The economics of Universal Credit


Reforming Universal Credit – are there lessons from Australia?

Peter Whiteford, Crawford School of Public Policy, Australian National University [1]

  1.               In my previous submission to the House of Lords Economic Committee I sought to identify a number of practical lessons that the United Kingdom might potentially learn from Australia, which has had an income-tested system of working-age income support payments that have significant similarities to Universal Credit, but which has been in operation for more than 25 years.
  2.               As part of that submission, I pointed out a range of ways in which it is possible to ease transitions on to and off payments, some with the aim of avoiding the unnecessary creation of debts for vulnerable people.
  3.               A new report, Working it Out Improving employment opportunities for women with criminal convictions, from the Prison Reform Trust has pointed out the problems that women prisoners face on their release, including access to government income support. The report notes that 53% of women convicted or cautioned in 2011/12 were claiming out-of-work benefits one month prior to their conviction or caution, as were 40% of men.  It therefore appears extremely likely that future released prisoners will need to claim Universal Credit. 
  4.               However, the report notes: “The DWP and the Ministry of Justice have not enabled UC claims to be made from within prison for commencement on a person’s release date. On release an individual can submit an Advance Payment claim but this must be repaid over a 12-month period. Women without knowledge of Advance Payments, the necessary documents or support to make a claim may be without benefits for several weeks, with only the discharge grant of £46 to survive on.” (Prison Reform Trust, 2020, p.17).
  5.               Australia has a range of income support measures designed to assist released prisoners. These are set out in the Guide to Social Security Law. In particular, a person in prison (or psychiatric confinement) may make a claim for a Crisis Payment as well as a social security pension or social security benefit up to 3 weeks before their release date. Where a person is being released from prison outside usual working hours, or in a remote location, this will allow their claim/s to be processed, granted and their entitlement paid to them at the prison in anticipation of their qualification on release from prison. The start day for payment will be the day of release from prison.
  6.               The Crisis payment is a one off payment equal to a week’s pay at the relevant existing income support payment rate. Generally, people going through extreme circumstances can get up to 4 payments over 12 months, but a person who is being released from prison can claim each time they leave prison.
  7.               In summary, this means that a single person leaving prison could be paid $838.50 on release, equivalent to £457 on current exchange rates, or nearly 10 times as much as the discharge grant.
  8.               The intention of these arrangements is that support is paid immediately, and with no need to repay this assistance, with the practical aim of reducing their likelihood of re-offending.

27 February 2020


[1] Note: From March to November 2019, I was a Visiting Fellow at the Institute for Policy Research at the University of Bath, working on social security income tests and timing issues in the United Kingdom and Australia.