Ministers have been urged to set aside some £6bn in historic debt in a bid to head off further poverty likely to be created by the continued rollout of Universal Credit.
A new report from the Institute for Government argues that wiping out overpayments of tax credit that are routinely deducted from the much-delayed and snag ridden six-into-one benefit is the best way to stop real hardship being inflicted onto new claimants.
Report author Nicholas Timmins said Universal Credit – the brainchild of former Conservative Party leader Iain Duncan Smith – had “unquestionably been a factor” in the rising numbers of people needing to use food banks in recent years.
Ahead of next week’s Budget, he said that despite Universal Credit’s “dreadful reputation” it was no-longer realistic to pause the programme, let alone scrap it. Meaning ministers’ goal had to be making it work better.
Timmins, a former Financial Times journalist who is now an IfG senior fellow, said there were two key ways to improve the way Universal Credit impacted the lives of recipients.
The first is to stop tax-credit overpayments being deducted from the benefit payments – something that can remove 30% from an already tough budget and which is a debt people often do not know they owe.
The second is to provide new claimants and people transferring to Universal Credit with a non-repayable “silver hello” or welcome grant for two weeks to help tide them over the five week period before they begin receiving Universal Credit.
Timmins said it was vital for ministers to take further steps to get money to the least well-off and quickly. He noted that 60% of Universal Credit claimants were forced to live on less than the standard rate because they were paying off various forms of benefit debt that was being deducted from their payments.
“Universal Credit has a terrible reputation,” Timmins said. “But the reality is that improvements to it have been made and it is now working better.
“The two most pressing issues are that more needs to be done to ease the transition on to Universal Credit, and something must be done to tackle the enormous sums of old benefit debt that Universal Credit is being used to recover. Failure to do that will undermine Universal Credit’s effectiveness.”
Timmins’ report said the issue was likely to be compounded as the number of Universal Credit users increased from December’s 2.8m claimants to an anticipated 7m in 2024.
Elsewhere, his report noted improvements with the information-technology issues that dogged Universal Credit’s early years appeared to have been resolved.
“The dire days of the IT system that supports UC are over,” the report said. “It has taken a long time to build something that works, and changes are needed to automate some processes that still have to be done manually.
“But the ‘test and learn’ approach eventually adopted by the Department for Work and Pensions has worked well, even if the ability to make changes swiftly has slowed as the caseload has increased – chiefly because any new error that a change introduces will now affect large numbers of claimants, simply because UC is now going to many more people.”
The report said that while further improvements could be made, IT was “no longer one of UC’s great weaknesses”.
Timmins also noted that Universal Credit had also benefited from stable leadership on the civil service side since Neil Couling became the programme’s senior responsible owner in September 2014 – after going through a “merry-go-round” of leadership with six SR0s in its first four years.
However, the report observed that stability of officer-level leadership had been accompanied by significant ministerial churn since Iain Duncan Smith’s departure as work and pensions secretary in March 2016.
Timmins counted six secretaries of state since then, amounting to an average tenure of less than six months – during which each incumbent “had to learn about UC pretty much from scratch” and had different priorities for what they wanted to fix.
The report can be read here.