Why we should scrap universal credit and replace it with UBI

Ben Ramanauskas

September 19, 2019

The aims of universal credit, namely simplifying the welfare system and incentivising work, were noble. In many ways, it was better than the system it replaced. Under Gordon Brown, welfare payments became more and more generous. This, coupled with the massive increase in the size of the public sector, created a client class, which was a move designed to buy votes.

Yet, despite its good intentions, universal credit is in need of reform.

Simply put, it is a cruel system. Making people with disabilities or who are struggling with their health prove that they are, in fact, too ill to work is demeaning. As for making people wait five weeks before they can receive any money – that is truly shameful. And as research from the Trussell Trust revealed, it has led to an increase in demand for food banks.

The trust does great work, and food banks are now playing an important role in helping the most vulnerable people in society. Moreover, the fact that there are so many volunteers willing to give up their spare time in order to help others should be applauded. Indeed, it demonstrates that individuals and groups are often far more effective than the state at providing for those in need.

Regardless, the government has failed one of its most basic tasks, namely providing a safety net for those in need. The fact that hard-working people in this country are happy to contribute some of their income in the form of taxation to help those less fortunate than themselves means that the government is not only failing those on welfare but also taxpayers. Given the fact that the tax burden is at an almost 50-year high, it is a damning indictment of how the state spends all of our money.

Universal credit was introduced to simplify the benefits system. To some extent, it achieved this goal – merging all the different welfare payments into one is certainly less complicated. However, there are numerous other factors at play which are leading to the system being complicated.

For example, although there is a five-week wait, claimants can borrow money against future payments. Then there are sanctions. If a claimant does not comply with the terms of universal credit then they will have their benefits stopped. But they are able to appeal the decision and again borrow money from the system. The sick and people with disabilities are expected to prove that they are unfit for work. Again, they have the opportunity to appeal the decision.

This all creates added layers of bureaucracy and requires an army of civil servants to administer claims and payments, and to hear appeals. As such, the state becomes bigger, requiring more money to fund at the same time. And this money comes from taxpayers who may have been planning on saving the money or investing it.

This all may well go some way to explaining the stagnant productivity growth in the UK. Of course, there are many reasons why productivity is so low, but forcing low-skilled workers without adequate training into jobs for which they are ill-suited surely contributes somewhat. Moreover, the fact that they would have to wait to receive welfare payments if they were to look for another job means that they, in the meantime, would remain trapped in their current role.

Furthermore, claimants who are out of work have to attend meetings in job centres. No doubt some of the training they receive is useful, but having to turn up and prove that they have been looking for work is not only an unproductive use of their time but also infantilising. This is not only true for welfare claimants, but also the civil servants working for DWP. They could surely be doing something more productive with their lives by either being redeployed elsewhere in the civil service or using their valuable experiences to help plug the skills gap in the private sector.

Finally, we should all be concerned about the power that universal credit grants to individual civil servants. They have the power to stop the benefits of vulnerable people and order them to find work or attend meetings. There is something truly sinister about this. Welfare claimants are, in effect, having their lives dictated to by civil servants. The state is essentially saying: “Do as I command, or starve”. These aren’t people who have broken the law and so they shouldn’t be treated like criminals by the government.

So what should be done? Well, in the short term, the five-week wait and sanctions need to be abolished.

As for the long term, we need to radically reform the welfare system so that there is a safety net in place, but one that will treat people with the dignity they deserve.

A universal basic income is such a system. It would cut complexity, reduce bureaucracy, and ensure that people would always be better off in work. Everybody over the age of 18 would be paid a certain amount of money each month, with no strings attached. You can read more about why I think it would be a preferable system here.

Although it’s enjoyed some success and is a well-intentioned policy, universal credit isn’t working. It’s time to scrap it and replace it with a universal basic income instead.


Written by Ben Ramanauskas

Ben Ramanauskas is a research economist at Oxford University and a former adviser to the International Trade Secretary.


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