Universal Credit (UC) is changing lives for the better, and the forthcoming budget is the time to invest in it.
The principles of Universal Credit are clear. To simplify the benefits system, reduce complexity and support more people into employment and to higher paid employment. UC was a response to a system where, at the peak of the Labour boom there were three million on out-of-work benefits, of whom a million didn’t work a day of the Labour years because they were caught in a welfare trap – and written off.
A great many were on incapacity benefit, written off as never being able to work again.
UC was and is needed to help get people work ready and, coupled with universal support, the process of transitioning people onto UC helps identify underlying financial difficulties and work with agencies to address them.
What has been designed in principle is a multi-dimensional measure that brings in a full range of local organisations to support the vulnerable and to help address the underlying causes of poverty.
Early results suggest that UC increases the probability that a welfare claimant finds work within six months of a claim, that they are more likely to work for more hours, they are more likely to progress in work, and ultimately to earn more.
The Department for Work and Pensions estimate that UC, when fully rolled out, will help around 250,000 more people into work, compared with legacy benefits, and one million more severely disabled will see a £110 increase per month. We believe it to be one of the most important public policy reforms in the fight against poverty because of the way it is designed and proven to support more people into work.
The Government should be congratulated on its investment of £2billion in recent budgets, partially reversing the cuts of your predecessor in 2015. And it is with that in mind that we are asking for further investment in this world-leading and proven system. It is crucial that the Government controls costs to put this country on a stable financial footing.
When it comes to welfare this must be done in a way that protects the poorest, most disadvantaged and gives people every opportunity to make the most of their potential. This can be best achieved by immediately raising the UC Work Allowance threshold before fulfilling our 2015 manifesto pledge to raise the personal tax threshold to £12,500.
This immediate investment of up to £2billion into UC would ensure that all spending goes immediately to those that need it most. It achieves two vital goals.
Firstly, it upholds and bolsters the manifesto commitment to allow low-income families to keep more of their income – increasing the work allowance is effectively the most targeted way of giving the poorest families the biggest tax break. While three quarters of the gains from increasing the personal tax threshold are felt by the top half of earners in the country, every penny invested in restoring the UC work allowances threshold goes to families who we know are already in need of income support.
Secondly, it will ensure that work always pays. People must be incentivised and rewarded for doing the right thing which is working and providing for themselves and their families. The UC work allowances are the most targeted way of doing this. By choosing to invest in UC work allowances more people will find work and those in relatively low-paid work will be better supported.
As well as being a costed policy, it would have a number of important subsequent economic and social benefits. By increasing the amount of money available to entrants to the new system, it would significantly reduce the need for protection payments, which those moving from the legacy system need.
While increases to NHS funding are hugely welcome, research on the social determinants of health, by Professor Sir Michael Marmot and others, show that UC investment would be good health policy: work, living standards, and income are as important to health as our access to services. This is a truly preventative health policy.
It is also an education policy, with the effect of a stable working household being as influential on child development as anything that happens in our schools.
The concurrent rollout of Universal Support would also give the right contextual support to people with a range of problems from addiction to serious personal debt. Unlike the legacy benefits it can improve lives not park them in benefit dependency.
If this is to be a Government that is committed to social justice, to making work pay, to physical and mental health, and to seeing every citizen flourish, this is the best investment choice that can be made to reflect those aims, at no cost, and indeed with potential savings, to the country.
Indeed as Joseph Rowntree said, “…it is the only opportunity we have to reform a failing and overly complex system. It removes the worst work incentives of the current system and redistributes resources to households in poverty.”
Iain Duncan Smith is the Conservative MP for Chingford and chairman of the Centre for Social Justice