This week marks the start of what ministers clearly hope will be the end game for Universal Credit (UC) – moving across to it the remaining claimants of the so-called “legacy” benefits that Universal Credit combines into one.

Almost nothing has been simple about the implementation of UC – now due to be completed in 2024, a mere 14 years after the white paper which set it out and seven years later than originally intended. And these next, and in theory final, steps will be anything but simple too, carrying risks for both claimants and for the Department of Work and Pensions.

The 2024 deadline to "get Universal Credit" done seems to suit the electoral cycle

The aim is to get on to UC the remaining 2.6m households who are still on the six so-called legacy benefits – among them Jobseeker’s Allowance, tax credits, housing benefit and the Employment and Support Allowance.

There are three ways in which households can move. So-called “natural migration” where a new benefit claim or a change in the circumstances of a household already claiming leads to a UC claim. That has been the chief driver so far for the 4.2m households currently on UC, accelerated by a tidal wave of applications at the start of the pandemic when the new system held up admirably.

Then there is “voluntary migration”, where people can opt to move on to the new benefit. And finally, and the most challenging, is “managed migration” in which those still not on UC are required to move across or cease claiming. The aim being to complete this in 2024 so that the tax credit system for those in work can be shut down in 2025.

There will be suspicions that the retention of the 2024 deadline suits the electoral cycle – allowing the prime minister to claim that, by and large, he has “got UC done”.

But there is some good news here. In a slug of documentation put out late last month, DWP calculates that 1.4m of the 2.6m households still on legacy benefits will actually be better off on UC than their existing benefits.

There were always going to be gainers as well as losers in the move to UC. The good news is that some 53% of the remaining total stand to gain, against an estimated 37% of the whole caseload when UC was originally announced in 2010. That is thanks to the rate at which the benefit is withdrawn as earnings rise now being lower. The range of gain varies. But the average is £220 a month.

Nearly a million households will lose out from the move to Universal Credit

The department hopes to encourage these households to move voluntarily. But, as the department acknowledges, the complexity of the benefits system makes it hard for individuals to work that out for themselves. It will encourage people to use independent benefit calculators and independent welfare advice to help them do that, and there remains a  bunch of things they need to take into account.

Anyone with savings of more than £16,000 is ineligible for Universal Credit and with more than £6,000 their benefit will be reduced (there are no savings limits in tax credits). So they should not move voluntarily. And then there is the perennial question of tax credit debt – money owed because too much was paid in past claims for the largely annualised benefit (worked out on the previous year’s earnings).

At the end of April last year there was still £4bn of debt owed by tax credit claimants, £2bn of it more than five years old and £600m of that more than 10 years old. The government remains deeply resistant to writing much of this off. And some will be unaware, or will have long forgotten, that they owe money which will be reclaimed from their UC payments: although that is set to happen in time whether they move voluntarily or under “managed migration”.

“Natural” migration will continue to shift people to UC. The big challenge is the “managed migration” for those who choose not to move voluntarily or who will be losers from the change.

For some 300,000 of the remaining households, the move to UC will make no difference financially. But the losers total an estimated 900,000 households. They will get transitional protection – the same cash sum as they were getting when they are moved. But that sum is not indexed. And as the Institute for Fiscal Studies has been quick to point out, it will be rapidly eroded by inflation, producing a decline in living standards until a beneficial change of circumstances or their underlying entitlement catches up. And, with inflation high and the annual uprating of benefits taking place in April, someone moving in April 2023 will be better off than someone moving just before as the current big spike in inflation looks set to lead to a significant jump in benefit rates next April.

DWP has promised to go “slow, slow, slow” in the move to managed migration. It says it will take “several months” to finalise its approach, starting with an initial 500 cases as it continues, in its words, to work out how best to notify claimants, understand their challenges and support them through the transition – while ensuring that the correct awards are made. The implication is that lessons will be learnt from that, and from succeeding smallish cohorts, before more mass transfers take place.

Completing the shift to Universal Credit will be hugely complex for both claimants and the DWP

There are clearly significant risks here for DWP reputationally and for claimants financially. Those on Employment and Support Allowance include many with mental health issues, some of whom will struggle with the on-line claims process and who could lose their benefit as a result. Among the losers are those on ESA who qualify also for the Severe Disability Premium where UC is less generous. And those on tax credits, who have been accustomed to a largely annualised relationship with HMRC, will have to engage with a DWP work coach and sign a claimant commitment to look for higher earnings. The 13 illustrative examples of winners and losers that DWP has (admirably) spelt out  shows just how complex this operation is going to be, both for claimants and the department.

Charities ranging from the Child Poverty Action Group to MIND are alarmed. More than 20 have written jointly to ministers expressing “grave concern”. They want more formal – or at least more visible – trials. And they want the process frozen until there is a guarantee that anyone who fails to respond to a migration notice will not have their benefit stopped until a UC claim is established.

There are many ways Universal Credit could be tweaked, but that fact is that it is here to stay. So completing the transition makes sense. But getting the reluctant and the losers safely across was always going to be one of UC’s biggest challenges.

 

Original source – The Institute for Government

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