Mil­lions face hard­ship, yet the Tories still won’t wake up Ob­server

The Observer - - News -

If a po­lit­i­cal party were to stand to­day on a plat­form of cut­ting fi­nan­cial sup­port for low- and mid­dle-in­come par­ents in or­der to pay for tax cuts for the more af­flu­ent, it wouldn’t get elected. It’s this re­al­ity that ex­plains the para­dox at the heart of mod­ern Bri­tish con­ser­vatism. Tory prime min­is­ters and chan­cel­lors since 2010 have in­sisted they un­der­stand the strug­gle many fam­i­lies face in a time of anaemic wage growth and ris­ing prices, and have promised that these fam­i­lies will be rel­a­tively pro­tected from the deep spend­ing cuts they have wielded. But their deeds be­tray their words: ev­ery in­de­pen­dent anal­y­sis of bud­gets since 2010 shows such prom­ises to be lies. By 2021, Con­ser­va­tive chan­cel­lors will have de­liv­ered more than £80bn of tax cuts a year, in­clud­ing £22bn a year in in­come tax cuts. The bulk of the pro­ceeds have found their way into the pock­ets of the most af­flu­ent half of fam­i­lies. Mean­while, bil­lions of planned cuts to tax cred­its and ben­e­fits mean low­in­come fam­i­lies and dis­abled peo­ple stand to lose eye-wa­ter­ing sums. The poor­est fifth of fam­i­lies with chil­dren will, by 2020, be more than £3,000 a year worse off on av­er­age as a re­sult of tax and ben­e­fit changes since 2010, while some of the most af­flu­ent fam­i­lies with chil­dren will find them­selves £500 a year richer.

And it’s in the crosshairs of this great Tory re­dis­tri­bu­tion, from the strug­gling-to-get-by to the com­fort­ably af­flu­ent, that the govern­ment’s flag­ship ben­e­fit re­form has got caught up. Univer­sal credit, which com­bines six ex­ist­ing ben­e­fits into one new one, had two orig­i­nal aims. First, to sim­plify a hor­ri­bly com­pli­cated sys­tem in which peo­ple could be in re­ceipt of sev­eral dif­fer­ent ben­e­fits at the same time, ad­min­is­tered by dif­fer­ent govern­ment agen­cies and means-tested in dif­fer­ent ways, which made it al­most im­pos­si­ble for any­one to work out what they were en­ti­tled to.

The sec­ond aim was to im­prove peo­ple’s in­cen­tives to in­crease their earn­ings. In the old sys­tem, a mi­nor­ity of peo­ple on ben­e­fits saw their in­come in­crease by less than 10p for ev­ery ex­tra pound they earned, as a re­sult of mul­ti­ple ben­e­fits be­ing with­drawn si­mul­ta­ne­ously as their earn­ings in­creased. By be­ing more gen­er­ous – by with­draw­ing ben­e­fits more slowly as peo­ple’s earn­ings in­crease – univer­sal credit was sup­posed to fix this.

The prob­lem is that deep cuts, planned by George Os­borne and be­ing ex­e­cuted by Philip Ham­mond, have meant that, far from be­ing more gen­er­ous, univer­sal credit is £3bn a year meaner than the sys­tem it is re­plac­ing. Some fam­i­lies will gain, but more will lose: 3.2 mil­lion fam­i­lies will be just un­der £2,500 a year worse off un­der univer­sal credit than un­der the old sys­tem, and that’s be­fore tak­ing into ac­count other ben­e­fit and tax credit cuts. Any tran­si­tion pro­tec­tion from the govern­ment will be tem­po­rary, last­ing only un­til a fam­ily ex­pe­ri­ences a small change in cir­cum­stance. The cuts also com­pletely un­der­mine the orig­i­nal ob­jec­tive to im­prove work in­cen­tives: in fact,un­der the new sys­tem, many peo­ple will have less in­cen­tive to in­crease their earn­ings.

The much-de­layed roll­out of univer­sal credit has also been plagued by se­ri­ous de­sign flaws and im­ple­men­ta­tion prob­lems. The six-week de­lay be­tween mak­ing an ap­pli­ca­tion and re­ceiv­ing a first pay­ment has pushed huge num­bers of fam­i­lies into debt and rent ar­rears, with many peo­ple fear­ing they would be made home­less as a re­sult.

Such a sig­nif­i­cant ben­e­fit re­form was never go­ing to go com­pletely smoothly, but a staged roll­out over sev­eral years should have pro­vided the op­por­tu­nity for the teething prob­lems that have caused huge hard­ship to have been swiftly fixed. In­stead, it has taken the govern­ment years to re­duce the six-week wait to five, de­spite re­peated and in­sis­tent warn­ings about its per­ni­cious ef­fects. There are many other is­sues on which it has been ut­terly un­re­spon­sive, in­clud­ing the heavy ad­min­is­tra­tive bur­den it puts on ap­pli­cants, with pun­ish­ing fi­nan­cial con­se­quences if they get things even slightly wrong.

Claims by for­mer Con­ser­va­tive min­is­ters that univer­sal credit could be a poll tax mo­ment may seem like hy­per­bole. But John Ma­jor is right. Around a mil­lion house­holds are cur­rently in re­ceipt of univer­sal credit, but by 2023, when full roll­out is com­plete, it will be 7 mil­lion, in­clud­ing more than half of all fam­i­lies with chil­dren. Not only is it wrong-headed to make mil­lions of fam­i­lies thou­sands of pounds a year worse off while de­liv­er­ing tax breaks that largely ben­e­fit the more af­flu­ent, it is po­lit­i­cally crazy.

The Na­tional Au­dit Of­fice is right that it is too late to drop univer­sal credit – turn­ing the clock back would be hugely com­plex and ex­pen­sive. But it ur­gently needs a mas­sive cash boost, funded by halt­ing the fur­ther un­nec­es­sary in­come tax cuts planned in the next few years and a re­design to en­sure it works with the ebb and flow of real-world lives.

Tory chan­cel­lors have re­peat­edly re­fused to change tack in the face of ar­gu­ments that load­ing the bur­den of aus­ter­ity on to low-in­come par­ents and their chil­dren is morally rep­re­hen­si­ble. We can only hope that the fact it in­creas­ingly runs counter to their po­lit­i­cal self-in­ter­est will be what saves mil­lions of fam­i­lies from this cruel, govern­ment-im­posed hard­ship.

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