Universal Credit - we're not sure where but we might know when

Universal Credit has a basic premise, to be a benefit which helps unemployed to become employed and to support the under-employed to become full time employed. To do this the benefit is paid monthly like a wage, it includes help for housing costs as a wage would. Further it is administered by one department, the DWP, who will have limited communication with other agencies such as social landlords. In other words it gives the claimant a lump sum once a month to manage themselves.

Under current practices, housing benefit departments have exceptional relationships with social landlords all over the country. There is an enormous amount of data sharing and cooperative working to help vulnerable claimants receive their correct housing benefit awards and prevent homelessness. It appears that until recently the DWP had no idea about the extent of this data sharing.

The danger in writing an article about the timetable for Universal Credit (UC) is that by the time it is published it will almost certainly be out of date. So it is important to start by acknowledging that any forecast for the rollout schedule is, at best, an educated guess, and that the timetable will doubtless change again. Nevertheless, I’m going to indulge in a bit of futurology and put in my tuppence worth as to the key dates for bringing in the new benefit.

My starting point is Iain Duncan-Smith’s (IDS) ministerial statement of 13th October 2014, in which he announced that expansion of UC “will progress from February 2015 to all remaining jobcentres and local authorities for new single claimants previously eligible for Jobseeker’s Allowance, including those with existing housing benefit and tax credit claims”. Further, the announcement also appears to set an end date to this stage of the rollout, talking about, “national expansion through 2015/16 and secure delivery of Universal Credit across Great Britain”. Assuming that Hansard uses standard notation for financial years, this means UC will be available in all GB jobcentres by April 2016. For the UC programme, this is about as close as it gets to a clear timetable. 

The statement also seems fairly clear that, outside of the north west and the six other existing pilot jobcentre areas, UC will only be available to single jobseekers. It is worth appreciating how unrepresentative this target group is. Experience from the pilots gives a good guide to the kind of people likely to claim, as until July this year UC was only available to this group. The latest statistics (for September 2014) show that, of the 16,590 people that had started a UC claim, 68% were male and, more importantly, 62% were under age 25. So relative to average benefit claimants, they have lower entitlements, are more likely to be active in the labour market and are less likely to have housing costs. Most importantly, childless people under 25 are one of the key gainers from the introduction of UC, as they now qualify for in-work support, whereas they do not currently qualify for working tax credit. It should therefore be unsurprising that incentives to work are improved, with Department for Work and Pensions (DWP) analysis finding that 60% of UC claimants would have left Jobseeker’s Allowance after 90 days, compared with 54% of Jobseeker’s Allowance claimants who leave benefit after 90 days.

The UC programme acknowledges that national rollout to single jobseekers will still leave them far short of their goal of replacing the six ‘legacy’ benefits (Jobseeker’s Allowance, employment support allowance, income support, child and working tax credits and housing benefit). But given the speed of accumulation of new claimants in the first eighteen months of the rollout, which averaged something like a thousand a month, it will feel like an acceleration. The current inflow rate of new UC claimants is around 3,500 people per month, so scaling up to national rollout might mean over 50,000 starts a month across GB. And in terms of jobcentres affected, rather than rolling out 50 new UC jobcentres over three months, the speed of the autumn 2014 phase of the rollout, DWP will need to put 50 live a month. According to the ‘Universal Credit at work’ publication, released on 22nd.October 2014, the current ‘planning assumption’ is that there will be roughly half a million households on UC by May 2016.

This phase of the rollout therefore stands a decent chance of reaching its objective of national coverage. But even if it reaches this point on time (by assumption, April 2016) the rollout will be less than one tenth complete, as the government estimates that 7.7 million households (containing roughly 12 million individuals) are expected to receive UC when it is fully rolled out. So what about the timetable for the remaining people affected by UC?

There are two distinct groups to consider – people who flow on to UC due to a change of circumstances (‘natural migration’) and people who move on to UC through an administrative process imposed on them (‘managed migration’). 
In his ministerial statement, IDS announced there would be “expansion to all claimant groups from 2016”. So assuming all goes well in the existing pilot areas, where new claimant groups are already being brought into the scheme, eligibility will be extended from April 2016 in other areas. Given the UC programme’s understandable bias towards groups who are likely to do best from the new benefit (relative to existing benefits), rollout might be expected to progress to, in order, couples, families, owner occupiers, in-work tax credit claimants and finally disabled people. Increasingly, this will mean extending eligibility for UC to groups where there are more people who will lose (relative to current entitlement rules), such as people who would currently receive a severe disability premium. It will also mean far more people on UC with substantial housing costs to budget for. Notwithstanding these factors, ‘Universal Credit at work’ states that ‘legacy benefits [will] close to new claims from 2016, beginning with Jobseeker’s Allowance claims from singles’, with the end date for closing legacy benefits to new claimants set as ‘before the end of 2017’. My guess is that this will mean another three million households will be on UC by the end of 2017, bringing the total to around half the 7.7 million households eventually expected to be on the benefit.

That leaves the timetable for ‘managed migration’ – how to deal with the stock of people who have not flowed onto UC naturally. One approach to this group is simply to ignore them and wait for everyone to flow on to UC through changes of circumstance. Certainly this has attractions, and ‘Universal Credit at work’ discusses these extensively.

But waiting for natural migration to gradually work its way through the stock of claimants could be a very long process, in particular because a large proportion of the remaining people will have a lower entitlement under UC. While transitional protection means there will not be a fall in cash incomes for affected people, there is still an incentive to delay moving over to the last possible date to get one last annual uprating – even if benefits only increase by 1%. If transitional protection lasts ten years, that could be equivalent to a 10% rise. So relying on natural migration alone does not seem very realistic.

To be effective, therefore, the managed migration process must have an end date. Moreover, without an end date legacy benefit, systems cannot be closed to existing as well as new claims. So what end date to choose? When first announced, the idea was that managed migration would take three and a half years, starting in April 2014 and ending in October 2017 and run alongside natural migration. However, three and a half years may be pessimistic, given that the natural migration period will have started earlier and lasted longer than originally envisaged, hence numbers will be smaller. So my final guess is that people will be moved on to UC (via managed migration) from early 2018, with the whole process ending in October 2020. That end date puts the programme three years behind schedule, which feels about right. More importantly, this end date would mean narrowly avoiding the ten year anniversary of the publication of the original White Paper ‘Universal Credit: welfare that works’ in November 2010. If they’re lucky!

Housing benefit sends award letters for every claimant to their social landlord explaining how much they will be paid each week and when these payments will appear in the rent account. The letters do not detail any personal information about the claimant such as how the calculation has been done or what their income is. The information is used by landlords to explain to their tenants what their shortfalls are and how and when to pay. Good practice, although some would argue this is a breach of data protection rules and also cumbersome and expensive for the tax payer to communicate on paper this way.
Under Universal Credit claimants alone will receive this information and will need to assess how much they pay each month for their rent.

This poses a number of difficulties:

  • Many social landlords charge a weekly rent and the new benefit is paid monthly. Many claimants believe there are four weeks in a month and will therefore under pay their rent.
  • Other problems arise when you take social landlords out of the equation, such as rent increases. Until recently the DWP believed that rent increases only happened in April, in fact they occur at all different times of the year with some landlords having multiple rent increases cycles across their properties. At present this information is sent electronically to Housing Benefit to be processed. Under Universal Credit the DWP expects each claimant to declare their rent increase individually and they believe they can process these one by one by the time the next payment is due. For over 12million claimants that’s no mean feat.
  • Some claimants will not pay their rent, they will use their housing cost money for other debts or other urgent expenses. If the claimant has been sanctioned they may use their housing costs as living costs.

Of course DWP have put in place safeguards to prevent homelessness and rent arrears. Namely Alternative Payment Arrangements (APA). These should be put in place when the claim begins if the claimant has rent arrears, other money troubles or certain vulnerabilities. They can also be activated as soon as a claimant reaches eight weeks arrears alongside a third party deduction which claws back the money owed at 5% of the standard allowance (or £15.70 a month for a single person). If you live in West London in a one bedroom flat you may have £1640 of rent arrears by eight weeks and it will take eight years to pay these back at £15.70 a month, but then again under the UC system you shouldn’t be out of work for eight years and be able to pay the debt back at a higher rate once you are employed. It can also be difficult to get an APA in place at time of claim, the Job Centre staff rely solely on the claimant knowing how much their rent arrears are and then disclosing this.

Aside from the obvious difficulties of having housing costs paid directly to the claimant landlords will have to manage their rent accounts differently. Under the current system the national insurance number is the reference for a claim and when an APA is in place the only information a landlord has to go by is the NINO, amount of money paid and dates the money covers. If the landlord doesn’t have the NINO for their tenant or it is kept somewhere they have to manually access then it can take a long time to allocate the payment to the rent account. This isn’t too much of a problem now when landlords only have a handful of claimants but if they have thousands, or tens of thousands claimants then they will need to ensure their housing management systems can allocate payments automatically. The DWP have announced that the reference number for UC will not be the NINO from the February 2015 nationwide rollout, yet UC is live now and the NINo remains the reference. DWP also haven’t announced what they propose to replace it with. Landlords are calling out for a UC reference number in the same way a HB reference number is used. However DWP are looking into using existing tenancy references which leads to problems such as two different associations having the same reference for two different tenants. It also doesn’t account for the difference in the format of the tenancy reference, some landlords use eight digits, some ten, some use mixtures of numbers and letters, how will the UC IT system cope with this?

Universal Credit is fundamentally an excellent idea. It replaces three different benefit offices who all work out their benefits differently. Housing benefit is worked out weekly, tax credits are worked out annually and income replacement benefits are paid fortnightly. The DWP are right that this drip of money which comes in weekly, fortnightly and four weekly makes it harder for people to budget when they start work and are paid monthly.

Universal Credit also has the major advantage that it allows real time information to be used so claimants who’s work hours change weekly and monthly don’t have to trudge to their local benefit office every fortnight wage slip in hand to have their benefits suspended, readjusted, paid and clawed back.

DWP have simply underestimated how complex the benefits system is and the many players involved, not just claimants and administrators. Social landlords are the key to the success of this brilliant idea, they need to be worked with, listened to and consulted. It does appear that DWP are finally receiving this message, they are working with housing providers, employing housing staff for projects and sending out regulations for consultation. If the communication between DWP and landlords continues to grow as it is now, then UC will not just be the biggest change to the benefits system since its inception it will also be the greatest.

Download Phil's article in IRRV Benefit magazine (December 2014 edition).

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