that IDS’s messianic objective to improve work incentives can be achieved – either you increase the rewards attached to paid employment or reduce the level of support offered to those dependent on state welfare. Evidence from the Coalition so far suggests they firmly favour the latter approach. Just think of the eye-watering proposals to cut the welfare bill by £18 billion, and compare with the stark absence of pledges to increase the minimum wage.

Set against this backdrop, the Universal Credit starts to look like one more way for the Government to push people off welfare and into work. If I were a gambling woman, I’d lay a hefty wager that IDS’s promise will be found wanting when losers in their thousands start to emerge from these reforms.