The Coalition Government yesterday set out their much talked about benefit reform package (DWP Universal Credit – welfare that works). The measures aim to reduce the current number of benefits from 30 down to one – a single Universal Credit. But is this reform needed or is it simply another efficiency drive?
Under the previous Labour Government reforming the welfare and benefit system had been proposed but as it was too late into their term and thus it was too politically difficult to push through the House. For a new Government with new ideas, making large scale reforms is a distinct possibility. Thus, after a public consultation with 1600 responses and endorsements from Citizens Advice and the Institute for Fiscal Studies, a single universal credit was popular, simpler and would improve efficiency.
The move to reduce the complexity of the system from a possible combination of 30 benefits to one Universal Credit will smooth the whole system out whilst simultaneously reducing the fraud opportunities. The argument goes that currently those people reliant on benefits would have little incentive to return to work as their returns would be minimal. This would keep people on benefits and generation after generation would be disincentivised to return to work. Under the old system people would keep only 5p in the pound on top of the benefit if they returned to work whereas under the new proposal they would keep 35p. If that was the carrot then there is also a stick: those people who refuse work three times will lose their benefit for three months.
There are naturally going to be fears in implementing this new reform. This whole reform is reliant on the fact that there are job opportunities. If there are no new jobs created, the reform becomes void and people will end up staying on benefits. Moreover, if there are jobs available will the skillset be matched perfectly? For example, would a 50 year old middle manager at a multinational company who was made redundant due to the recession be expected to take a job on a supermarket floor? If he refused this work would he then be denied his benefit?
Even though the Coalition Government feels it will move up to 350,000 children and 500,000 adults out of poverty, those most vulnerable in society may suffer. Will certain disabled people now be expected to work? The danger of driving some people who are currently on the cusp of a definition is large – they could lose their benefit putting further strain on carers and families.
This blog was also expecting a larger gain for those poorest in society as a result of the reform. A graph within the official document (figure 11, page 53) shows that the poorest decile would gain by 1.5% which decreases to 1.25% and a little over 1% for the next subsequent two deciles. An improvement of 1.5% for the lowest decile equates to an increase of £2.40 per week, or around £125 per year – hardly the light at the end of the tunnel given the economic and political situation these people find themselves in.
There is no doubt that there needed to be reform – the old system was inefficient, over-complex and would only incentivise people to remain on benefits. Having said this, for a system to be started in 2013 which could take a good decade to be fully implemented and costing £2bn, this blog would’ve liked to have seen greater changes for the poorest. Nevertheless, unless the government can stimulate the private sector which will duly create the large number of jobs needed, the reform could have zero or negative impact for people whilst costing the cash-strapped government £2bn.