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Universal Credit at risk of collapse if problems aren’t fixed ahead of mass roll-out

Public support in the new benefits system "risks taking another battering" if DWP ministers fail to learn from their mistakes.

The Government’s flagship Universal Credit system is facing catastrophic failure if ministers fail to fix existing problems before it’s rolled out to over two million people, experts have warned in a damning assessment of the Government’s handling of the embattled welfare reform.

A new report from the left-leaning Resolution Foundation thinktank says the UK Government faces “crunch decisions” this Autumn as Universal Credit enters its “most difficult phase”, which will see an estimated 2.1 million households gradually moved from legacy benefits to the new system over a three-year period, beginning in July next year (2019).

This so called “managed migration” will include sick and disabled people currently in receipt of Employment and Support Allowance, many of whom face significant or unsurmountable barriers to employment.

Universal Credit has been beset with problems and delays since its creation, including costly problems with IT software and significant payment delays, and now experts are warning its reputation could be left in tatters without major changes.

Resolution Foundation also say that public trust in Universal Credit has already been undermined by cuts in the Summer Budget 2015, that greatly reduced the generosity of the scheme.

Their report, ‘The benefits of moving‘, says that if done correctly around 700,000 families could gain around £2.9bn in total from being moved to Universal Credit.

But it has also been established that, without changes, around 1.8 million people look set to be worse off under the new system, including the self employed and many disabled people.

Recommendations from the report include:

Speeding up UC payments. “The government should show that 90 per cent of new claims to UC are paid on time and in full before it rolls out the managed migration process. In February 2018, 83 per cent of claims were paid in full and on time, with little improvement since June 2017.”

Reducing financial risks. “The government should ensure that the state, rather than individuals, bears any financial risk that may arise from teething problems in the managed migration phase. No existing claim should be closed until a new UC claim is in place, so that people don’t lose support altogether.”

Boosting financial incentives. “The government should introduce an earnings disregard for those being forced to move onto UC to prevent claimants with volatile earnings (such as self-employed workers or those on zero-hours contracts), or who have a short-term boost in pay, from losing out financially from the transition. More broadly, the government should improve incentives by increasing single parent work allowances and introducing one for second earners.”

David Finch, Senior Economic Analyst at the Resolution Foundation, said: “Universal Credit enjoyed almost universal support when it was first announced. But its reputation has been undermined in recent years by significant cuts and payment delays that have left too many claimants in difficult financial straits.

“But despite these problems, the rollout of Universal Credit is still going ahead and is in fact about to enter its most difficult phase as two million families already claiming benefits start to be moved onto the new system – including one million just about managing families.

“Get this final phase of the rollout right and it could help to reboot Universal Credit’s reputation, but get things wrong and UC’s reputation risks taking another battering, and worryingly some families could be put off claiming UC altogether.”

A Department for Work and Pensions spokesperson said: “Universal credit is a flexible and responsive benefit, providing claimants with personal support and helping to get them into work faster and stay in work longer.

“As we continue rollout we are focused on ensuring a smooth transition with uninterrupted support for claimants, including those migrating from legacy benefits.

“We continue to listen to feedback and make any necessary improvements during the rollout with our ‘test and learn’ approach.

“And research shows that the vast majority of people receiving universal credit are satisfied with the service they receive.”

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