British Welfare Reform Travels From Idea to Infamy in a Decade

LONDON (Capital Markets in Africa) – The agonizing effort to leave the European Union is taking up every breath of U.K. politics, so most people haven’t taken note of the 10th anniversary of one of the root causes of the country’s discontent.

In September 2009 a group of researchers, academics, and management consultants hired by a think tank led by a Conservative Party grandee published its recommendations for simplifying Britain’s complex social security system. It laid the groundwork for a big idea: Six types of benefits—including tax credits for parents, unemployment payments, and contributions toward housing—should be bundled into a single payment known as Universal Credit. Within a year, the Conservatives had won power and the overhaul was under way.

Conceived as the centerpiece of a welfare state fit for the 21st century, Universal Credit has instead become a symbol of the breakdown of the British social contract. The theory behind the plan has been applauded by many advocates for the poor: People would know exactly what money they were entitled to and would be able to access it more easily. Yet the rollout, begun in 2013, has been beset by delays, IT glitches, and controversies, leaving recipients without essential funds. What’s more, an almost decade-long austerity drive has made awards less generous. Just 1.8 million households have migrated to the new system, a fraction of the more than 7 million that the government initially estimated to be eligible. 

A major improvement on paper looks more like “Universal Discredit” in practice, according to a November report authored by Philip Alston, the United Nations’ special rapporteur on extreme poverty and human rights. Alston, whose report was the product of a two-week fact-finding tour of the U.K., found it can take as long as 12 weeks for claimants to get the money they need, meaning some have to forgo heat and food. He concluded that about 20% of the U.K. population lives in poverty, while 1.5 million people qualify as destitute. The U.K. government dismissed Alston’s numbers, saying the report was “barely believable.” The Office for National Statistics puts the figure at 17%, while the government says what it calls persistent poverty is more relevant, and that’s 7.8% of the country.

A decade ago, Asheem Singh was as a senior researcher at the Centre for Social Justice, the London-based think tank that produced the policy paper at the basis of Universal Credit. The problem was not one of design, he says, but that the new system wasn’t supposed to have less money to disburse. “Exactly the opposite happened of what the report recommended, and it’s unsurprising that what’s resulted is unfairness and chaos,” says Singh, who for a spell in 2008 was a special adviser to Boris Johnson, Britain’s current prime minister. “While it might have been a good idea, the implementation of it was absolutely horrific.”

The bungled rollout provided rich fodder for critics as British media carried stories about rising homelessness, lines at food banks, and a spike in business for payday lenders. These cast a glaring light on what Johnson’s predecessor, Theresa May, once referred to as the “burning injustices” that ultimately fueled the Brexit vote. One big culprit: the effort to chop away at government deficits swollen by bank bailouts during the financial crisis. Spending cuts enacted since 2010 add up to £70 billion ($87 billion).

Universal Credit’s failings found vivid expression in a 2016 film by Ken Loach, a British director long sympathetic to the plight of the working class and the dispossessed. Titled I, Daniel Blake, it documents one man’s struggle to get his welfare payments after being declared unfit for work. The film won the top prize at the Cannes Film Festival just weeks before the EU referendum. 

David McCarthy found himself in a similar position. The 55-year-old from Chippenham, in the west of England, suffered two ministrokes in November last year that left him unable to walk. He lost his license, which meant he could no longer support himself as a truck driver for a concrete company. He struggled with the documentation requirements, and the call center that’s supposed to assist claimants was too busy to be of much help. He eventually managed to submit his claim for Universal Credit with help from a charity. 

It took 15 weeks for McCarthy to get any money, he says. Payments were approved in January, but because he got backdated holiday pay from his previous job that month, they were immediately stopped as he was judged to have too much money. So the first cash arrived at the end of February. McCarthy now receives a little more than £600 a month, equal to about a third of his income when working. He’s still repaying a £310 advance from the welfare office that helped tide him over. He also got help from friends. 

“It’s no wonder people go to food banks—they can’t get enough money from Universal Credit to bloody eat,” McCarthy says. “To the government you’re just a statistic. The only thing they are doing now is just buggering things up for everyone and spending too much money on Brexit. Why didn’t they bloody leave it?” 

Groups that work with the poor have blamed the payment delays for pushing people into further hardship, adding to the more than 1 million people who rely on high-cost credit to fill holes in their monthly budget. A November report by the charity Shelter cited welfare cuts as a factor behind an increase in Britain’s homeless population to 320,000 in 2018, a 4% rise from the previous year.

Earlier this year, May’s government spent more than £200,000 on an ad campaign to promote Universal Credit, including a four-page spread in Metro, a free newspaper with a large circulation. Johnson, who’s been in power only since July, has been consumed with Brexit and has not directly addressed the shortcomings of the reform, though he has promised to get back to tackling Britain’s social problems.

There’s no prospect of a quick fix. The U.K has had seven cabinet ministers in charge of the welfare system since the start of 2016, the year of the Brexit referendum. (The most recent, Amber Rudd, quit on Sept. 7). Chances are that the issue, along with many others, will remain on the back burner until the divorce is sorted out.

“We want a simpler system, we want a system where people know what they are entitled to, and to improve such things as takeup of benefits,” says Kayley Hignell, head of policy for families welfare and work at the Citizen’s Advice Bureau, the charity that helped McCarthy enroll. “It doesn’t reflect the variety and complexity of life.”

Life has the potential to become much more complex for the U.K.’s almost 70 million people, depending on the terms under which the country exits the EU. An economic slump—even a short one—is a real possibility, which could swell the ranks of people needing to tap welfare benefits. Frank Field, the Brexit-supporting chairman of the Work and Pensions Committee in Parliament, wrote to Johnson earlier this year asking what work the government has done to understand how Universal Credit would work in a recession. The legislature was suspended this month by Johnson, causing an uproar among lawmakers. 

According to another member of the more than 15-strong group that originally worked on the welfare reform concept, the problems that have plagued Universal Credit are what can be expected when you approach social security as if it’s a business. “My concern about the process was that you had these management consultants coming who thought that you could approach the benefit system the way you approached a failing company,” says Nick Hillman, a former adviser to a Conservative minister and now director of a think tank looking at higher education. “You’re talking about real human lives. This week, have they got enough money to feed their children and pay their rent?”

Source: Bloomberg Business News