Responding to critics in the House of Commons about the national roll out of the Universal Credit (UC) scheme, and the introduction of a benefit cap from £26,000 to £23,000, Ian Duncan Smith the Work and Pensions Secretary, said that before the introduction of UC housing providers got rent money paid directly to them, while the individual in difficulties sorted themselves out. Under UC, they can apply for an extra payment, and that will be done direct.
The national roll-out of universal credit began earlier this year with first-time claimants being offered the new benefit instead of jobseeker’s allowance.
The concept of UC, first announced by Work and Pensions Secretary Iain Duncan Smith in 2010, has enjoyed cross-party and now Labour front bench support – but its implementation has come under fire from some detractors. The new single monthly payment is said to mark the biggest overhaul of the benefits system in 60 years. So what difference will it make and when will it come into force?
It is a new type of financial support for people on a low income or looking for work, say the Government. The single monthly payment will eventually replace six other benefits and tax credits, including: income-based jobseeker’s allowance; income-related employment and support allowance; income support; child tax credit; working tax credit; and housing benefit.
The rationale for the change, according to the government, is that UC will bring greater fairness to the welfare system by “ensuring that people are better off in work than on benefits”. Duncan Smith says that the old system reduces the financial incentives of taking a job as it is difficult for claimants to take on short-term or part-time work without losing all their benefits at once. Universal credit gradually reduces as claimants earn more, with no limits to the number of hours people can work in a week.
Clive Betts, Labour MP for Sheffield South East, thought that a lower benefit cap, combined with the introduction of direct rent payments under universal credit, could lead to a rise in evictions from social housing. He asked the Work and Pensions Secretary whether he was aware of the problem and what consultation his department had carried out.
Betts told MPs:
“This issue was raised by Tony Stacey, the chief executive of South Yorkshire Housing Association. Currently, if a household is in rent arrears and gets housing benefit, the benefit can be paid directly to the social landlord.
“When universal credit is introduced, if the family also gets a welfare cap, it is the housing cost element that is squeezed by the cap. No longer will the amount of universal credit be paid directly to the social landlord the problem, and what will he do about it?”
Duncan Smith replied to this by saying:
“Let me be absolutely clear about the importance of universal credit. In the past, housing providers would get the money paid directly to them while the individual in difficulties sorted themselves out. Under universal credit, they can apply for an extra payment, and that will be done direct.
“The key point about this is that the housing provider works with the individual family to help them turn around their circumstances, rather than just leaving them as they are and not doing anything about them. All of that is being tested under universal credit. People on universal credit will be better off directly as a result of the changes that we are making.
IDS said that his department had been working closely with more than 50 landlords “across all sectors” which would include private as well as social landlords.
“I instituted a phased roll-out of universal credit, so we would have time to consider any issues that arose and to deal with them. Jobcentre Plus and local authorities are working together with ‘Universal Support — delivered locally’.
“We will continue to develop this important partnership to ensure the most vulnerable get the support they need to lead independent lives. We have done a huge number of reviews. We regularly engage with more than 50 landlords across all sectors, which includes meeting with social landlords in key areas where universal credit is live.”
Matthew Pennycook, Labour MP for Greenwich and Woolwich, then questioned IDS on the benefit cap.
He asked: “Section 96 of the Welfare Reform Act 2012 stipulates that the level at which the total benefit cap is set will be determined by reference to estimated average earnings. How do the Government justify breaking the link between the cap and average earnings by reducing the rate to £23,000?”
Duncan Smith replied:
“The hon. gentleman should address his question to his frontbench team, as they apparently support our move.”