White Paper on Universal Credit

Written evidence submitted by Ruth Lister

Summary

I. It is unclear how successful the UC will be in achieving the laudable objectives of greater simplicity, improved work incentives and a reduction in poverty.

II. Assumptions about the nature and extent of ‘welfare dependency’, which drive the kind of draconian sanctions proposed in the White Paper, are open to challenge.

III. Given the number of unresolved matters in the White Paper and the significance claimed for the reforms, it is imperative that a more prudent timetable is followed rather than moving to legislation as early as January.

IV. There are a number of matters of concern from a gendered perspective:

· The proposed payment of the full UC, including the child credit, to one member in a couple.

· The erosion of contributory benefits, which have provided a growing number of women in couples with an independent social security income.

· The potential incentive for the re-creation of a male breadwinner model.

· The impact on mothers of the proposal to pay benefits monthly.

1. The Committee’s decision to hold a short inquiry into the proposals in the White Paper on Universal Credit is welcome. This short submission does not offer an overall analysis of the White Paper but simply raises a number of concerns. It is divided into two parts. The first deals with some general issues; the second considers some possible implications for women.

General Issues

2. The proposed universal credit (UC) is the latest in a long history of attempts to simplify the social security system and improve incentives. These are laudable objectives but experience suggests that they are easier to achieve on paper than in practice. Already, complexities appear to be creeping in to the proposals, for instance through the interaction between the new disregards and housing costs and the decision to make local authorities responsible for council tax benefit (with detailed proposals yet to be worked out).

3. There is an assumption that complexity itself creates a work disincentive. This may certainly be the case with regard to the decision to move into paid work (the unemployment trap) and one advantage of the UC is that it addresses the insecurity many claimants feel with regard to the transition into paid work. However, perceptions and attitudes are also shaped by the insecure nature of the kind of jobs available to many people out of work (insofar as there are jobs available) and by personal factors such as those associated with the care of young children and health status. Moreover, from the perspective of the incentive to improve earnings once in work (the poverty trap), there is a danger that the greater simplicity of a single taper could be counter-productive because the effects of an increase in earnings will be more immediate and visible to the worker than under the present system.

4. Efforts to tackle the poverty trap created by the interaction between tax credit/benefit withdrawal rates, tax and national insurance are welcome. However, while the single taper proposed for the UC will reduce marginal deduction rates for the minority who currently face rates of over 80 per cent, it will mean an increase for many others. Family Action estimates that as many as 1.35 million households could face a higher marginal deduction rate and that among tax-payers in receipt of means-tested benefits the number of gainers with regard to marginal deduction rates exceeds the numbers of losers.

5. Another aim of the White Paper is to tackle what the Secretary of State describes as the ‘underlying problem of welfare dependency’. Assumptions about the nature and extent of this problem appear to drive the further ratcheting up of the regime of conditionality and associated sanctions. Yet neither here nor in the discussion document, which preceded it, is the notion of ‘welfare dependency’ properly defined. Here and in previous documents, it appears to be equated with the simple receipt of benefits (primarily among people of working age). And reference to the reintroduction of a ‘culture of work’ implies a widespread ‘dependency culture’, referred to in the earlier document 21st Century Welfare. Yet the research evidence does not support the view that there is a widespread culture of ‘welfare dependency’. [1] The use of such terms is stigmatising and contributes to the ‘othering’ of people living on benefits. They are highly ideological terms, which serve to delegitimize receipt of state support through the benefits and tax credits systems and thereby the kind of draconian sanctions proposed in the White Paper.

6. The White Paper claims that ‘by virtue of the changes to entitlement and improved take up’ UC could ‘lift as many as 350,000 children and 500,000 working-age adults out of poverty’, without taking into account the potential impact of more people moving into paid work. This would, of course, be very welcome. However, some scepticism has been expressed as to how this will be achieved in the context of the cuts taking place elsewhere in the benefits system and the overall spending constraints within with the DWP is working. It would be helpful if the Committee could explore the assumptions upon which these projections are based.

7. There is an important procedural issue, which needs to be raised. It is understood that it is intended to bring forward legislation in January. The White Paper leaves many important issues unresolved – an example is the treatment of childcare costs. Given the claims made for the significance of the reforms, it would be prudent to move more slowly and allow more time for resolution of such issues and for full debate before moving to legislation.

Gendered perspectives

8. The social security system plays an important role in shaping gender relations and the gendered distribution of income, with particular significance for the well-being of women and children. It is therefore important to consider the proposals from a gendered perspective.

9. A serious concern is the default position that the whole of the UC, including the credit for children, will be paid to one partner in a couple. Following concerns raised about this issue in response to 21st Century Welfare, at the very end of the White Paper it is stated that ‘we will consider the scope to arrange payments to parents in couples, so that support for children goes to the mother or main carer, as now in Tax Credits’. The implication is that this is an operational issue. However when questioned on the factors that would decide this issue at the recent SSAC stakeholder seminar, Neil Couling, Director of Benefit Strategy, stated that it was a matter that would be taken to Ministers. It therefore appears that this will be a political decision.

10. It is a crucial decision. It is a widely accepted principle that benefits for children should be paid to the ‘main carer’, usually still the mother. In practice, the household member making the application in a couple is more likely to be the father than the mother. Thus, if the full UC were paid to one partner, there would be a gendered redistribution from ‘purse’ to ‘wallet’, with a potentially adverse impact on intra-household poverty. The last time a Conservative government attempted this with its family credit proposal, it was forced to back down in the face of widespread opposition. Similarly, the New Labour government attempted initially to pay the working family tax credit through the pay-packet. Again it faced widespread opposition and conceded that child tax credit should be paid to the caring parent. This was, in part, in response to the evidence in a Joseph Rowntree Foundation study conducted by Jackie Goode, Claire Callender and myself, which demonstrated the continued importance of paying benefits for children to the caring parent and the continued significance of the intra-household distribution of benefits. [2]

11. Furthermore, the more reform cements means-tested benefits as the foundation of the social security system, the more difficult it is to address this issue and ensure that women achieve an independent income in their own right. As more women have built up an entitlement to contributory benefits, this is an argument for strengthening rather than diminishing the role of contributory benefits, suitably reformed. Instead, the proposal to time limit Employment and Support Allowance for those deemed capable of work will further erode women’s access to an independent social security income. The future of the Carers Allowance is also important in this context. This is another unresolved matter. It is important that the benefit is retained. Moreover, as the White Paper notes, it is paid at a lower rate than other income-replacement benefits thereby reducing its effectiveness. The answer is to increase it to a level which enables it to play a more effective role.

12. The UC proposals could also have the effect of reducing women’s access to an independent income from paid work. While the overall improvement in disregards (other than for single people) is very welcome, there is no independent disregard for a second earner and it would appear that marginal deduction rates could rise significantly for second earners. The White Paper suggests that in some cases ‘second earners may choose to reduce or rebalance their hours or to leave work. In these cases, the improved ability of the main earner to support his or her family will increase the options available for families to strike their preferred work/life balance’. However, it seems more likely that the system will tilt the ‘architecture of choice’ towards a traditional male breadwinner model, which may not necessarily reflect the preferred work/life balance of both members of a couple and which would weaken women’s labour market position. It would also undermine the Coalition Government’s commitment to ‘encourage shared parenting’. [3] And at the SSAC stakeholder event, the Secretary of State’s response to a question on this suggested that he regarded a return to a male breadwinner model as a welcome outcome.

13. The White Paper states that the DWP is considering whether payments of UC should be made monthly. It acknowledges that ‘many people on low incomes will be used to managing fortnightly payments of benefits’. It proposes ‘appropriate budgeting support to ensure recipients are supported effectively’. It is unclear who will provide this ‘budgeting support’. In families with children it will largely be mothers, as the managers of poverty, who will bear the strain of monthly payments. Managing a low income on a fortnightly basis is difficult enough but moving to monthly payments could upset completely the delicate juggling act that many mothers perform and could result in greater debt. Budgeting support is no answer and implies that the problem lies with low income mothers rather than an inflexible system. It seems perverse deliberately to increase the difficulties faced by low income mothers in the name of encouraging them to ‘manage their financial affairs in a manner that best reflects the demands of modern life’.


[1] See R Walker with M. Howard, The Making of a Welfare Class? The Policy Press, 2000; R. MacDonald and J. Marsh, Disconnected Youth? Palgrave, 2005.

[2] J. Goode, C. Callender and R . Lister, Purse or Wallet? , Policy Studies Institute, 1998

[3] HM Government, The Coalition: our programme for government , 2010.