|
Universal Credit is a new benefit for people of working age, whether they are in or out of work, which will replace six existing benefits. It is a key part of the Government's welfare reform programme and is being introduced with the objectives of simplifying the benefits system and increasing incentives to work. It will be implemented over a four-year period between 2013 and 2017.
The principles behind Universal Credit have widespread support, which we share. The Government has made significant progress in designing a system which will help ease the transition from benefits to work and it deserves to be congratulated for the progress it has made in this respect. We recognise that the new system will be effective for the majority of claimants but have concerns about the plans in place to take account of some of the more vulnerable benefit claimants.
It is acknowledged that some of the most vulnerable claimants struggle with the existing system and this inquiry has shown that serious concerns persist about how they will be supported with the transition to Universal Credit. The focus of this report is therefore the further steps the Government needs to take to ensure that Universal Credit works properly for all claimants, not just the majority.
The aim of moving to an online benefits claiming system and of increasing digital inclusion is welcome. However, the target for the vast majority of Universal Credit claims to be made and managed on line—"digital by default"—is ambitious and carries a risk that some vulnerable people will have difficulty in accessing their benefit entitlement because they do not know how to make a claim. DWP has not to date provided sufficient information about how this will be addressed. It now needs to set out: how people will know where to go to make a claim; what support they will be able to get; and what resources DWP plans to allocate to providing this support.
There will be a significant increase in demand for advice services during the four-year period of Universal Credit implementation, which will place a heavy burden on the advice sector. DWP needs to ensure that sufficient additional resources are available in the advice sector to support a successful transition to the new system.
Universal Credit entitlement will be assessed on a monthly basis, and paid in a single, monthly amount to each household. The Government believes that this arrangement will help to improve the financial literacy and financial inclusion of benefit claimants by mirroring paid employment. We support this principle but, while the change may be manageable for the majority of claimants, some vulnerable households, who already struggle to manage their finances, may not be able to manage a monthly, single household payment. The Government proposes to use an "exceptions" process to identify and provide support to claimants who may need it. There is a risk that some vulnerable claimants will be identified as such only after they have actually experienced problems.
The default arrangement under Universal Credit will be for rental costs to be paid to the benefit claimant who will then pay their landlord, rather than the landlord being paid directly. This represents a major change for many claimants, particularly for tenants in social housing, and some may struggle to manage this new arrangement for rent payments. It is more likely to be effective if the Government allows time for a proper evaluation of its current pilots, which are testing the impact of direct rent payments, and to have a phased implementation after appropriate safety net arrangements for vulnerable people have been put in place.
The Government has clearly stated its commitment that Universal Credit will provide more generous support for disabled adults and disabled children than it does for people in similar circumstances who are not disabled. However, there are concerns that some disabled people will be worse off under Universal Credit because of the loss of additional disability payments which are available under the current system. Transitional arrangements will provide some protection but this will erode over time and when claimants' circumstances change. The Government should reconsider the system of disability additions under Universal Credit, particularly those affecting disabled children and severely disabled people, to ensure that it meets the commitment it has made to disabled claimants and that there is no diminution in their overall benefit package, which includes entitlement under Universal Credit.
The Government plans to calculate monthly Universal Credit payments by using up-to-date monthly information about claimants' employment earnings taken from HM Revenue & Customs' new Real Time Information (RTI) system for PAYE taxation. Ministers continue to be confident that RTI will be delivered on schedule, in time for full implementation of Universal Credit from October 2013. This timetable is very ambitious and leaves little opportunity for dealing with any problems which arise. DWP needs to clarify and publish details of the contingency arrangements which will be put in place for claimants to provide earnings information for calculation of Universal Credit if RTI is not available.
Universal Credit implementation is taking place at the same time as a number of other significant changes affecting benefit claimants, most notably the introduction of a system of local council tax support to replace Council Tax Benefit. This new support will sit outside Universal Credit; each local authority will be able to design its own scheme; and it is being introduced in combination with a 10% reduction in funding. Our key concerns about local council tax support are that: it contradicts the aim of simplifying the benefits system; it risks adding complexity to earnings incentives; and it has the potential seriously to undermine one of the objectives of Universal Credit which is to enable claimants to see clearly the financial benefits of taking up a job or working more hours.
The Government should reflect on the possible consequences of the scale of the proposed change for some of the most vulnerable people in society and, if those consequences cannot be adequately addressed, should consider modifying its implementation timescale accordingly. The Government has indicated that it expects to lay the Regulations to implement Universal Credit before Parliament in December. We hope it will take full account of the concerns raised in this report in finalising the detailed arrangements for delivering Universal Credit which it plans to set out in the Regulations.
| 
