Universal Credit is set to cost billions more than legacy benefits, says government’s spending watchdog

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Despite the widespread concerns about the financial hardships that Universal Credit has created for many people , the government’s official spending watchdog says that the Conservative’s flagship policy will, nonetheless, cost the UK billions more than the legacy benefits system over the next five years. 

In its response to the Autumn Budget, the Office for Budget Responsibility (OBR) changed its previous prediction in March 2018 that the government’s controversial welfare overhaul will save public money. Instead, the OBR now forecasts that Universal Credit will cost ‘the taxpayer’ £7.1bn more than the current system between 2019/20 and 2023/24.

That amount also includes new funding for the programme announced by chancellor Philip Hammond on Monday in response to the serious concerns raised by MPs about the impact Universal Credit is having on people.

However, the OBR added that even without these measures, which include an extra £1bn for transition support and a £1.7bn-a-year plan to raise the work allowance threshold for some claimants, Universal Credit would have a net cost of £1.9bn over the next five years.

Perhaps an analysis of the costs of the administrative and delivery framework would be useful. 

The OBR say: “On a pre-measures basis UC is now projected to be more expensive than the legacy system would have been from 2019-20 to 2022-23, having been less expensive (i.e. generating a net saving to the Exchequer) in our March forecast. This reflects many changes, some down to revising key assumptions that can now be tested against outturn data relating to the 1 million or so cases now on UC.” 

In its Economic and Fiscal Outlook based on the Autumn Budget, the OBR said: “Our pre-measures forecast revisions were sufficiently large to push our estimate of the effect of [Universal Credit] on welfare spending from a net saving to a net cost in most years – the first time that it has been shown as a net cost on average since our March 2015 forecast.”

The watchdog added :“Once Budget measures are factored in, the marginal cost moves significantly higher.”

The high cost of Universal Credit indicates that the political motivation behind this radical reform is purely ideological, rather than being based on any economic necessity. ‘Making work pay’ is about punishment and discipline – ultimately it is about driving people into any work available, regardless of job security and conditions, regardless of whether the wages meet the costs of living.

Meanwhile in work poverty is growing significantly. Deregulated, supply side labour market policies drive wages down. Reducing welfare support creates a desperate reserve army of labour who have absolutely no collective bargaining powers to improve work conditions. 

Other comments of interest include: “The Department for Work and Pensions (DWP) is subject to ongoing legal challenges. We asked the Government whether there is a detailed central list of ongoing DWP legal challenges and the likelihood of losing them, and why it takes a different approach to recording these DWP contingent liabilities than it does to tax-related legal challenges recorded in HMRC’s departmental accounts.

“The Treasury stated that it is working to improve the reporting and managing of DWP’s legal cases in accordance with steps set out in its 2018 Managing Fiscal Risks report.”

The OBR report also confirms that disabled people in receipt of severe disability premia will not be moved onto Universal Credit until provision is made to ensure the premia are integrated to ensure people on legacy benefits such as Employment and Support Allowance are not left worse off through migration or through a change of circumstance that means a new claim has to be made. This follows a court ruling that the loss of disability premia is unlawfully discriminatory. 

The court defeat for the government indicates once again how unfit for purpose Universal Credit is. Rather than being the ‘simplified’ system as promised, the administration of the welfare provision has become subject to a series of post hoc amendments because of the original model’s incorporated and systemic abuse of people’s human rights and violation of equality legislation. These are being uncovered by ongoing legal challenges.

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26 thoughts on “Universal Credit is set to cost billions more than legacy benefits, says government’s spending watchdog

  1. i often think that the name UNIVERSAL CREDIT lends itself quite nicely to real overhaul needed which is a universal basic income for everyone. the political and social good should be obvious to everyone who is comitted to a better more inclusive society. no more friction betyween low paid workers and those without a job for whatever reason. it would also release a lot of psychic energy that is currently spent on these hostilities.

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    1. You are right Phil, my UC Claim was an absolute disaster and catalogue of incompetence by DWP staff as a result I am still fighting to have things put right 2 years after my claim ended. A Basic Income system would negate all the bad things of UC and give people more in their pockets which they will spend and will go back in to the economy. We have the GDP to support a £16k basic income payment. All you would do is go by stages 16 years (start of eligibility) to 18 years, Employed , Unemployed, Disabled, retired. All that changes is your status by ticking a box. This would benefit all.

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    1. Part of it seems to have been to have ended the ‘benefit culture’ where generation upon generation in the same family chose the dole and benefits as a ‘lifestyle.’ But in my experience this UC system is a total failure, it failed me and the staff made a catalogue of errors I am still 2 years after my claim ended trying to resolve.

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      1. There is no ‘benefit culture’ nor is there evidence of families with ‘generations’ of the same family ‘choosing’ the dole. Most people move in work, but work is insecure, so they tend to move in and out of work over time.

        The whole ‘dependency’ myth has never been evidenced. It’s a Tory prejudice

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      2. In a town I used to live in there were a group of men who used to sit outside waitrose most of the day, they were people I was at school with and could easily have worked, at that time they were able to get away with that (1988), students used to get benefits then, they don’t now. I do think that some change should be made where legitimate study is supported, particularly if you are on a benefit as self improvement could help you find work. Work in the 90’s was less secure especially where I lived, companies were getting taken over or going bust frequently, or were only employing temporary staff through agencies rather than have the problem of employing them. Especially after the 91 recession the effects of which continued until the early 2000’s for the job market. Automation has taken many jobs silently since the turn of this century.

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  2. I would have thought that it would be illegal to leave anyone who has a right to welfare destitute? certainly against their human rights. Why would the tories cut their nose off to spite their face?

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    1. This was never about a fair system. Nor do the Tories care about human rights. Universal Credit is about ‘makig work pay’. It has an ideological basis that is about pushinh people into any work available, regardless of whether or not that work pays a wage that covers the cost of living, has decent conditions, is secure, or appropriate. All because they are ideologically opposed to welfare provision

      Liked by 1 person

      1. Why do some of the Labour party say that in theory it is a good Idea? If it lets even One person down it is definately Not a good Idea, theoretical or practical.

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      2. Because they thought combining all the different benefits into one would make the system easier. However, Labour don’t think the cuts to the amount is a good idea. UC is less than legacy benefits

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      3. I agree with the ‘making work pay’ and forcing people into unsuitable jobs just to get them off the books, that was tried on me but I was able to get a job before that happened. I was asked to go to an interview at the job centre for ‘retail training’ for 2 weeks with Tesco, I already had retail experience so this was just a box ticker as far as I was concerned. The Tesco people said ‘this is a job’ I said this isn’t what I was told, it was only training. They showed me a list of exclusions for employment and I said I had two of the ill health ones, Then they called the job coach in and they challenged her over what she had said which made her look stupid. I explained why I couldn’t take the job due to mobility, the job coach then later rang me at home and told me I had got the job which was 1 day a week guaranteed 30 miles away, which wouldn’t really pay the travelling. Basically a zero hours contract and probably on shit money.

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    2. In the Old DSS days of 20 plus years ago when I worked for them briefly, the DSS were aware that rents were ‘fixed’ by Landlords so that the DSS / Govt. was bound to pay the ‘going rate.’ UC’s housing benefit means that if you are in a moderate to prosperous area of the country, your housing benefit won’t pay your rent. I spent over a year looking for work and it is no joke when the DWP sanction you at the maximum rate without warning or leave to appeal, remove your housing benefit and leave you living on less than £100 a month. UC is a massive failure in my view and experience.

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  3. This is little surprise.

    I was contacted on Thursday last, 1 year after my last contact from someone dealing with my UC ‘car crash claim from 2016’ to which they had to partially admit they would pay some withheld benefit, 2 years after my claim ended.

    The Independent Case Examiner is investigating my case but is still waiting for a response and information from the DWP (they told me this a year ago) which is apparently still outstanding. Unlike the DWP’s performance which is shambolic and risible.

    This benefit is a joke, my UC claim was a disaster from start to finish with staff making serious errors throughout the claim, the DWP breached the Data Protection act by witholding information I had a right see which was not ‘secret’ and was about me, they gave me spurious excuses such as ‘case sensitivity’ which was absolute tosh to prevent me having this information for a tribunal which I believe would have helped me win my case.

    I applied under the recent GDPR regulations to see this information and was given more excuses but no information. I was asking for example, how they validated the information and checked this information before they made the decision, the phrase ‘cover up’ comes to mind.

    UC is no success story, of the two people running it from the start, one died in harness and one left due to stress. If you can find it, there is an official government report on-line on UC in which the last 10 pages deal with the problems it had (then at the outset).

    The Director of UC had to deal with the problems I had but even she (who has now left the post) could not solve the problems.

    The problems of UC could be negated by a Basic Income Payment system, each over 16 British Citizen receives regardless of income £16k a year (more than any UC payments) and this single payment would run across a strata of 5 states – 16 plus, unemployed,when employed they check that box, disabled, either that box, retired, that box.

    The payment remains constant, your status merely changes with the tick of a box. It is so simple it is bizarre that this has not been adopted. No stupid red tape, no £389 million a year to run.

    We have the GDP to cover this and if people are given money, they will spend it, thus it will be a part of the ‘money go round’, the economy is stimulated, people will be better off including retired people, it is a win win situation, what is not to like? It is not rocket science.

    In the coming twenty years and onwards as robots and automation take jobs and dispalce humans evern more than before, this type of benefit structure will be essential.

    This is a form of ‘Universal Credit’ that will actually work!

    It will also be cheaper to run and if you are working there is the incentive that this £16k is tax free so you’re basically getting £16 k a year to pay for a house, invest or spend, used wisely, this will ensure we are all better off as well as receiving a wage.

    This is the only real alternative. Who is going to have the balls to grab the nettle and put this into practice?

    Liked by 1 person

  4. It was always certain to because the private companies involved make a fortune every time they reject a claim meaning appeals and tribunals costing more to not pay out.

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    1. In my case Barry, a ‘decision’ was made to remove housing benefit and I appealed, in May 2016 against it, the appeal did not sit until August 2017, the judge then decided against me even though I produced evidence to support my claim. I asked for the Decision Maker to provide the answers to 5 simple questions on how they reached their decision, the investigation they di into the facts, proof that they checked and validated the information they were using. They obstructed me in this completely and gave spurious reasons of ‘case sensitivity’ even though my claim had been closed for 6 months when this appeal sat. The DWP broke the Data Protection act by denying me access to information on the Decision and what steps the Decision Maker had taken to remove my benefit in August 2017. When I again challenged them to provide this in May 2018 under the New GDPR regulations, they again did not provide the information. The phrase cover up springs to mind.

      Liked by 1 person

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