The UK – a ‘failed welfare state’

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The government’s planned £20-a-week cut to universal credit will come in this weekend amid fears it will plunge 500,000 people into poverty.

At a Religion Media Centre online briefing, poverty experts gathered to discuss the consequences and there was agreement that it was clearly wrong to remove it.

Furthermore, the briefing was told, some people on universal credit had to pay back 25 per cent in debt arrears, a situation made worse by the pandemic.

Universal credit was introduced in 2013 to replace and combine six benefits for working-age people who have a low household income. An extra £20 was added in March 2020 to help people during the Covid-19 pandemic.

The £20 “uplift” was initially planned to last for a year, but it was extended until the end of this month.  After the uplift is withdrawn, the typical universal credit claimant will have £324.84 a month to live on. 

The decision to end the uplift has caused widespread concern and provoked several campaigns to try to force a change.

Bishops including Liverpool and Durham have spoken against it; 1,100 church leaders have signed a petition against; six Tory MPs voted against the withdrawal in a Commons vote in January; and 100 organisations including charities working on the front line, signed an open letter of protest in the campaign “Keep the Lifeline”, claiming  it would affect half a million people.

Gareth McNab, head of external affairs at Christians Against Poverty, explained the frustration among community leaders working with people on very low incomes, which had led to the open letters of protest.

It was a key tenet of faith to stand in solidarity with those on the margins of society and they were appealing to the government to change its mind. For the uplift to be withdrawn at the end of this month is “at best, poor timing, at worst, deeply cruel and divides society”.

Even the original architect of universal credit, Iain Duncan Smith, and the think tank he co-founded, the Centre for Social Justice, appealed for the uplift to be maintained. But the government has not relented. No minister was made available to join the briefing.

Edward Davies, policy director of the Centre for Social Justice, told the briefing that the uplift had worked and it was money that should have been invested five years ago. But it was not the result of a coherent strategy. There was broad agreement at the briefing that the money used might have been spent differently and to better effect.

Mr Davies said: “I think, if we had sat down in February 2020, and said ‘we’ve got three or four billion pounds to put in universal credit, where should we put it?’ this isn’t where we would have put it. There are about half a dozen other areas where we could put it”.

One key area for reform is debt repayments. “There are people who are paying 25 per cent of their receipt back again, straight out at source. And actually, that negates any sort of funding boost,” he said.

“A lot of this debt is tax credit debt owed because of government error, that there are some people paying back debts that are 17 years old, incurred by government error, and they are now losing a significant portion of that universal credit payment.”

Paul Morrison, policy adviser at the joint public issues team representing Methodists, Baptists and the United Reformed Church, said debt problems had been made worse during the pandemic, with people carrying a huge burden from unpaid bills and then stalling on other payments.

“The single biggest thing that causes debt accumulation is the advanced payment. So, the money that you might be given at the start people have to pay back,” he said.

Gareth McNab said 80 per cent of the people who went to his charity for help with debt were single alone or single with children.

There is a similar pattern at food banks, according to Mr Davies. “One in 10 people in the UK live completely by themselves, but about half of people that go to food banks live completely by themselves,” he said. “Add into this that one in 20 people are lone parents in the UK, and they make nearly a quarter of people in food banks.”

Food banks, he said, offered more than just food; they offered community, support, signposting and direction.

Mr Morrison said the level of food banks had increased during the pandemic, but it was already at very high levels before that. He cited a report from the Joseph Rowntree Foundation which showed that 2.5 million people experienced destitution in 2019-20.

“That’s just wrong. Any welfare state that allows two-and-a-half million people to go to a food bank is a failed welfare state. We should aspire to having a welfare state that doesn’t allow people to be destitute,” he said.

“And cutting this £20 a week brings us back to there. But we’re in a much worse, much worse economic situation [than before the pandemic] — one where there’s much more uncertainty, and people are carrying a huge burden of debt from unpaid bills and all the things that they had to forestall during this pandemic.”

Anvar Sarygulov, senior research fellow at the Bright Blue think tank, which is also against the removal of the uplift, warned that there would always be cracks in any welfare system and some kind of emergency help such as food banks should always play a role.

But there was real concern about what destitution, debt and hunger said about the way society was organised. Becca Stacey of the Zacchaeus Trust said it was clear that a minority were living with an extremely inadequate income, barely enough to live. And there was a huge gap between the level of universal credit and the cost of living. The income they received was just not enough, she said.

Ms Stacey criticised one of the main thrusts of universal credit policy, that it is meant to encourage people back into work. She pointed out that it was a benefit payable both to people who might be in work, and to those whom the government admits should not even be trying to: the disabled or the parents of very small children.

The government, she added, had always pushed for work as the route out of poverty.  “And ultimately, it just doesn’t take into account the reality of the many people that we support for whom it’s not suitable. It fails to account for the 1.6 million people on universal credit who are not required to search for work.”

More research is needed: “What we want to see is government-commissioned research on minimum income standards, and have that inform the rate of universal credit in the longer term, because £20 a week makes a huge difference.”

Mr McNab said it was “absolutely shameful” that the government did not analyse the impact of removing the uplift before taking the decision.

There was agreement round the table that a comprehensive strategy was required. Mr Davies spoke of the wider ecosystem around poverty. “Your job is important, your housing is important, your family’s important, tax status is important. What I would really like to see is a coherent strategy that says yes, level of welfare is important. But what about these other factors on the dashboard?”

So, what of the future? Ms Stacey reported that several claimants, represented by the legal firm Osbornes Law, have taken an action in the High Court against the withdrawal of the uplift. An application for a judicial review was started in the spring, but a lack of available judges has meant the case has been delayed and will not be heard until after the cut has been made.

The chief issues highlighted by many participants in the RMC online discussion were the ways in which benefits might be still further reduced under the present system.

Even when people do get into work, the combination of income tax, national insurance, and the withdrawal of benefits means that anyone who comes off universal credit when they find a job can keep only a little over a third of every new pound they earn. The “taper rate” — the percentage of wages that the government immediately claws back — is now 63 per cent. The Centre for Social Justice wants it lowered to 55 per cent; but this, Mr Davies says, costs about £1bn a year for every percentage point it is lowered.

He believed the government had got the message from their own MPs’ constituency cases that the withdrawal would cause serious problems.

James Ballantyne, a community worker in Durham, spoke of initiatives to break the cycle of dependency, with groups coming together to share allotment food, hot meals and each other’s company, in forms of social enterprise that created confidence and ambition. Mr Davies called these initiatives “little rays of light”.

Mr Morrison warned: “I think on the front line, there is genuine fear about what this winter will hold. The fear is not only of the destitution as you described it, the fear is that the people on the front line who’ve been filling the gaps, through the food banks and so forth, the charity workers … won’t be able to cope with the level of need.

“All of the organisations that are forecasting and trying to understand what impact this will have, are saying that it will increase food bank use, it will increase debt, it will increase evictions. All of these things we know. And that’s a choice.”

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