The economics of Universal Credit

Coventry Citizens Advice (CCA) is a charity delivering independent, impartial, confidential and free advice and guidance to the citizens of Coventry. Its work is predicated on the fulfilment of two principles: to give advice to those who need it; and to use evidence of client experiences to make society fairer.

In 2018-19 CCA supported approximately 20,000 clients with over 30,000 separate issues. These ranged from welfare benefit and debt issues to employment, housing and consumer empowerment issues. Every client contact with a CCA adviser is recorded on CCA’s case recording system – Casebook. Evidence used and comment offered in this report is derived from this resource and from conversations with CCA caseworkers and volunteers.

For context, full service Universal Credit began roll out across Coventry in July 2018; following the earlier introduction of ‘live service’ UC in December 2017. We supported 31 clients with 38 issues in the first quarter of 2018-19 under the ‘live service’. By December 2019, under ‘full service UC’ we had supported 2,370 UC clients with 7,983 UC issues; including 1,115 clients (with 5,100 issues) through the DWP-funded, but Citizens Advice delivered, Help-to-Claim Scheme.

Initially, clients required help to make a claim and understand the mechanics of Universal Credit. Applicants experienced numerous problems accessing IT facilities, understanding evidence requirements, being able to verify their identity and knowing what was required of them under the ‘claimant commitment’.

Very quickly three new issues became a priority once an application had been submitted: coping with a long wait for an ‘on-time’ first payment; understanding how to make work coaches aware of client vulnerabilities in order to avoid unjustified sanctions for breaches of the claimant commitment; and ensuring direct rent payments to landlords weren’t delayed so long that claimants were automatically threatened with eviction.

This second phase has now spilled into a third phase of difficulties. These difficulties revolve around the effective management of a one-size-fits-all digital-by-default welfare benefit which puts administrative efficiency above client need. Emerging issues now focus on the regime under which advance payments are offered, accepted and repaid; on the accuracy of payments adjusted to ‘real-time income’ data from employers; the inability of the system to cope with employed claimants who receive an early xmas payment; the inability of the designed process to adequately support those unable to work and those with childcare responsibilities, to incentivise those in work to work more hours, or to protect those striving to improve themselves through self-employment. 

A continual rise in the number of UC applicants has also put a severe spotlight on the number of eligible applicants who cannot effectively access the benefit, or manage their claim independently, because of language difficulties, digital illiteracy, mental health problems or other issues. Coventry advisers now experience, on a day-to-day basis, all of these sets of difficulties (and more) simultaneously.

The response, locally and nationally, to successive and ongoing presentations of supporting evidence is that the evolution of Universal Credit roll out has been predicated on a ‘test and learn’ agile system, ready to react to properly evidenced complaints and comments. Unfortunately, never throughout this whole process has it been accepted that it has been the most vulnerable in society who have been forced to bear the risk of every technical hitch, delivery issue and design flaw identified after roll out and that it is the most vulnerable that have been driven to personal debt, food poverty, fuel poverty and threatened homelessness in their thousands if not tens of thousands.

Primary Questions:

  1. How well has Universal Credit met its original objectives?

Coventry CA understands the original objectives of Universal Credit to encompass the following:

  1. To simplify the benefits system,
  2. To reflect, in its design and delivery, the world of work,
  3. To ‘make work pay’, and
  4. To reduce public expenditure on welfare benefits.

In our view, bringing the experiences of our clients and advisers to bear, we believe none of these objectives have been met in any meaningful way. Furthermore, the design and delivery of Universal Credit is as far away now from meeting its original objectives – especially for vulnerable claimants - as it ever was.

  1. Were the original objectives and assumptions the right ones? How should they change?

In abstract the original objectives were and are laudable; they need not change, with one exception. No reference is made to supporting those too sick to work with long term illnesses or disabilities. UC is geared to jobseekers, its terminology focuses on jobseekers and it’s payment design focuses on job seekers. ‘Making work pay’ and ‘reflecting the world of work’ means nothing positive to the long term sick. Looking after those too sick to work must be reflected clearly and prominently in any revision of UC objectives.

In reality, the way in which these objectives have been translated into a policy ‘on-the-ground’ has completely undermined them. The attempt to ‘socially engineer’ an entire population into becoming digitally literate and effectively active, as a precondition for the success of the policy, is one of the (but not the only) most glaring illustrations of this.

  1. What have been the positive and negative economic effects of Universal Credit?

Coventry CA deals with clients who, for one reason or another, cannot effectively help themselves. We provide information, advice and or guidance on their rights, entitlements and responsibilities, and we help them, with specific reference to benefits issues, claim their entitlements or challenge unfair decisions.

The design and delivery of Universal Credit has proclaimed itself to be an ‘agile’ system with a ‘test and learn’ approach to continuous improvement. To a client and their adviser this has simply meant, for client after client after client, that the system was implemented before it was ready, it was service users who have had to tell service designers and deliverers what has gone wrong and when (and, in many cases, suggest the solutions) and it is the client who has borne the entire risk of system or delivery failure. The ‘economics of Universal Credit’, for thousands of clients, has been accumulating personal debt, food poverty, fuel poverty, ill-health and threatened (if not actual) homelessness. The ‘safety net’, of which accessible welfare benefits paid at rates that reflect subsistence needs is a vital element, now has holes so large that those who need it most are falling through. The consequences are not only life-changing personal and household detriment but significant spill-over costs into homelessness services provision, health and social care service provision and other statutory provision across the ‘welfare state’.

Elements of Universal Credit may benefit some sections of the ‘benefit register’; particularly those in and out of reasonably paid work with savings to tide them over. However, it must not be forgotten that the vast majority of the most vulnerable UC claimants, those on disability benefits, have not migrated to UC yet. Any pluses are far outweighed by the negatives and the numbers experiencing a negative will increase as ‘managed migration’ pitches the long term sick into UC.

  1. What effect has fiscal retrenchment had on the ability of Universal Credit to successfully deliver its objectives?

We have noted above that the original objectives of Universal Credit were and still are laudable. ‘Fiscal retrenchment’, or austerity economics as everyone else labels the strategy, has been a key – but not only – driver undermining attempts to turn ideas into policy.  It has acted in two main ways.

Firstly, the objective of ‘making work pay’, though never applicable to those too sick to work in the first place, has been undermined by cuts in the financial incentives that were meant to accompany UC employment support. Allowances for those entering work, arrangements for the self-employed and payment arrangements around childcare costs are all examples of areas where funding cuts have undermined potentially positive policy.

Secondly, austerity has hit the public sector work force in terms of numbers, training and working practices. Our clients and advisers have found an enormous range in the quality of service provided by DWP personnel. The agile system mentioned earlier has led, at times literally, to no-one really knowing what the latest custom and practice is on a given issue, with some issues being ‘lost in the shuffle’ and not addressed as other priorities have overtaken them. Staff have seemed demoralised and unsupported at times. Spatial reorganisations and the introduction of more remote (‘virtual’) working have left our advisers confused as to who to contact to discuss client issues and almost broken the link between local advisers and local DWP staff.

In the broadest sense Universal Credit behaves like a benefit designed by administrators to please accountants. It has lost any sensitivity or empathy it may have had for its target clientele and, to all intents and purposes, acts against their interests rather than in their interests. It is the very opposite of user-friendly.

  1. Which claimants have benefited most from the Universal Credit reforms and which have lost out?

Everyone who has claimed (or tried to claim) Universal Credit has lost out. Even where benefits have been paid ‘on-time’ there has been a minimum 5 or 6 week delay in a first payment forcing claimants either into poverty or an advanced payment (and then deductions-driven poverty). Once first payments are made there has been no guarantee that regular accurate payments will follow. Even if regular accurate payments follow there is a design flaw where at least once a year (for example, at Xmas) those in work may get paid twice in the same calendar month will have their benefit greatly reduced or their claim closed and have to reclaim. Then, to complete the story for claimants whose claims haven’t ‘gone wrong’ in any obvious way, they are paid a subsistence benefit which increasingly covers less and less of their subsistence costs. The 4 year benefits freeze, by itself, has driven claimants into poverty. What must not be forgotten is the reality for tenants and those liable for Council Tax, that neither local CT support policies nor local housing allowances have kept up with inflation. UC claimants, with no income and no savings, are required to use part of their already inadequate living expenses to pay rent and council tax (rather than for food or heating).

The situation is worse for large swathes of the claimant population. If you are digitally illiterate, have no easy access to the internet, have a language difficulty, a mental health problem, cognitive issues, learning difficulties, no access to public transport, are self-employed, are disabled, have questions over your immigration status or are already in debt you will find a one-size-fits-all policy doesn’t fit you. The reality is that it doesn’t matter how the claim breaks down. What matters is that in whatever way it breaks down, including ‘official error’, it is the claimant that loses out.

  1. How has the world of work changed since the introduction of Universal Credit? Does Universal Credit’s design adequately reflect the reality of low-paid work?

The ‘gig’ economy, what was once called ‘flexible labour markets’, exacerbates the volatile and unpredictable nature of work for many of the low paid. Their incomes, and employers, can vary on a weekly fortnightly or monthly basis. Consequently, their UC payments can require constant recalculation; the accuracy of which is dependent on employers providing accurate and timely wage information to the DWP. In theory claimants can choose flexible UC payments – split, weekly, fortnightly and so on – to mitigate the complexities of their working patterns and minimise shortfalls.

The reality, according to our experience, is that data presentation from employers can be patchy in its timing and accuracy. Flexible payments must be justified on a case by case basis and are either not publicised as options for claimants or not allowed in any meaningful numbers.

Working claimants need child care support but the allowances for such support and the application-payment mechanism is such as to make this hard to afford or access.

Low skilled workers, those most affected by the ‘gig’ economy, are often the ones most disadvantaged by a digital by default online benefit built for English speaking claimants.

Low paid workers are often the ones with no savings. As such they are not able to survive a minimum 5 week wait for an initial payment or afford unsympathetic deductions.

UC is built to reflect salaried and stable employment patterns. Those most likely to claim UC will not enjoy such working patterns.

  1. If Universal Credit does not adequately reflect the lived experiences of low-paid workers, how should it be reformed?

There are numerous ways in which to reform UC to reflect better the lived experiences of low-paid workers. Here are five that we would recommend:


It is impossible in such a small space to illustrate how our clients are affected by Universal Credit. We would be happy to host the Committee if they felt they could benefit from visiting a local Citizens Advice office to see at first hand the work of our advisers and the plight of our clients.

Author: Ed Hodson, Research and Campaigns Co-ordinator, Coventry Citizens Advice.

25 February 2020