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Leading article

The Universal Credit crunch

15 September 2012

9:00 AM

15 September 2012

9:00 AM

Exactly three years ago, The Spectator devoted its cover to a revolutionary proposal for welfare reform. The proposed Universal Credit seemed, then, to be one of those ideas too sensible actually to be implemented. It proposed replacing the rotten, complex layers of benefits with a single system that paved the way to work rather than dependency. Its goal was as simple as it was audacious: that everyone should be able to keep a significant chunk of the money they earn. The welfare trap, in which so many millions are caught, would be dismantled.

Its author, Iain Duncan Smith, had then abandoned hope of getting back into government, which perhaps explains his boldness. The Department for Work and Pensions has more out-of-work ‘clients’ (as it calls them) than the combined populations of Estonia, Latvia and Lithuania. To change the way these ‘clients’ are treated is the equivalent of overturning a country within a country. It seemed impossible. But when Duncan Smith was put in charge of welfare reform, it was a sign that the government was prepared for the upheaval. It would no longer tolerate a welfare system that was mass-producing the very poverty it was designed to eradicate.

Two years on, the fight seems to be draining from the government. Treasury officials have been against Duncan Smith from the start, due to the threat which Universal Credit posed to their beloved tax credits. Ambition in itself is looked down upon by ministers who deride ‘IDS’s grand projet’. Sir Jeremy Heywood, the civil servant effectively running Britain, is letting it be known that he is ‘sceptical’ about Duncan Smith’s mission. This, in Whitehall, is the equivalent of a go-slow order. Civil servants will not waste time or personal capital on anything likely to join the identity cards and the NHS supercomputer in the graveyard of ministerial follies.

That Universal Credit would run into problems was inevitable. Anything involving a massive computer system will throw up hideously complex problems, as any project manager will tell you. The trick is to catch problems early. Nerves of steel are required. But when David Cameron tried to move Duncan Smith from the department last week, it suggested panic. Sensing weakness, Labour called for a debate on Universal Credit and has done its best to suggest that the government’s agenda is in chaos. As they know from their own misadventures in government, such prophesies can be self-fulfilling.

Some employers are protesting about having to supply monthly salary data, on which the Universal Credit payments would depend. But this data is being collated by the taxman anyway; the welfare system will just piggyback on work done already. As the project progresses, design flaws will emerge. They can be corrected and delays can be accepted if needs be.

There is, meanwhile, nothing abstract about the damage which the unreformed welfare system inflicts on Britain’s poorest communities. Jane Ellison, one of the Tories who spoke in the welfare reform debate, described how a constituent living in a council estate was mocked by her neighbours for going to work. Another, Richard Graham, read a letter from a constituent that showed him how her income would drop by 10 per cent if she accepted a job. ‘The system appears to have been designed to make sure that I should never work again,’ she wrote. ‘The depressing thing is that my letter will make absolutely no difference at all.’

This welfare trap now ensnares the victims of a new recession. As Frank Field pointed out, the government accepts that the rich would be discouraged from working by a tax rate of 52 per cent. So what about the poor, confronted by an effective tax rate of over 90 per cent? When welfare robs marriage of its economic function, incentivising break-up, is it so surprising that one in four British children is brought up by a single parent? When welfare pays more than work, is it surprising that one in six children is growing up in a workless household? Or that poverty is passed down through generations?

If tinkering with the system was enough, then the 13 Labour years would not have ended in failure. But if radical reform is to work, it needs the full support of government. This Prime Minister should throw his weight behind Duncan Smith rather than seeking to remove him. He ought to remind Sir Jeremy that, as head of the civil service, he is paid not to be ‘sceptical’ about government policy but to implement it. Welfare reform is the thorniest problem in government, which is why so many ministers have ignored it. It is far safer, politically, to leave the poor to rot.

In America it took a widespread sense of crisis, and cross-party determination, to implement proper welfare reform in 1996. Two years ago it seemed, for a while, as though Britain had reached this moment of consensus and resolve. This is now falling apart. The Treasury frets about the ‘business case’ for Universal Credit, but this is not about saving money. It’s about saving lives. It’s about what David Cameron once called ‘Broken Britain’ — except that the country itself was never broken; the welfare system was. Fixing it was  never going to be straightforward, which is why so many governments have given up trying. We will now see if the Tories will be any different.

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