Lame duck Universal Credit is still unproven and could actually cause unemployment

Thu, 23/10/2014 - 14:06 -- nick

The latest report on Universal Credit has been released, and shows how desperate Iain Duncan Smith is to make a silk purse out of his personal sow's ear.

The scheme's timetable slippage has been well documented, as has its hugely increased cost and the money wasted on unusable IT systems.

It is no surprise that Smith has fought back through commissioning this positive report, but its findings are highly dubious at best.

It anticipates cost savings of £7 billion per year when the scheme is fully up-and-running, but it doesn't take much investigation to cast huge doubt on the figures.

These are divided between a number of anticipated effects, including:

1) Labour market effects - the report claims that "by improving the incentives to work, and to work more, the business case estimates that there will be up to an additional 300,000 households in work". Tax receipts and benefit savings will pick up and these will save the country billions.

But this doesn't take into account the huge and growing level of sanctioning in the UK. Many of those who get work already receive no benefit money due to nearly one million sanctions being handed out each year.

It also forgets the labour market itself. The Office for Budget Responsibility (OBR) has just downgraded its growth forecast for next year, and job creation is being threatened by all kinds of events in Europe and around the world. It would be a big surprise if 300,000 more people than otherwise would have been the case get work due to Universal Credit, and in fact if the current pace of falls in unemployment is continued.

This government has been keen to make the case that unemployed people are somehow a class apart, needing especially harsh punishment if they are to get into work.

The truth is that around half find jobs within three months with little official help, and the supply of jobs, rather than the attitudes of the workless, is the key factor. Universal Credit does nothing for this supply side.

2) Redistribution benefits - as part of this the report claims child poverty would be reduced. But it has been established that parents working full time would be worse off under Universal Credit than they are now due to losing childcare money. Few parents are currently included among the 14,000 who receive the payments.

The Joseph Rowntree Foundation has shown that the scheme will provide an income far lower than claimants need - allthough this is also true of the current benefits system - and further costs will be incurred through addressing the resulting poverty through hardship funds and food banks.

3) Reduction in fraud - linking work and benefits in one system cuts the possibility of claiming while working, although this is likely to affect error more than fraud, much of which takes place with off-the-books work.

The unspoken truth behind these 'savings' is that some of them will come from making redundancies in the Jobcentre system, or a 'reduction in administrative costs' as the report puts it.

When most benefits are being managed online this function will be taken away from frontline advisors, meaning many will lose their jobs.

For these people Universal Credit is a passport to unemployment rather than work, even if the claimants, used now to getting more harassment than help from them, will not mourn this loss.

Some obvious misinformation permeates the report. Its authors apparently believe "early evidence shows those on the scheme looking for work for twice as long as those on Jobseeker's Allowance (JSA)."

But it doesn't take account of two obvious factors: first, that few parents yet receive Universal Credit, and they have less time to look for work in general, and second, that these early adopters are being scrutinised and evaluated closely, and are likely to respond to this attention with more activity.

The report's apparent emphasis on hard evidence is abandoned when it comes to the key question of whether the scheme has resulted in more people getting into work, using staff testimonies rather than real numbers.

Universal Credit is not in itself a bad idea, but the way it is being implemented has shown the government's managerial incompetence as the budget keeps rising and final timetable keeps slipping, as well as a generally bad attitude towards unemployed people.

Improving incentives for work is vital, and ensuring that those who get jobs are better off than they would be on benefits should be a minimum requirement of any policy.

The fact that Universal Credit does not do this for all groups, its rising cost and the unlikely projections for cost savings mean it is still more lame duck than fine flagship.