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Universal credit: fair for whom?

New changes intended to simplify the UK's welfare benefit system could have negative consequences. While the government moralises about "individual responsibility", its policies will entrench poverty for some
Deborah Padfield
6 August 2011

[T]he Government are committed to reforming the welfare system to make it fairer and more affordable, and to tackling poverty and welfare dependency.” (Chris Grayling, Minister of State for DWP, Commons Select Committee, Welfare Reform Bill, 29 March.)

The basic structure of Universal Credit attracts fairly universal support. Tackling poverty and welfare dependency is an aim to which all parties clearly subscribe. What is less clear is what those words mean once the detail of the reform is unpacked. The welfare system is to be made “fairer”, but fairer for whom?

I have just done a scan of several Select Committee discussions on Universal Credit. “Affordability” is a notion to which Chris Grayling, Minister for the Department of Work and Pensions, constantly returns. “Aspiration” is a word used only by the Labour party save once, on March 31, when benefit-dependents were criticised by a Conservative MP, Paul Uppal, for their ‘poverty of aspiration’. Labour MP Kate Green responded that “I do not think that we are talking about a poverty of ambition and aspiration, but a poverty of resource”.

What does this say about the Coalition’s approach to welfare reform?

In practice, the focus of the Universal Credit (UC) reform seems to be cutting the costs of supporting benefit-dependent people while ensuring a plentiful supply of compliant labour for the “flexible” job market. In various ways it cuts across aspirations to climb out of poverty. Indeed, while moralising about individual responsibility, government policies will for some people entrench poverty.

“Fairness”, in the context of UC, primarily means fairness for the taxpayer and employer, not fairness for those dependent on the state.

Universal Credit is supposed to simplify the welfare system and ensure that “work will always pay”. It sensibly integrates most working-age benefits into one calculation, producing one deduction rate as other income rises. This should abolish the massive marginal deduction rates currently suffered by some through the withdrawal of benefits when they go to work, and the “cliff-edges” that, amongst other perversities, suddenly make work effectively unaffordable (because people on already-tight incomes lose as much or more in benefits than they gain by being employed).

UC is a huge web of benefits, and I can only explore a few corners here. One thing is certain. It is not intended to help people gain more than basic subsistence. That is evident in relation to self-employment and savings.

Little support for climbing out

The regulations on self-employment, like much else, are still being drafted. However, the ruling assumption is that self-employed people will earn the minimum wage or over for each hour of work they declare. This approach (unlike that of tax credits) does not recognise that at the outset self-employed people routinely work long hours for little (if any) return, or that established businesses can hit major fluctuations.

UC will also discourage people from saving their money. Again unlike tax credits, UC will be capped when savings hit £16,000, with reduced payment from £6,000. Why, asks government, should the State subsidise people who can pay their own way? The contrary question is: How can people escape permanent insecurity, or help their children to climb out of poverty, if they are debarred from saving? This is not a problem for those who find reasonably stable and well-paid jobs, but there is plenty of hard evidence that that is an unrealistic hope for many. Those many will never be permitted to accumulate the capital necessary for present or future security. When they hit problems – ill health, redundancy or old age – they will necessarily be thrust back into benefit dependence.

Couples and Families: let the man be the breadwinner

Universal Credit aims to make work pay for households, not individuals. Deduction rates favour the first earner’s return to work while being punitive for the second. Likewise, conditions and sanctions will focus on the first earner. Within the boundaries of affordability, this is seen as the most effective way of reducing household poverty. “It is not our intention to impose severe or stringent conditionality upon households where the right thing is being done—where people are working more, and where the main earner is moving up the income scale. Our goal is to ensure that we have a system that lifts households out of worklessness” [Grayling, 5 April].

The first earner will often be the man. Many observers are worried about the vulnerability of women whose access to the job market will again be marginalised. More widely, women will have legitimate concerns about entering a partnership. UC – including the components covering children’s and housing costs – will be paid to one person in a couple, which in many cases may well be the man. Women’s independence will (continue to) be heavily compromised.

Child-care and mini-jobs

As yet, the DWP has not worked out how support for childcare and such currently “passported” benefits as free school meals will fit into this picture. Chris Grayling had to “freely admit that some aspects of the current system make it complicated to create the perfect outcome, so we have to…. try to ensure that we deal with some of the complexities.... The approach we take has to be simple and affordable…. Given that all these benefits lie without the benefit system, there is no certainty that they will move into the universal credit system.” [5 April].

This sounds like an acceptance that affordability for the State has priority over the affordability of paid work for parents. If the costs of childcare and school meals are not integrated into Universal Credit, then cliff-edges will remain.

The “mini-job”, a job of 16 hours a week or less, is intended to be a key route back into work under UC. Under the current system many have no incentives to hold down a job of 16 hours a week or less, as they would be better off on benefits. UC provides incentives for benefit-dependents to take on such “mini-jobs” and extends childcare payments to people working these reduced hours.

Chris Grayling argues that we “will see a greater willingness for child care providers to provide short-term placements, precisely because the system will be more geared towards mini-jobs. …I would be surprised if the market did not respond. At the same time,... child care support for mini-jobs can be delivered within families. Informal child care will enable quite a lot of people to take the first few steps back into work, before moving on to something more substantial…”

Chris Grayling wisely avoids relying too much on the market’s willingness to respond to the need for flexibility – not least the extreme flexibility needed by shift workers; instead he relies on families’ ability to provide childcare for up to 16 hours a week. If adequate childcare cannot be found, sanctions will apply to single parents who fail to look for and accept jobs. Yet dependence on family for childcare will be sabotaged by the effects of the benefit cap and of changes to local authority homelessness duties under the Localism Bill, both of which will force people to move away from existing support systems into cheaper areas.

At the same time, primary carers look likely to be cut off from progression into more “substantial” work. No extra money has been provided for extending childcare payments to those working 16 hours or under, so their gain is at the expense of those working longer hours, who will get less.

Within two-parent families, then, mini-jobs may be the best hope for many second-earners. Single parents may well be caught between the unaffordability of work in view of childcare costs, and sanctions for failure to take “reasonable” offers of work. Their ability to refuse childcare which they judge unsatisfactory will be subject to the discretion of Job Centre Plus.

Sanctions

“Low level” sanctions will apply where there are “significant” breaches such as failure to attend a work-related interview without advance notice: “If one of your staff did not turn up for work and did not tell you…, you would not be best pleased. I do not see why it is different for somebody turning up for a work-focused interview” [26 April]. So, like more ruthless hourly-rate employers, Job Centre Plus will stop payment until the employee/customer complies once more. It can also apply a short fixed-term sanction to signal the seriousness of the breach.

Where such incidents become “persistent” (at least three), or where people have refused to apply for jobs “that they are suited to do” or “wilfully” turn down job offers, sanctions of up to three years will come into play. Exactly what sanctions will mean in practice depends on regulations yet to be set out. A sanction for an over 25 year-old Job Seeker currently means withdrawal of all JSA. For couples, the other partner may be able to continue claiming some money. People can apply for “hardship payments” amounting to 60 per cent of the JSA, though these are rarely paid for the first fortnight. For ESA, sanctions for breach of conditions are less tough but people can be “disqualified” from any payments for up to six weeks, for example for not taking treatment or for failing without good cause to notify DWP that they are going away from home.

Many people on benefits were living well below the poverty line even before the recent cuts. Already, people are hungry and are facing eviction. Larger families will be further affected by the overall benefit cap under UC. Sanctions spell severe poverty, and long-term sanctions spell the engrained poverty which is most difficult of all to break. People will increasingly drop out of the system into the “informal” economy.

Sanctions are also least likely to hit the cannily work-shy. Past experience suggests that the impact will be heaviest on vulnerable people who, because of such problems as mental ill-health, long disconnection from “society” and/or substance misuse, cannot comply with conditions. Chris Grayling insists that Job Centre Plus decision-makers will avoid sanctioning people with mental disorders, speaking of their current and future power to visit people at home where they are in doubt. Wilfully or not, he is living in fantasy-land. I have never heard of such a pre-sanction visit, nor have my CAB colleagues. In any case, such sensitivity can extend only to those whose disabilities are recognised by the system, which is currently very far from all.

Employers benefit from the sanctions regime

 A punitive sanctions regime makes uncertainty and fear, not a sense of responsibility, the primary condition of life. Such fear forces people to accept any job, however short-term and dead-end. Evidence has shown that people are less likely to stay in jobs accepted under compulsion; and that people taking jobs below their skills level are likely to stay below it.

This is a system with short-term benefits for employers: increasingly, ours is a technologically-based economy offering jobs for people able to pick up a low level of skills fast, then moving on to learn other low-level skills as demand shifts. Those trapped in that continual churning have no opportunity to gather the skills, experience, confidence and sense of hope necessary for career progression. “Career” is not a word which fits this discussion. These are people whose duty is to be grateful and responsible to the State which gives them the “help” they need.

I return to that critique of people’s “poverty of aspiration”. I do not meet such poverty in most of the people I see. Some of them, yes – just as some rich people surf on the boards provided by family and connections. Poverty of opportunity alongside an agonised longing to aspire I certainly meet; and welfare reforms look set to perpetuate it.

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