The managed migration regulations released earlier this week put into place a new ‘transitional protection’ system, the mechanism designed to protect households who will be worse off under Universal Credit (UC). The vote on the regulations, however, is likely to be tight. Some Tory rebels are promising to vote against, joining Labour and other opposition parties in arguing that, given all the problems associated with UC, the rollout should be paused. But is pausing UC the worst option of all?
The government’s argument is that passing the regulations can only be beneficial as they provide an extra benefit to millions of people. As well those households that will gain from higher benefit rates under UC, transitional protection means that those who will lose out get a top-up to maintain the cash value of their benefits.
As set out in detail in my blog on UC winners and losers, before the Budget around £5.5 billion was taken from losers (households with lower benefit rates under UC) and an extra £4 billion was given to winning households (those gaining from higher benefit rates under UC). Losing groups include low earners affected by the reduced work allowance, people with a severe disability and disabled children. Winners include people working less than 16 hours a week, people with high childcare costs and low earners aged under 25.
The announcement to increase the value of the work allowance in the Budget acts to reduce the problem of low earners losing out (though the allowances were not returned to their previous level for all, see our blog on the Budget).
However, there was no action to help the other two main losing groups, people with a severe disability and disabled children. Unlike the reduction in the work allowance these cuts to disability premiums have always been built into the structure of UC, as part of the original compromise between George Osborne and Ian Duncan-Smith where extra costs for some people were balanced by savings from others. Right from the start, the plan was always that transitional protection would stop people in these losing groups from suffering cash losses.
As hinted in the name though, the problem with transitional protection is that it does not last: not only is it unavailable to people who ‘naturally’ migrate onto UC through a change of circumstance, it is also expected that people who get transitional protection will in time lose it as their circumstances change. Indeed, without people leaving transitional protection the government’s numbers do not add up, as there would be reduced savings not only in the short run but in the long run too.
Ultimately this means severely disabled people and disabled children will always be losers from UC. Those lucky enough to be moved under managed migration will get a brief respite through transitional protection, but as soon as they experience a change of circumstances they will revert to being losers.
So, how does that leave the politics of the forthcoming vote on the managed migration regulations? On the one hand, voting for the regulations to be passed progresses a scheme that will see many winning households become eligible for more help and introduces new protections for losing households. Against this, voting for the regulations endorses a scheme that penalises severely disabled adults and disabled children, albeit with the temporary respite of transitional protection for some.
Even if the various delays and re-assurances convince Tory rebels that UC can deliver operationally, and it is worth extending the benefits of UC to winning households who would otherwise remain on legacy benefits, in the current climate convincing them to vote to take thousands of pounds from millions of vulnerable households will be a big ask.
I can see two ways out for the government if it looks like they will lose the vote. One direction is to pause the roll-out entirely, including stopping people moving onto UC through natural migration or new claims and re-opening applications for legacy benefits. This means no new UC losers would be created, but such a large U-turn does not seem very likely.
More possible, just, is that the government will concede that the cuts affecting severely disabled people and disabled children will be permanently reversed, and benefit rates in UC for these groups brought up to their current levels.
In the same way as the cuts to the work allowance were reversed (to some extent), the cuts to disability premiums could similarly be reversed. Given the ongoing legal challenge to these cuts, and the chance the government will lose in court, then it may make sense for them to swallow the pill (and cost for the resulting increased spending) in order to get the regulations passed and accept that creating losers while moving people onto a new benefit is a strategy that was never going to work.