Gavin Rice is Policy Director at The Centre for Social Justice.
It’s only when history comes to be written that unsung heroes emerge.
Edmund Hillary may be remembered as the first person to climb Everest, but it was Tenzing Norgay who carried his bags. We have all heard of Neil Armstrong and Buzz Aldrin, but how many know that Michael Collins orbited the Moon alone for 21.5 hours while his colleagues made history?
Likewise, while the cause celebre of the pandemic has been Rishi Sunak’s salary-saving, budget-busting furlough scheme, the quiet saviour of the lockdown has been Universal Credit.
In the first two weeks of the pandemic, Universal Credit (UC) processed one million new cases. At the peak of demand the number receiving this lifeline benefit more than doubled, from 2.9 million cases before the pandemic to a high of over six million – an increase of over 100 per cent. In September there were still 5.8 million claimants, more than was ever originally envisaged, and after the end of furlough last month there will be more to come. Through the economic maelstrom of the last 18 months, 96 per cent of payments were made on time.
Not that Chancellor will be talking about that when he reveals his Autumn Budget on Wednesday. His decision to end the £20 per week uplift in October led to six former Secretaries of State for Work and Pensions, and 50 Conservative backbenchers, to call publicly for its retention.
UC was designed by the Centre for Social Justice (CSJ) with two main goals: reducing the complexity of the old, “legacy” system by rolling six overlapping benefits into one, and eliminating financial disincentives to work.
Before UC, welfare claimants could find themselves no better off even when taking on work, since their benefits would be withdrawn. In some cases 100 per cent of someone’s earnings could be lost in withdrawal, removing any incentive to work more. UC slashed these barriers via the “taper”, meaning work would always pay.
Inefficiencies were eradicated by means testing on a household basis. UC produced a data-rich system, with clear information about each household’s income available centrally to the DWP. And conditionality was introduced, meaning claimants would be obliged to look for work if they were able. Work coaches helped hundreds of thousands to stand on their own two feet.
But the pandemic came like a bolt from the blue. The Chancellor and Thérèse Coffey, the Secretary of State for Work and Pensions, agreed an emergency increase of £20 to the Standard Allowance – the basic rate of UC given to all claimants. In this way they protected people’s incomes at a time of national crisis. Work search duties and sanctions were rightfully suspended.
More money in welfare isn’t everything, but the £20 increase followed a decade of cuts to benefits through the benefits freeze and benefits cap, which kept UC falling in real terms. That’s why the Centre for Social Justice supported keeping it, as a way of partially redressing these reductions.
But there is now a vital conversation to be had about the future of UC. There are many other ways the Government can invest in this vital national infrastructure other than the much-discussed £20.
First, it could cut the taper rate of UC down – the CSJ originally recommended a rate of 55p in the pound, rather than the current 63p. Softening the taper would eliminate the situation, flagged by Sir Keir Starmer, in which someone on UC who is working full time on minimum wage could face a withdrawal rate of 75 per cent, since they would be liable for income tax and national insurance. This would seriously benefit the 40 per cent of UC claimants who are in work.
Money saved by removing the £20 uplift could be put back into the Child Element to support households with children, thus helping families struggling with the cost of living at a time of high inflation and soaring energy prices.
The maximum amount of childcare covered by a UC award could be raised from 85 per cent to 100 per cent, as called for by the CSJ. And, at zero balance sheet cost to the Treasury, the maximum rate of monthly debt recovery for UC recipients eligible to repay arrears or historical benefit overpayments could be reduced from 25 per cent of their incomes down to 10 per cent.
But there could be much more to Universal Credit than that. The goal of levelling-up, reskilling for a low-carbon economy, increasing labour productivity, and relying less on low-skilled immigration will need a streamlined, time-tested state apparatus to drive it.
We have record numbers receiving benefits, yet also have a labour shortage. UC should provide the structure to link the welfare system to the jobs market. Why not ‘bake’ skills into claimant contracts?
The DWP should become a skills department, not just a deliverer of cash. Through partnership with employers and educational providers, UC should become the engine of opportunity.
No-one is going to sing about it. Wednesday’s budget will barely mention it. But just like Sherpa Tenzing and Michael Collins, Universal Credit will do the heavy lifting in this recovery.