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Double whammy of Universal Credit attacks against DWP

Whitehall has suffered a double barrage of criticism over its ongoing Universal Credit benefit reform programme in two major reports by the Public Accounts Committee (PAC) and the Institute for Fiscal Studies (IFS), both published today.

The think tank’s report found that a series of pre-emptive cuts means introducing Universal Credit will “reduce the generosity of the benefit system” in the long run, including to working families.

Even when highlighting the reform’s positive side, the IFS said Universal Credit will strengthen financial work incentives “only slightly” in the long term.

On average, working single parents will effectively keep 8% less of their earnings under the programme than under the current system because of the way Universal Credit is withdrawn as their earnings rise. Households with two-earner couples are also relatively likely to lose.

While Universal Credit was intended to be more generous than the current system when it was first proposed, the think tank said cuts to how much recipients can earn before their benefits start to be withdrawn have now reversed this.

Across working households, 2.1m will get less in benefits as a result, and will lose more per year than the 1.8m households set to gain more in benefits.

And although early evidence suggests Universal Credit had a positive impact on employment amongst the small group already affected, the IFS said it is not possible to draw broader conclusions from this yet.

Robert Joyce, an associate director at the think tank and author of the report, said: “The long-run effect of Universal Credit will be to reduce benefits for working families on average – a reversal of the original intention.

“However, the potential gains from simplifying the working-age benefit system remain mostly intact: Universal Credit should make the system easier to understand, ease transitions into and out of work, and largely get rid of the most extreme disincentives to work or to earn more created by the current system.”

‘Delayed programme and evasive department’

MPs on the PAC took a slightly different angle in their report today. Instead of focusing on families set to lose or benefit from the reform, they attacked the Department for Work & Pensions (DWP) for its “persistent lack of clarity and evasive responses” to the Committee’s inquiries, particularly around the extent and impact of roll-out delays.

The department expects Universal Credit to be fully operational in March 2021, but the Office for Budget Responsibility forecasts a further six-month delay beyond this latest planned deadline.

The PAC expressed concern that such delays will postpone the programme’s alleged benefits, with delays relating to the digital service particularly at risk of hiking costs.

It also slammed the department’s weaknesses in milestones for the programme’s implementation, which MPs found created “uncertainty for claimants, advisers, and local authorities, and makes it difficult for Parliament and taxpayers to hold the department to account”.

Meg Hillier MP, the Committee’s chair, said: “The DWP appears either unable or unwilling to level with Parliament and the public about Universal Credit.

“Since our previous report it has emerged there will be further delays before Universal Credit becomes fully operational, the full implications of which are unclear. It’s also worrying that the approved business case for the programme has not been updated to take account of the Spending Review and Autumn Statement.

“If taxpayers are to have any faith in what is already a complex and controversial project then the department must provide clear information about the impact of these factors and the roll-out of the programme as a whole.”

The Committee urged the government to “set out and report publicly” against a wider set of clear milestones, outlining areas it expects these to cover. It also called for greater clarity on the programme’s business case.

But a DWP spokesman disagreed with the PAC’s criticisms of the department’s transparency, commenting: “We are disappointed that they seem to have failed to take into account much of the evidence we supplied.

“Universal Credit is on schedule. Once fully rolled out it will generate £6.7bn in economic benefit every year. We welcome the IFS analysis which shows that UC will make work pay and increase financial incentives for people to work more, while also bringing the welfare bill under control.”

Also today, campaigners at The Equality Trust have argued that the new system will not benefit families who pay income tax and national insurance, who face losing 76p in every extra £1 they earn when moving onto Universal Credit.

(Top image c. Kirsty Wigglesworth, PA Wire)