Labour gambles on Universal Credit failing

By Harry Phibbs
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Three of the four Universal Credit pilots due to start in April have been postponed to July. It might sound a modest delay but the Labour Party is gleeful. Liam Byrne, the Shadow Work and Pensions Secretary says:

"This scheme is now on the edge of disaster."

That sounds like hyperbole to me. However, no doubt any computer glitches will be seized upon. If there are, Labour should not be too smug in bemoaning Ministerial incompetence - it was Labour Ministers who presided over the waste of a staggering £12 billion for an NHS computer system that didn't work. 

Yet let us suppose just for a moment that whatever technical difficulties emerge can be overcome. Suppose that there will be some bad publicity for the Government, with individual cases of benefits being delayed. Prompting increased demand for foodbanks - but despite this embarrassment, the Government press ahead. The prize is considerable. A system is established whereby those who work are better off than those who don't. This is not just right politically and economically, but also morally.

The fourth commandment tells us not to work on the sabbath, but it also says we should work the rest of the time.

The Archbishop of Canterbury blogs:

"It’s a very complicated area, and the first thing to say is that the current Secretary of State for Work and Pensions, Iain Duncan Smith, has spent hard years turning himself into a leading and principled
expert on welfare, its effects and shortcomings. He is introducing one of the biggest and most thorough reforms of a system that most people admit is shot full of holes, wrong incentives, and incredible complexity. Like many parish priests’ families, we got benefits, and it was incredibly complicated. For lots of people in the parishes where I worked, taking some extra hours of work could actually lower income; that is exactly the kind of thing that the move to universal credit aims to change."

Universal Credit merges six benefits into one. Mr Duncan Smith estimates it could reduce the number of workless households by around 300,000. Around 700,000 low-earning workers will be able to keep more of their earnings as they increase their hours. Simplifying the system will not only mean people will be better off working, but will be able to see they are better off working. Administrative costs will be cut by more than half a billion pounds a year, and levels of fraud and error will be reduced by £1 billion a year.

For all the talk of cuts, if everyone behaves the same way as they do now, the welfare budget will actually increase by £1.7 billion a year under the new system. Payments will taper off more slowly then under the present arrangement - you will lose 65p of benefit for each £1 you earn, rather than losing a £1 for each £1 earned. This is why The Treasury has been cautious about the scheme.

It could all go wrong. The computer system could crash. The Lib Dems could go on the attack. Those on welfare might not respond to the greater incentive to work. The Archbishop of Canterbury, in a worrying echo of Sir Humphrey Appleby, says it is "incredibly brave."

Should it succeed, however, that will be very bad news for Mr Byrne and his Labour colleagues who have invested so much political capital in it failing. It will be very good news for the rest of us.