Is universal credit really a good policy?

One of the main purposes of the benefit system is to help people in need be able to recover and get back into the job market. However, the current system has many problems which make this difficult, such as quick withdrawal of benefits which makes it unrewarding to work extra hours. This means that it isn’t working as well as hoped, creating a benefits culture as many believe it not worth working, with fraud also a major issue. Therefore, the current government is trying to fix it, bringing a new system, called universal credit. It hopes to simplify the system and fix many of the problems, possibly saving money and improving the incentive to work. 

On the surface there are many benefits to the new system. With the new design, as the benefits are withdrawn slower and more people will be better off working every additional hour, the incentives increase. For example, people who used to have a marginal tax rate of 90% will now see lower decreases, back to a marginal tax rate of around 60%, meaning that they are possibly more likely to seek work and take a job. In turn, this should mean that more people work, reducing the cost of the benefit and saving money for the government and also ensuring that people can be better off. In addition, work search requirements are going to increase, hopefully ensuring that more people will have to try and find a job. Currently, people just have to show that they are trying to find a job, with the new system meaning that they have to show more proof. This should hopefully mean that more people try, helping to find a job at one of the 400,000 vacancies available. As a result, this means that the system is designed to fix many of the issues with the old benefits system.

Furthermore, universal credit should hopefully reduce the cost. This is because as the new system is easier and simple to administrate, cost should be saved, with much of the work done through the internet rather than by person. At the same time, by combining all of the benefits into one, work is reduced while more people will be able to see benefits they are eligible for, again reducing the work load for staff. At the moment, multiple benefits require multiple departments, but combining this should bring efficiencies. In addition, this new system through the internet and simplification should reduce the opportunity for fraud, again saving money. This is currently worth £200 million per year, a substantial saving, which could be spent on investment or cutting the deficit, if it works, showing that universal credit is a good policy.

One of the problems with universal benefit is that it still doesn’t tackle the root causes for  people living on benefits. It’s a policy to try to fix this, but it ignores that many other issues could be at fault. This could be because many people don’t have the skills required to do the jobs that are available, meaning that increased education focussing on skills would be a better idea. At the same time, many people could lack ambition, not wanting to work even if it does get them more money, valuing the leisure time more. These factors could mean that even though on paper the new system might seem better, it could fail to change behaviour and as a result actually mean that the burden on the state increases. In turn, this makes the problem even worse and makes the new system a waste of time. Instead, other policies, such as funding apprenticeships, would be better idea.

Additionally, there are problems with the implementation and design that mean it might not be as successful as intended, and could actually create more problems. Part of this is because the current system is based on the current month’s situation, but the new system considers the previous month. This means that if somebody loses their job, they won’t be eligible until the following month, creating a problem as they could struggle to live in the short run. Many people could see this as undesirable, and not worth the supposed benefits. Second, with the new system being administered through the internet, this creates additional problems. This is because not everyone, especially people on a low income or disabled, don’t have access to the internet, thus cannot easily use the new system. As a result, many people could experience hardship and costs could increase if this turns out to be more people than expected. This has been seen in initial trial runs, with problems as many confused. These could just be teething issues, with many of the benefits seen in the long run.  Thus, universal credit isn’t as good as it first seems.

In conclusion, the new system seems to have a lot of positives, fixing a lot of the problems with the old system, improving the incentive to work and ensuring that work pays. Simplification and reducing fraud should hopefully save money, helping the government to work towards its main fiscal mandate. However, the new implementation might mean that should people lose out, and since it doesn’t tackle the root cause of benefits, it might not mean a change in behaviour. As a result, the £3 billion spent introducing the new system could be a waste. Overall, it is likely that it will be a long time before it is known if universal credit has worked, seeing as many previous government predictions have turned out to be wrong. Therefore, although it has promise, it is impossible to know if it is successful until it has been implemented.

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