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Three years of evidence that universal credit isn’t working

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LGC’s essential daily briefing.

‘Universal Credit ‘could cost more than current benefits system’, said the BBC. ‘Universal credit ’may never deliver value for money’ said Sky News. ‘It’s official: universal credit is a colossal, costly, hellish catastrophe’, added the Guardian.

Even the Daily Mail went with the headline: ‘Universal Credit system is ‘bad value for money’ and took too long to roll out, damning report finds’.

As far as PR disasters go, today’s report from the National Audit Office about the Department for Work & Pensions’ handling of changes to the benefits system is up there with the best (or should that be worst?) of them.

Yet readers of LGC are likely to have nodded in agreement at this morning’s headlines and perhaps let out a brief wry smile. But any mild amusement about the predicament the government has found itself in will have been quickly washed away by the knowledge of the impact these changes to the benefit system are having not just on their councils but some of the poorest residents they serve.

This is no laughing matter, as Doncaster MBC chief executive Jo Miller pointed out in a column for LGC in 2015.

“The consensus in our house is that we would skirt financial disaster if we had to manage [money] the universal credit way…” said Ms Miller. “It’s hard to see, then, how universal credit is going to help people best handle money on a monthly basis.”

In January last year, a joint report by the Association of Retained Council Housing and the National Federation of Almos warned of the “devastating impact” welfare reforms were having on households as research found 86% of tenants receiving universal credit were in arrears in September 2016 compared to a third in September 2015. This later led to the organisations to call on the government to pause the rollout of universal credit to prevent the situation getting worse.

That requested was not acted upon.

Today’s NAO report said: “Local authorities, housing associations and landlords have seen an increase in rent arrears since the introduction of universal credit, which can take up to a year to recover.”

Quelle surprise.

LGC revealed in September last year how the first three councils with housing stock to complete a full roll out of universal credit had amassed almost £8m in rent arrears. That meant more than 2,500 tenants claiming universal credit across Croydon, Hounslow and Southwark LBCs were so far behind with their rent they were at risk of eviction.

That led to Southwark’s cabinet member for finance Fiona Colley (Lab) to urge the government to ditch the “dogma” and adopt a more “pragmatic” approach to the rollout of universal credit or face rising homelessness. This came after a survey by the charity Crisis and social research body the Joseph Rowntree Foundation found nearly all councils (89%) feared universal credit would worsen homelessness.

More research, this time by Child Poverty Action Group and the Institute for Public Policy Research (IPPR), found about one million more children will be in poverty by the end of the decade as a result of changes to universal credit.

In a speech last July, Ms Miller, by then president of the Society of Local Authority Chief Executives & Senior Managers, criticised the Whitehall-designed universal credit system under which recipients at the time regularly had to wait six weeks to receive their first payment. She asked: “Who feeds those children? Do you wonder why our neglect figures are going through the roof? So we’ve got a system that doesn’t save money and it’s also inhumane. It doesn’t seem to me that this is a civilised society.”

Following much pressure in the national media, chancellor Philip Hammond last autumn announced the government was cutting by one week the waiting time for new claimants to receive universal credit. At the same time, changes were made to the way universal credit claimants in temporary accommodation receive financial support in a bid to “ensure local authorities can recover more of their costs” with a view to the government finding a long-term solution to the issue.

However, the financial impact on councils was made stark in Labour research published in January. That found some councils were setting aside millions of pounds in a bid to offset the impact of people switching on to universal credit.

As Ms Miller said today, the NAO’s report made “grim reading that regrettably does not come as a surprise” to officers.

She said councils had “repeatedly warned” implementing the system would be “so complex that it could have devastating impacts on vulnerable people” if the government failed to learn from users and local authorities.

“It gives us no satisfaction our warnings have come to pass,” said Ms Miller, but added “it is not too late” for the government to work closer with “local partners” to address issues.

Writing for LGC in May 2016, then welfare reform minister Lord Freud said the government “can’t deliver our vital welfare reforms alone” but admitted: “[Allowing] local stakeholders and local authorities to shape overall reform represents a cultural shift for the department in designing and implementing policy.”

While there have been tweaks and changes to the system, it would appear the DWP continues to struggle to make that cultural shift.

The DWP today stood firm and said it had “made significant improvements to universal credit as part of our ‘listen and learn’ approach”.

Many would argue the government has not listened hard enough, nor has it learned quickly enough. Today’s report by the NAO shows the government has to urgently change the way it works with local areas on this issue because the reforms that are designed to get people back into work are, quite simply, not working.

By David Paine, acting news editor

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