Universal credit debates on Wednesday 11 July 2018

This House of Commons Library landing page gives a brief overview of recent developments concerning Universal Credit, and links to relevant sources.

** NOTE: Previously, a second Westminster Hall debate concerning Universal credit and the use of food banks had been scheduled for the same day. This has now been cancelled but some of the material below was selected to assist this secondary debate.**

What is Universal Credit?

Universal Credit (UC) is replacing means-tested social security benefits and tax credits for people of working age. UC aims to simplify and streamline the benefits system, improve work incentives, tackle poverty among low income families, and reduce the scope for error and fraud. It is administered by the Department for Work and Pensions (DWP) in Great Britain, and by the Department for Communities in Northern Ireland.

Around 7 million households are expected to receive UC when it is fully introduced, at a total cost of around £60 billion a year. 0.7 million were receiving UC at December 2017 – roll-out of UC is therefore only around 11% complete. The situation varies widely between areas however – in some constituencies over 40% of those expected to receive UC are already receiving the benefit, while in others roll-out is only around 3-4% complete.

Implementation delays

The DWP originally envisaged that Universal Credit would be fully introduced by 2017, but the roll-out timetable has been pushed back several times. Following early problems, the entire programme was “reset” in early 2013. In 2016, the DWP began rolling-out the “Full Service” – the final digital version of UC, available for all claimant groups – using a “test and learn” approach. The Full Service was to have been rolled-out to every part of the United Kingdom by September 2018, but in autumn 2017, following emerging evidence of problems experienced by people moving onto UC, the Government slowed the roll-out plans significantly for January-March 2018 while it introduced measures intended to ease the transition to UC. These included abolishing the 7-day “waiting period”, increasing the amount of the advance payment people can get at the start of their claim and extending the repayment period for advances, and allowing people moving onto UC to continue to receive Housing Benefit for two weeks. The pace of roll-out is now accelerating again – the Full Service was rolled-out to 41 new jobcentre areas in May 2018 and to 61 in June.

The Full Service and “natural migration”

When the Full Service is introduced in an area new claims for “legacy” benefits – the benefits and tax credits UC is replacing – cannot be made (with limited exceptions). Legacy benefit claimants do not move onto UC straight away, but a change in circumstances may trigger a move to UC. The DWP refers to this as “natural migration.” When a person moves onto UC, it will not normally be possible to move back to legacy benefits – the “lobster pot” rule.

The final stage: “managed migration”

Under the DWP’s latest plans, the Full Service will be available in every part of the UK by December 2018. The remaining legacy benefit and tax credit claimants will then transfer to UC by a process known as “managed migration.” This is expected to begin in July 2019 and be completed by March 2023.

Around 2 million households – mainly people receiving income-related Employment and Support Allowance and families on tax credits – are expected to move onto UC by managed migration. Where claimants moved to UC via managed migration are entitled to less support than they were receiving through legacy benefits and tax credits, they may be entitled to a top-up payment so that they do not lose out in cash terms at the point of transfer. This “transitional protection” will continue until the claimant’s circumstances change significantly, or their UC entitlement “catches up”.

Transitional protection will only be available to claimants moved onto UC by managed migration. For legacy benefit claimants who move onto UC in the meantime – following a change of circumstances triggering a claim for UC, for example – there is no such protection and their UC award may be less than their previous benefits and tax credits. On 7 June the Government announced new measures to transitionally protect claimants who would lose out as a result of moving onto UC. These include preventing claimants in receipt of the Severe Disability Premium (SDP) from moving onto UC until the managed migration stage so they can qualify for transitional protection, and making additional payments to people who have already lost SDP as result of moving onto UC.

On 22 June the Department for Work and Pensions published draft regulations setting out the detailed rules for managed migration, how transitional protection will work, and introducing the additional protections announced on 7 June. The Social Security Advisory Committee (SSAC) has launched a public consultation on the draft proposals, which runs until 20 August. The final version of the regulations will be laid before Parliament and debated later this year.

Further information

Commons Library briefing CBP-8096, Universal Credit roll-out: Autumn/Winter 2017, 15 November 2017, covers developments in 2017 including concerns about how long people were having to wait for their first payment of Universal Credit.

Library briefing CBP-8299, Universal Credit roll-out 2018-19, 14 June 2018, gives information on the latest roll-out schedule, including statistics on how far roll-out has progressed for different claimant groups and in different parts of the country. The briefing also explains the implications of the introduction of the Full Service and the circumstances under which people move onto Universal Credit in Full Service areas.

The Library has developed an online tool which gives the latest UC caseload data for constituencies in Great Britain and, for different claimant groups, how far roll-out has progressed – see the page Constituency data: Universal Credit roll-out (14 June 2018).

The Library has also recently published a blog post, entitled Universal Credit: The roll-out so far (9 July 2018).

The draft Universal Credit (Transitional Provisions) (Managed Migration) Amendment Regulations 2018 and accompanying DWP Explanatory Memorandum are available on GOV.UK.

Universal Credit and food banks

On 24 April 2018 the Trussell Trust published a report, Left behind: is Universal Credit truly universal? Analysis of food banks in areas where the UC Full Service had been rolled out for a year or more found that these projects experienced an average increase of 52% in the twelve months after the roll-out date in their area. Comparative analysis of random samples of foodbanks taken from 247 projects either not in full UC areas, or only in full roll-out areas for up to three months, showed an average increase of 13%.

A further survey of 248 people referred to 30 Trussell Trust food banks in Full Service areas, conducted over five weeks between February and March 2018, found, among other things:

1. The wait for a first payment had severe and immediate consequences: 70% of respondents found themselves in debt, 57% experienced issues with their mental or physical health, and 56% experienced housing issues. The majority of respondents were waiting or had waited the intended weeks for their payment but this wait still had severe financial implications.
2. There was little statutory support available during this wait. 63% were offered no help, while the most likely form of help offered was a foodbank voucher. Advance payments were helpful for some, whilst a half who provided detail said they were unhelpful, too little, or unaffordable to repay.
3. Only 8% said their full Universal Credit award covered their cost of living. This was even less for disabled people or people with ill-health, of whom 5% said the award covered their cost of living.
4. Poor administration was a persistent concern. 35% had waited, or were waiting, longer than 6 weeks for their first payment. A third had experienced poor communication, and 30% had experienced underpayment. Over and underpayment were particularly rife amongst those in work, with 50% in work affected.

[Left behind, p3]

The report recommended:

• A “true Universal Support service” which “supports people transitioning onto the service or making a new claim; expands support for people with the greatest financial need; and extends beyond the initial claim or transition”;
• More financial support, in particular for the most vulnerable;
• An “urgent inquiry into poor administration” within Universal Credit and its effects, particularly in relation to insecure work; and
• More flexibilities for claimant requirements and a “yellow-card” warning system for sanctioning.

Asked what plans the Department for Work and Pensions had to respond to the recommendations in the Trussell Trust report, the Parliamentary Under-Secretary of State Kit Malthouse said in a written answer on 9 May (PQ 139374):

People use food banks for many and varied reasons, and it would be misleading to link them to any single cause. Work offers people the best opportunity to get out of poverty and to become self-reliant; adults in working families are around four times less likely to be in poverty than those in workless families. This is why we are undertaking the most ambitious reform to the welfare system in decades - so that it supports people to find and to stay in work. While there are no official statistics on food bank usage, recent data from the Trussell Trust shows that the majority of users are out of work.

As a safeguard for people needing more support, we have a well-established system of hardship payments, benefit advances and budgeting loans. Universal Credit has introduced a further package of measures announced at the Autumn Budget 2017, such as making advances of up to 100 per cent of the indicative award available and increasing the repayment period to 12 months, removing the 7 waiting days, providing an additional payment of 2 weeks of Housing Benefit to support claimants when they transition to UC, and changing how claimants in temporary accommodation receive support for their housing costs.

In a subsequent written answer (PQ 146351, 29 May 2018), Mr Malthouse said that the Department had not carried out any research into trends in the number of people using food banks.

Asked by Lord Kirkwood of Kirkhope what plans the Government had to meet representatives of the Trussell Trust to discuss the use of food banks in Full Service UC areas, the DWP Parliamentary Under Secretary of State Baroness Buscombe said in a written answer on 18 June (HL8290):

Officials from the Department for Work and Pensions meet regularly with key stakeholders including the Trussell Trust, where a range of issues are discussed. We are also currently reviewing research carried out by organisations including the Trussell Trust to add to our understanding of food bank use and will consider requirements to add to our evidence base.

NAO report: Rolling out Universal Credit

On 15 June the National Audit Office (NAO) published a report, Rolling out Universal Credit (HC 1123 2017-19).

The NAO found that while some elements of Universal Credit are working well, with the Full Service operational in 258 jobcentre areas by 12 April 2018, evidence of good relationships between work coaches and claimants, and significant improvements in systems since they were first introduced, some claimants had struggled to adjust to Universal Credit. It noted:

• Evidence from local and national bodies suggesting that a significant number of claimants had suffered difficulties and hardship during roll-out of the Full Service, as a result of issues with the design of UC and its implementation.
• The Department had found it difficult to identify and track those it deemed vulnerable – it had not measured how many UC claimants were having difficulties because it does not have systematic means of gathering intelligence from delivery partners.
• DWP did not accept that Universal Credit has caused hardship among claimants, because of the availability of advances. However, its own survey of Full Service claimants published in June 2018 found that four in ten claimants surveyed were experiencing financial difficulties.
• One in five claimants do not receive their full payment on time. Around 113,000 new claims were paid late in 2017, approximately 25% of all new claims. On average these were paid four weeks late.
• Universal Credit is creating additional costs for local authorities and other organisations that help administer Universal Credit and support claimants. The Department had acknowledged and compensated local authorities for some additional costs, but had placed the burden of proof on local authorities to prove them and had not sought to systematically collect data on these wider costs.
• Organisations told the NAO that DWP had been “unresponsive” to issues they had raised.

NAO noted that the DWP’s Full Business Case for Universal Credit (a summary of which was published on 7 June) states that the Department expects UC eventually to deliver £8 billion of net benefits of year, but added that this “depends on some unproven assumptions.” NAO has “significant doubt” about the main benefits of UC. It points out:

• It is not known whether the employment impact identified in early evaluations can be replicated across the programme.
• It is not clear that UC will cost less to administer than existing benefits.
• DWP does not know whether UC is reducing fraud and error.

The NAO states that “The Department will never be able to measure whether Universal Credit actually leads to 200,000 more people in work, because it cannot isolate the effect of Universal Credit from other economic factors in increasing employment” (Executive Summary, para 16).

The NAO’s overall conclusion on value for money is that:

17 We think that there is no practical alternative to continuing with Universal Credit. We recognise the determination and single-mindedness with which the Department has driven the programme forward to date, through many problems. However, throughout the introduction of Universal Credit local and national organisations that represent and support claimants have raised a number of issues about the way Universal Credit works in practice. The Department has responded to simple ideas to improve the digital system but defended itself from those that it viewed as being opposed to the policy in principle. It does not accept that Universal Credit has caused hardship among claimants, because it makes advances available, and believes that if claimants take up these opportunities hardship should not occur. This has led it to often dismiss evidence of claimants’ difficulties and hardship instead of working with these bodies to establish an evidence base for what is actually happening. The result has been a dialogue of claim and counter-claim and gives the unhelpful impression of a Department that is unsympathetic to claimants.

18 The Department has now got a better grip of the programme in many areas. However, we cannot judge the value for money on the current state of programme management alone. Both we, and the Department, doubt it will ever be possible for the Department to measure whether the economic goal of increasing employment has been achieved. This, the extended timescales and the cost of running Universal Credit compared to the benefits it replaces cause us to conclude that the project is not value for money now, and that its future value for money is unproven.

The NAO report notes that the DWP is now approaching the task of migrating existing benefit and tax credit claimants to Universal Credit and that, after that, UC needs to provide the basis for future development and refinement of working age benefist. To succeed, NAO believes that DWP “must ensure its flexible approach to delivery helps it learn from its own experiences, those of claimants, and those who support them.” It recommends that the Department (Executive Summary, para 19, original emphasis):

Improve the tracking and transparency of progress towards Universal Credit’s intended benefits. It should set out clearly how it calculates those benefits and encourage third parties to review and monitor assumptions. The Department should assess the impact of Universal Credit on third parties and include this in its calculation and budgeting of the implementation costs.

Ensure that operational performance and costs improve sustainably before increasing caseloads through managed migration. It should formally assess the readiness of automation and digital systems to support increased caseloads before migration begins, and ensure the programme does not expand before business-as-usual operations can cope with higher claimant volumes.

Work with delivery partners to establish a shared evidence base for how Universal Credit is working in practice. The Department needs to ensure that delivery partners’ feedback on both implementation issues and the impact on claimants is considered alongside the existing feedback from frontline staff and programme managers. It needs to systematically collect, analyse and publish data and evidence from delivery partners and produce a shared understanding of what is happening on the ground and how it is addressing any issues raised.

Make it easier for third parties to support claimants. This might include:

• extending the concept of the landlord portal to simplify verification processes (for example, for childcare costs);
• sharing, with the claimant’s consent, appropriate information with third parties, such as information on additional support requirements;
• allowing the bulk upload and download of information helpful to the support of claimants, such as changes in rent; and
• allowing those supporting claimants access to a version of the journal through which they can view appropriate shared information and communicate with the Department.

Further developments

On 21 June the Secretary of State for Work and Pensions, Esther McVey, made an Oral Statement to the House about Universal Credit and recent welfare changes, during which she referred to the NAO report (HC Deb 21 June 2018 cc491-507). For Labour, the Shadow Secretary of State for Work and Pensions Margaret Greenwood called on the Government to halt the roll-out of UC (c494):

The NAO is very clear that the DWP should not expand universal credit until it is able to cope with business as usual. The Government must now listen to the NAO, stop the roll-out of universal credit, and fix the flaws before any more people are pushed into poverty by a benefit that is meant to protect them from it.

Following the Statement on 21 June and further statements made by the Secretary of State at Work and Pensions Questions on 2 July (HC Deb cc1-13) the Comptroller and Auditor General, Sir Amyas Morse, wrote to the Secretary of State on 4 July. The letter states:

I wrote to you on 27 June asking to meet to discuss my report on universal credit and your comments, but I have not yet been able to see you. Following your second set of statements in the House about the report, I am now reluctantly writing an open letter to you to clarify the facts.

Our report was fully agreed with senior officials in your Department [for Work and Pensions]. It is based on the most accurate and up-to-date information from your department. Your department confirmed this to me in writing on Wednesday 6 June and we then reached final agreement on the report on Friday 8 June. It is odd that by Friday 15 June you felt able to say that the NAO [National Audit Office] “did not take into account the impact of our recent changes”. You reiterated these statements on 2 July, but we have seen no evidence of such impacts or fresh information.

I’m afraid your statement on 2 July that the NAO was concerned universal credit is currently “rolling but too slowly” and needs to “continue at a faster rate” is also not correct. While we recognise regrettable early delays to universal credit, my recommendation made clearly on page 11 of the report is that the department must now ensure it is ready before it starts to transfer people over from previous benefits. This will avoid the department’s performance declining further as it faces higher claimant volumes. I also recommended the department learns from experiences of claimants and third parties, as well as the insights it has gained from the rollout so far.

I’m also afraid that your statement in response to my report claiming universal credit is working has not been proven. The department has not measured how many universal credit claimants are having difficulties and hardship. What we do know from the department’s surveys is that although 83% of claimants responding said they were satisfied with the department’s customer service, 40% of them said they were experiencing financial difficulties, and 25% said they couldn’t make an online claim. We also know that 20% of claimants are not paid in full on time and that the department cannot measure the exact number of additional people in employment as a result of universal credit.

I would still very much like to meet to talk about the report and to discuss the independent investigation we are currently undertaking on Motability, a matter that I know is important to you.

On 4 July the Secretary of State made a statement to the House:

I want to apologise to you, Mr Speaker, and the House for inadvertently misleading you. I meant to say that the NAO had said that there was no practical alternative to continuing with universal credit. We adopt a “test and learn” approach to the roll-out of universal credit, which the NAO says mainly follows good practice, and therefore the point I was trying to make was that the calls from the Labour party to pause it seemed to fly in the face of those conclusions. As you know, Mr Speaker, I asked you yesterday if I could come to the House to correct the record. I believe it is right that, as a Minister, I should come and correct the record, and I therefore hope that you will accept my apology.

On the other issues raised in the letter sent today by the NAO, the NAO contacted my office at the end of last week and we are working on setting up a meeting. On the NAO report not taking into account the impact of the recent changes to UC, I still maintain that this is the case, and those changes include the housing benefit run-on, the 100% advances and the removal of waiting days. The impact of those changes is still being felt and therefore, by definition, could not have been fully taken into account by the NAO report. I hope that that clarifies the position.

(HC Deb 4 July 2018 c321)

The Secretary of State’s response was also the subject of Urgent Questions in both the Commons and the Lords the following day (HC Deb 5 July 2018 cc495-504; HL Deb 5 July 2018 cc645-8)

The Government will officially respond to the NAO’s report after the Public Accounts Committee hearing on Universal Credit on 9 July (PQ 154701).

Press releases

Work and Pensions Committee, Shambolic” Universal Credit may never realise promised benefits, 15 June 2018

Public Accounts Committee, Claimants suffering hardship in Universal Credit roll-out, 15 June 2018

Citizens Advice, “Government must take action to fix unacceptable problems with Universal Credit”, says Citizens Advice in response to NAO report, 15 June 2018

Child Poverty Action Group, Response to NAO report on Universal Credit, 15 June 2018

News articles

Esther McVey apologises for misleading Commons over universal credit report, Times, 5 July 2018

Universal Credit: Labour says Esther McVey should resign, BBC News, 5 July 2018

McVey apologises for ‘incorrect’ comments on universal credit, Financial Times, July 4 2018

Esther McVey 'should resign for misleading on welfare changes', Guardian, 4 July 2018

The problems with universal credit are unacceptable - government must do more, Times, 15 June 2018

Food banks dish out 19,000 emergency parcels in a year to North Wales families in crisis, Daily Post, 27 June 2018

Government must 'wake up to universal credit flaws', Guardian, 21 June 2018

Today’s report on Universal Credit is hardly surprising. But the failing system can still be fixed, New Statesman, 15 June 2018

Nearly 4 million UK adults forced to use food banks, figures reveal, Independent, 6 June 2018

Food bank use in UK reaches highest rate on record as benefits fail to cover basic costs, Independent, 24 April 2018

Use of food banks in Scotland hits record high, Scotsman, 24 April 2018

People with 'nowhere else to turn' fuel rise in food bank use – study, Guardian, 24 April, 2018

Line 18: Food bank use four times higher in Universal Credit areas, Sky News, 24 April 2018

Why we’ll keep paying housing benefit for an extra two weeks, Times, 11 April 2018 [article by Esther McVey]

Food bank use 'could rise after universal credit roll-out', BBC News, 20 March 2018

Universal credit: what is it and what exactly is wrong with it? Guardian, 25 January 2018