The truth about universal credit

by Michael Meacher MP in The Morning Star

Universal Credit was officially launched on a very small scale at the end of last month in Ashton-under-Lyne in Lancashire.

It merges several benefits and tax credits into one monthly pay-out – not, let it be noted, weekly.

Work and Pensions Secretary Iain Duncan Smith is keen to tell the public that three million people will gain – though for some reason he forgets to add that on the government’s own impact assessment 2.8 million people will lose.

Somehow he’s also forgotten to tell you that the cuts have taken place even before universal credit starts – cuts to housing benefit, the bedroom tax, cuts to working tax credit and child tax credit, and the replacement of council tax with local schemes that often involve people losing £200 a year.

That’s just for starters. Universal credit is going to mean difficulty for millions for a whole range of different reasons.

Applications for UC can only be made online. It takes 20-40 minutes to complete the online form.

But according to the Office of National Statistics 7.6 million people have never used the internet and in some rural areas people who can use the internet don’t have access to broadband.

The National Audit Office says only 37 per cent of people are happy to provide personal details on government websites, another obstacle to online applications.

Households that earn £247 or less a week will see a fall in real income in 2015 because of the changes to benefits, and lone parents will be worse off whatever their circumstances.

Low earners with a working partner will see their marginal tax rate rise, because universal credit has a higher withdrawal rate than tax credits do.

Workers on low incomes who receive tax credit currently already lose most of the credit when their salary rises above a certain level – so a couple with two children on £25,550 lose 73p in every pound they earn over that level, but this is set to rise to 76.2 per cent.

People will be driven to use payday lenders, or even worse loan sharks, because unlike current benefits universal credit is paid monthly in arrears.

So people will have no money coming in for the first five weeks after they have successfully made a claim.

At present half those earning under £10,000 a year are paid more frequently than once a month.

Given that universal credit applications are online only, people will have to rely on help via the telephone.

The UC helpline on (0845) 600-0723 costs up to 10p a minute from a landline and up to 41p a minute from a mobile.

Between April and October 2012, calls to 0845 numbers lasted on average seven minutes and 42 seconds, so an average call to a DWP 0845 number would cost over £3.

The amount you receive will depend on the data submitted to HMRC by the employer. So you lose out if your employer provides the wrong information or at the wrong time.

Council and Housing Association tenants are denied the choice to have their rent paid direct to the landlord. That will be less efficient, less cost-effective, and is likely to increase rent arrears.

And to get universal credit you will have to sign a “claimant commitment.”

This sets out what you are expected to do in preparing for work, looking for work or getting work that pays the equivalent to 35 hours at the minimum wage – that is, at least £216.65 a week.

It will also set out the consequences if you fail to do what is required.

And because universal credit is a household benefit what one person does or does not do will affect all the other members of the household.

Lord Young, one of Thatcher’s business ministers, has got himself sacked before for making deeply callous and insensitive remarks.

He has obviously not lost the knack because he’s now making comments of similar ilk.

Reminiscent of Jo Moore sending round an email on September 11 2001 which said “today might be a good day to bury bad news,” Lord Young circulated his message last week that a recession was a good time to increase profits.

Apart from the offensive distastefulness of trading profits on other people’s misery, Young has really let the cat out of the bag about the government’s motives for the austerity programme.

It has always been difficult to explain why Osborne & co have persisted with a programme of semi-permanent stagnation when it was manifestly failing.

Young has given us a clue that suggests that in the last analysis this is not a deficit-reduction policy at all.

Its real target is not only shrinking the state and squeezing the public sector into the farthest recesses of a fully privatised regime – it’s also to push down wages so far that it creates a bonanza for profits.

In the era of neoliberal capitalism since the early 1980s the policy has worked well.

The share of wages in GDP steadily fell from 65 per cent to just 52 per cent in the early 2010s.

It is now being taken further – the freeze on public-sector pay over the last three years has led to a real terms cut in wages of some 7 per cent.

But what Lord Young has exposed is that this is not just an unfortunate consequence of fiscal consolidation.

It is deliberate government policy now being ruthlessly driven through for a valuable outcome in its own right – soaring profits.

Germany did this, it is argued, to secure its industrial and economic supremacy, so why not impose the same discipline on Britain?

Welfare, to give the social security system the name the Tories have now poisoned, was chosen as an easy, soft target. You shrink the state and by increasing desperation put downward pressure on wages too.

Osborne has now realised he made a major mistake at the outset in hacking back capital investment. He’s now restoring some of those lost investment opportunities and raiding the welfare budget mercilessly to fund them.

Quite apart from the sheer heartlessness in treating the livelihood of the most vulnerable sectors in society as a convenient piggy bank to be raided with impunity, it is also a policy ultimately doomed to failure because it strips demand out of the economy and reinforces stagnation.

The policy will end in devouring itself.

The problem is, how many millions will it have damaged and victimised in the process?


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