Universal Credit is the Conservatives’ flagship social policy launched with the Liberal Democrats in 2010, which after nine years of spending and chaotic waste of resources, with numerous glitches, is still in the process of being ‘rolled out’. The Conservatives’ manifesto for the General Election pledges to “continue the roll out of Universal Credit”, without a hint about why it has taken so long to implement.
What critics have not adequately emphasised is that it will have profoundly regressive consequences for the future of work and labour in Britain as it is rolled out, consequences that will dwarf the effects of other labour market policies outlined in party manifestos.
Universal Credit will weaken the bargaining position of all those in the lower end of the labour market, and thus in itself will drag down average real wages, worsening income inequality. It will also have the effect of increasing useless labour while reducing useful work, since those absorbed into its system will not have the time or capacity to do care work and other unpaid work of value to themselves, their families or communities.
"The dystopia is here and will grow much, much worse."
The Conservatives put out an advert in national newspapers, paid for by the public, claiming that the policy had improved the ability of people to obtain jobs. Yet research has shown that it does not do so. Eventually, they had to withdraw the advert, but not until millions of people had seen it. They should have been required to issue public statements correcting the fake news.
Labour is committed to abolishing Universal Credit, and is committed to piloting basic income, i.e., a benefit paid to all legal resident citizens, coupled with needs-based payments for those with disabilities and with other special needs, such as maternity, accidents, frailty or old-age. The Greens are also committed to abolishing Universal Credit and to replacing the core with a basic income, retaining housing and disability benefits.
Voters and commentators should realise what Universal Credit purports to do and what it does. It is the most strategic policy of neo-liberalism, more important in its ambition than most people realise. By the early 2020s, according to the Child Poverty Action Group, half of all children in Britain will be enmeshed in it. Every candidate and voter should regard it as a central issue in the election. Yet the Conservatives and the media are keeping it out of the debate.
Basically, Universal Credit combines six means-tested benefits into one. A means-tested system aims to give benefits only to the “deserving poor”. That requires administratively complicated tests to prove somebody is poor and complex tests to determine their poverty is not their own fault.
Universal Credit (UC) subjects vulnerable people to such invidious tests, which are stigmatising, arbitrary and hard to understand. Observers should realise that in every country where means-tested benefits have been applied low take-up rates have resulted, i.e., many who should receive benefits do not receive them. In Britain, according to the government itself, about two in every five people who should receive such benefits do not obtain them. The Treasury even budgets on the basis that many who should receive benefits will not do so. This is unfair, and is deliberate.
Then there is the Catch-22 trick played on claimants. They are required to apply for benefits online. But many do not have computers or access to one or know how to use them. They are told they should use public libraries to apply online. But the Conservatives’ austerity policy (backed by the Liberal Democrats) has led to the closure of over 750 libraries.
To compound the failings of means-testing, if benefits are granted only to ‘the poor’, then somebody who obtains a low-paying job faces loss of benefits – known as a poverty trap – that makes any net gain minimal. The Department of Work and Pensions (DWP) admit that such a person faces a marginal tax rate of 80%. That is ridiculous. Yet the Conservatives intend to continue the policy.
The situation is worse, because of what I call the precarity trap. The problem starts with the government’s rule that someone who becomes entitled to a benefit must wait for five weeks before claiming it (it was six weeks until evidence of hardship became overwhelming). Actually, according to the National Audit Office, a quarter of claimants do not receive benefits for over nine weeks. Could someone explain to supporters of this policy how impoverishing this is? It can only be deliberate.
Now we come to the precarity trap. If someone loses a job, she must wait for at least five weeks. Suppose that after eventually obtaining benefits she is offered a short-term job. She would face not only the 80% poverty trap but also the prospect of being out of a job again shortly, having to wait for another five weeks or more before receiving benefits again. It would be irrational to take the job. Yet if she refused, she would be ‘sanctioned’, losing any income.
"Every legally trained person should protest at this inequitable system"
Under Universal Credit a claimant must be ready to be interviewed and assessed regularly, at short notice, and must prove they are ‘working’ indefatigably job seeking. If a bureaucrat says they have not been looking hard enough or are late for an interview, the bureaucrat – poorly trained, inexperienced, working for a firm paid by how much they save the system – can sanction the claimant, by suspending payment.
This contravenes a basic principle of common law – due process. In effect, they are deemed guilty until they prove themselves innocent. They can appeal, but that takes nine months, during which they receive no money. Extraordinarily, most people who appeal win. But this is not justice, since they have suffered the penalty. Many become homeless and sick, many commit suicide or attempt to do so.
The Conservatives claim the threat of sanctions improves work motivation and social integration. There is not any evidence to support that. On the contrary, research has shown it has the opposite effect. But even if there were evidence an instrumental justification for an immoral illegal act is abhorrent.
Another amoral feature is that benefits are only paid for the first two children, which obviously penalises any third or fourth child. What has the child done to deserve that? The policy is moralistic, rationalised as deterring childbearing by “the poor” (unless the mother can ‘prove’ she was raped). This is toxic utilitarianism.
Then there is the rule that a worker dismissed for alleged misconduct is denied benefits for at least 13 weeks. This fails to respect due process. The DWP should not presume one party or the other is telling the truth. A woman may be dismissed for some petty action but actually have refused a sexual advance. A worker could have objected to having to do tasks not in his job description. It is unfair to presume guilt and subject the person to a harsh punishment – loss of subsistence.
One telling statistic is that so far the number of claimants who have been sanctioned exceeds the number of people convicted of petty crimes or misdemeanours in magistrates and sheriffs’ courts, and the penalties have been more severe. Every legally trained person should protest at this inequitable system.
Universal Credit is morally repugnant. Any Party advocating it deserves contempt. Every leader should use the last few days of the campaign to expose what Universal Credit will do to poverty, insecurity and inequality over the next five years. Where it has been rolled out so far use of food banks by the precariat and underclass has risen fourfold. The dystopia is here and will grow much, much worse.
Guy Standing is Professorial Research Associate at the School of Oriental and African Studies University of London. An economist, he is a Fellow of the British Academy of Social Sciences, a Fellow of the Royal Society of Arts, co-founder and honorary co-president of the Basic Income Earth Network (BIEN), and Council member of the Progressive Economy Forum. He is the author of many books including his most recent work: Plunder of the Commons (2019, Penguin).
This article has also been published on the Progressive Economy Forum site.