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IDS announces universal credit acceleration

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Work and pensions secretary Iain Duncan Smith has said the rollout of universal credit will be accelerated across the country – despite suggestions that the trial in the north west has been less successful than claimed by the government.

From early next year, all local authorities and jobcentres will use universal credit, under which six benefits and tax credits – including housing benefit – are brought together into a single payment.

In a speech to the Conservative Party conference in Birmingham, Mr Duncan Smith said: “Universal credit is a vision for a new welfare settlement, a welfare state fit for the 21st century, a testament to the hard work of jobcentres and local authorities that we are now implementing it.

“It has now been rolled out in the north west of England to couples, shortly to families, to more than one in eight jobcentres by Christmas, safely and securely as I always said.”

However, experts warned that the rollout may be premature, with reports of serious problems with the IT system and concerns that universal credit may have introduced perverse incentives, rather than end them. 

A spokesman for the Joseph Rowntree Foundation said: “JRF strongly supports the principles behind universal credit. It is the only opportunity we have to reform a failing and overly complex system. It removes the worst work incentives of the current system and redistributes resources to households in poverty. Therefore it is important universal credit works.

“Structural and implementation problems must be resolved as part of any speedier rollout, and the design of the system should be improved to ensure work really does pay for those on the lowest incomes. Otherwise, we risk seeing the worst of both worlds: cuts without reform and another broken welfare system.”

Colin Talbot, professor of government at the University of Manchester, disputed the suggestion that universal credit had been successful in the north west trial. “I think they got a few th,ousand individuals without encumbrances, in simple circumstances, off the existing system. I would hardly describe that as a ‘success’,” he said.

Professor Talbot added that the IT system used was “over ambitious” and warned that it would have to be abandoned. “They went for a Rolls-Royce option, to integrate with the HMRC’s real-time tax system,” he said. 

Local authorities might have to step in with emergency payments if the rollout goes as badly as the tax credit system did, he suggested. “We lost about £12bn or £13bn on overpayments of tax credits,” he said. “If universal credit leads to underpayments it will cause real hardship to people.”

Benefits to be paid by prepayment cards

Benefits payments will be made via a prepaid card that can be used only on food and basic necessities, under a trial scheme announced by Mr Duncan Smith. 

“We will make benefit payments so that the money [people on benefits] receive is spent on the needs of the family, finally helping break the cycle of poverty for families on the margins, change we can be proud of,” he told the conference.

But the move was condemned by the Joseph Rowntree Foundation. Its head of poverty research Chris Goulden said: “JRF research consistently shows that people on low incomes are mainly very good money managers - they have to be when every penny wasted counts. What they need from financial products is a combination of flexibility, control and stability. Unexpected costs - such as a fee for an unpaid direct debit - are to be avoided, even if it might cost more in the long run.

“If welfare cards can be used optionally by people on benefits to take control over and compartmentalise their finances then they may have some merit in an anti-poverty strategy. But not if they are another means to further stigmatise and punish people who are struggling to meet their basic needs.”

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