With Universal Credit, work might finally pay
It's been a long time coming, but Iain Duncan Smith's attempt to streamline the benefits system might finally be bearing fruit - despite the efforts of George Osborne
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6:22PM GMT 15 Feb 2015
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We are at a job centre in Oldham and 21-year-old Dan is pondering his career prospects. Dan has had a few setbacks in life, and dropped out of university, but now hopes to build a future programming computer games.
A work coach is teaching him how to model a CV, and make job applications. She urges Daniel to regard his job-seeking as a full-time, 35 hours a week occupation. She encourages him to take up voluntary employment for the time being, in order to get used to turning up for work.
Dan (not his real name) is a guinea-pig in an enterprise that ministers believe will change forever the experience of losing your job and looking for work. A year ago, Daniel would have been part of the Gordon Brown’s old system. It was so complicated that even managers of benefit offices found it impossible to understand, let alone jobless youngsters.
Brown’s system was designed to help the poor. But there were so many different credits – related to childcare, housing benefit, disability and a myriad of others – that even experts were unaware of the existence of some of them.
Expert office managers would waste hours using Gordon Brown’s notorious ''Better off in work calculator’’ to estimate manually how much claimants were due. More disastrous still, it deterred the unemployed from returning to work because many of them were actually better off on benefits.
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It was also arbitrary. Jobseekers were rewarded if they worked for exactly 16 hours a week. But woe betide them if they showed initiative and dared to work for 17 hours, because at that point their income could fall sharply.
Brown’s demented, Kafkaesque method helped to create a pool of long-term unemployed who made the economically rational decision to stay on the dole. This was damaging for the British economy. It was also a human tragedy, with hundreds of thousands condemned to hopeless lives as clients of the state.
The most intelligent people in the Labour government – ministers Frank Field and James Purnell were the most notable – understood there was a problem. But when they tried to find a solution they were ruthlessly blocked by Brown.
It was left to the Coalition to pick up the mantle after Labour lost office. Today, Iain Duncan Smith sounds the death knell for Brown’s vision with his announcement of the roll-out of Universal Credits across the nation. His welfare revolution is potentially the most important achievement of the Government.
UC compress all benefits into one single, monthly payment. That makes it simple to operate, and easy to understand. Most important of all, it guarantees that work always pays. A year ago, it might have been madness for Daniel to take a short-term job. There could have been little or no financial benefit and he would also have faced a bureaucratic nightmare because he would have been obliged to sign off benefits – and sign back on again when his work ended.
The Universal Credit is already transforming the job market in Oldham. Petra Kelly, of the recruitment firm Blue Arrow, told me: ''UC has opened up the world of work to lots of people. Under the old system people wouldn’t take on short-term contract work.’’ Under the new system, job-seekers stay with universal credit whether they are in work or not – and retain a much bigger chunk of their earnings. There are already signs that the changes are helping to bring down the pool of long term unemployed.
The story of universal credit is one of the most dramatic in post-war political history. Chancellor George Osborne ran a personally vindictive briefing campaign (press allies reported Osborne claiming that Duncan-Smith is ''not clever enough’’) against his Cabinet colleague, and tried to get him sacked.
Mr Osborne entered an unspoken alliance with Left-wingers like Polly Toynbee of the Guardian in his vicious campaign to destroy his career. Duncan Smith was impervious. ''I am not sure that there is another politician who could have got this done,’’ says Christian Guy, director of the Centre for Social Justice and a close ally of Mr Duncan Smith.
One influential ally compares Duncan Smith’s refusal to budge from the Department for Work and Pensions to Michael Gove’s readiness to be moved from education, after coming under fire from the teaching unions.
''There’s no way that Iain would have done what Michael did and take the job of chief whip. For Iain it was never about political games or moving up the Westminster ladder. The origins of Iain Duncan Smith’s mission date back to the final days of his doomed period as party leader. On a trip to Gallowgate in Glasgow, he saw how many lives were being lost to drink, drugs, joblessness and despair.
The locals taunted him that, like every other politician, he would never return. Iain Duncan Smith pledged to do so: it was this transformative moment that caused him to set up the Centre for Social Justice after losing his job.
With the Tories in their long period of opposition, IDS and his team diagnosed the causes of social collapse: drink, drugs, debt, family breakdown. The Centre for Social Justice realised that it was essential to scrap Brown’s tax credits. However, its planners were warned that the obvious replacement, a single payment, would be impossible. It would need a computer large enough to cope with 8 million households – approximately 20 million people.
The new system needed to connect in real time, to employers, HMRC and DWP records. Expert advisers Price Waterhouse advised that this would take eight years to build. This was partly why there was no Tory manifesto pledge to introduce the UC.
Once in office Mr Duncan Smith and his ministers worked flat out on a replacement system. Welfare minister David Freud says that he lost a stone over the summer of 2010 as he drafted the welfare reform White Paper.
He also recalls the ''lightbulb’’ moment when, at a chance meeting, ''I learnt that Vocalink, a payment systems company, had already spent four years building a real-time PAYE system that worked. This meant that we had the information technology to make Universal Credit effective.’’ At the end of 2012, the nascent UC system ran into trouble. Philip Langsdale, the computing genius who was overseeing the hugely complex UC technology, fell ill and died at the tragically early age of 56. His death came at the worst possible moment, because DWP civil servants had not worked out how to prevent fraudsters hacking into the system.
George Osborne, in alliance with the Left, moved in for the kill. Sceptical of the entire UC project, Mr Osborne persuaded David Cameron to get Duncan Smith moved.
According to one friend, Duncan Smith told Cameron: ''You can sack me but I am not going to move from the Department of Work and Pensions.’
He stayed and called a ''pause’’ in the introduction of universal credits. The system was remodelled and the original plan to introduce it in one ''big bang’’ moment scrapped.
From now on it would be introduced in stages. ''We’ve called it 'test and learn’,’’ says Lord Freud. ''Rather than building something and banging it out to a pre-agreed timetable, we work all elements through, test them, and roll them out only when it’s safe and secure.’’
Lord Freud is generous in his praise for senior civil servants who, he says, have welcomed the new scheme. He also highlights the practical advice from local job centre managers. For the last 18 months the scheme has been in operation in pilots in London, Inverness, Rugby and the north west of England. At first it was adopted for new claimants only, later for couples. Now it is being rolled out across the nation.
There is still a long way to go, but ministers believe that they have taken the first steps in a transformation that makes the economy more dynamic while bringing back hope to the long-term unemployed.
Lord Freud goes further: ''We are bringing about a social revolution.’’
As for Daniel, when I checked late last week, I was told that he had found a job.
Plus this from the Daily Telegraph too:
12:01AM GMT 15 Feb 2015
The Coalition's flagship benefits reform is more likely to get claimants back into work and earning more money than the system it replaced, new analysis has found.
The most comprehensive analysis to date of Universal Credit, conducted by the civil service but peer reviewed by a leading think tank, reveals the reforms appear to be working.
Iain Duncan Smith today uses the findings to accuse Labour of being the party of “welfare dependency” for failing to embrace his shake-up of the benefits system.
The Work and Pensions Secretary attacks Mr Miliband’s “notorious inability to make decisions” and “ridiculous” position of wanting to “pause” Universal Credit in a piece to Telegraph.co.uk.
It comes with Mr Duncan Smith due to appear in television interviews today to promote the Government’s welfare shake-up and put political space between itself and Labour.
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Tory strategists believe the party can win over wavering voters with its toughening up of the benefits system in an election dominated by concerns about the money in people’s pockets.
A nationwide rollout of Universal Credit, which replaces six existing benefits, will begin tomorrow, with the scheme predicted to be in all British jobcentres within a year.
The most comprehensive analysis of the scheme to date reveals that the Coalition’s benefits shake-up appears to be working by increasing people’s chances of getting back into work.
Labour, which supports the principle of Universal Credit, repeated its criticism that implementation of the welfare change has been “glacial” over the weekend.
However Mr Duncan Smith uses the findings to attack Labour for failing to wholeheartedly back a scheme which “liberates people to take work” in a piece published on the Telegraph's website.
“Having opposed every one of our reforms, yet again they stand in the way of progress,” Mr Duncan Smith writes.
“Miliband says he will ‘pause’ Universal Credit – a position that might seem ominous were it not so ridiculous. His, by now notorious, inability to make decisions is perfectly encapsulated in this stance: a pause, while he tries to decide what to do next.
“Not for the first time, Miliband is out of step with the nations employers – who have been quick to realise the clear benefits of Universal Credit in terms of creating a more dynamic, more productive workforce.”
New analysis compiled by the Work and Pensions Department but whose methodology was peer reviewed by the thing tank IFS appears to back up Mr Duncan Smith’s case.
Researchers compared the performance of thousands of benefits claimants on Universal Credit to those on the previous system inherited from Labour over a four month period.
They found those on Universal Credit were 13 per cent more likely to have found work than those on Jobseeker’s Allowance and on average earned more money.
In addition the department said the findings showed Universal Credit claimants are more likely than Jobseeker’s Allowance claimants to believe the benefit system is encouraging them to find work and spend more time looking for work.
