Here is my view on the key risks facing Universal Credit:
- Undermining the policy objectives of Universal Credit before launch.
- It and system implementation risks.
- Advisor preparedness, buy in and behaviour change.
- Progression in work.
- The employer response to Universal Credit.
Undermining the policy objectives of Universal Credit before launch.
- Examples include the localisation of council tax support and free school meals.
- It is worth mentioning that some of these challenges (i.e. FSM) could be overcome with only a little extra cash (like childcare), but departments feel constrained in their consideration of policy options by the cost neutral objective. See my post on Free School Meals for more information on this.
IT and Systems risks.
- Though data security is critical (IRIS / Cerberus), smaller IT providers are concerned that this is used as a catch-all excuse to stifle innovation.
Delivery: Advisor preparedness.
- The advisor / claimant relationship is critical to Universal Credit delivering on its policy objectives. From speaking with local authorities, JCP and Work programme providers, I would say there is some way to go in getting buy-in, particularly at delivery level. A poll on this website found that more than half of respondents said that Universal Credit would not benefit anybody.
Progression in work.
There are three stages of progression:
- Out of work to in work
The primary objective of Universal Credit is to reduce the number of workless households.
- In-work conditionality
There needs to be in-work conditionality in place, households capable of part-time or full time work can’t settle for less. One question the treasury / DWP needs to ask itself is whether they are happy with the earnings requirements for in-work conditionality (Earnings > 36*NMW or 16*NMW) – I think they are reasonable, but could perhaps be ‘gamed’ by higher earners.
- Progression in work
Universal Credit makes apparent a problem that already exists today, some households will be claiming an element of Universal Credit in perpetuity. If households can cost-effectively be encouraged to increase their earnings (and their skills) then taxpayer savings will result.
- The employer response to Universal Credit has been overlooked (other than their preparedness for RTI). Businesses with large numbers of flexible, entry-level roles were forced to respond to the hours rules in the tax-credit system. How they will respond once the rules are removed is uncertain. One important question to be determined is whether employers will be more likely to employ fewer people on more flexible hours, or more people at fewer than sixteen hours.