Universal credit has proven highly controversial, with reports of astronomical overspending, administrative problems, and ministers ‘in denial’.
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The word ‘benefits’ is familiar to us. But many may ask, what is ‘Universal Credit’? It seems that until recently, this scheme, which aims to help people avoid financial difficulties, has achieved the very opposite.
Let’s break down this elusive ‘Universal Credit’. First announced nine years ago by the former Work and Pensions Secretary, Iain Duncan Smith, Universal Credit is the government’s new flagship benefits system. Duncan Smith said Universal Credit had the aim of making the social security system fairer to both taxpayers and claimants.
Universal Credit is essentially a benefit for working-age people, replacing six benefits and merging them into one lump payment.
It is designed so that if the claimants work, they will still end up getting more money with the scheme and their salary combined than if they didn’t have a salary. This also means that the amount people are paid each month depends on their income. It is designed to mean ‘work always pays’.
Universal Credit was legislated for under the Welfare Reform Act 2012. Currently, it is being rolled out in stages across the UK. Universal credit was designed with the vision of a simplified benefits system.
As of August 2018, figures showed that there were 1.1 million claimants of universal credit. However, this figure is expected to eventually increase to around 7 million people.
Previous Work and Pensions Secretary Esther McVey told the BBC:
‘I have said we made tough decisions and some people will be worse off.’
Some household will receive more money from Universal Credit than they would have done under the old benefits system, while others will receive less.
In November 2018 four single mothers claimed in the High Court that Universal Credit disproportionately affects single parents—the majority of those being women.
Universal Credit is paid once each assessment period, and the way the payments are calculated is set out in the Universal Credit Regulations 2013. The system operates in such a way that it may show that individuals’ assessment displays that they have been paid twice, but not get the Credit next month, as they had not been paid for work in that assessment period.
Lawyers acting for the women said that the system left their clients £500 a year worse off, and that budgeting in the months where they would receive no benefits was an extreme hardship because of the way the system operated.
However, this January, we saw a small glimmer of hope in that the four single mothers: Danielle Johnson, Claire Woods, Erin Barrett and Katie Stewart successfully won a judicial review action against the government over the method used to calculate Universal Credit payments. The court eventually found that the public body interpreted the law incorrectly in the faulty payments to the benefits claimants.
On the same date, the current Work and Pensions Secretary, Amber Rudd, promised to make the Universal Credit system more tailored to the needs of the claimants, for example by making payments fall more regularly. The judgment has also encouraged discussion about how best to support those on low pay.