Universal Credit was the centrepiece of Iain Duncan Smith's reforms at the Department for Work and Pensions between 2010 and 2016. It has been widely criticized and its delivery beset by problems. To understand the policy, though, and how it might be reformed by a left-wing government, we must understand the Thatcherite thinking that shaped it.
In 2002, as the Conservative Spring Forum approached, the floundering Tory leader, Iain Duncan Smith, announced a newfound concern for the most vulnerable people in society, a conversion supposedly provoked by a visit to the Easterhouse estate in Glasgow a month earlier. To many, it seemed a contrived and unconvincing change of heart. A favourite of Margaret Thatcher, an ally of Ann Widdecombe, and undoubtedly a 'rocker' rather than a 'mod' under William Hague, IDS won the party leadership with a reputation as a right-winger against the centrist Europhile Ken Clarke. Duncan Smith's ill-fated leadership of the party was confused and contradictory. Despite seeming to have discovered the necessity of 'modernising' and a desire to see the left's monopoly on 'social justice' broken apart, he was prone on occasion to right-wing outbursts. (1)
The year after his Easterhouse 'conversion', Duncan Smith was deposed, and he busied himself while on the backbenches with setting up a think-tank, the Centre for Social Justice (CSJ). This would go on to set the agenda for much of the social policy of David Cameron, a leader more committed than Duncan Smith to 'modernising' the party. The CSJ's emphasis on tackling social problems with traditional values, and its hostility to 'welfare dependency' seemed to provide Cameron with material that was both compassionate and authentically Conservative. (2) Little surprise, then, that following the formation of the Coalition government in 2010, Duncan Smith was given control of the Department for Work and Pensions (DWP). At the party conference of that year he announced plans to revolutionise the welfare system with the introduction of Universal Credit. For Duncan Smith, this was a very personal agenda, something to which he became firmly ideologically committed.
This article examines the intellectual, ideological and political background to Universal Credit. Far from being part of a new 'compassionate conservatism', the background from which the policy emerged, in particular the work of the Centre for Social Justice, is in many ways shaped by older Tory ideas, including elements of Thatcherism. Its moral attitude to poverty is presented as something new while in fact being almost indistinguishable on closer inspection to older ideas. In the conclusion, I will comment on the possibilities for reform of Universal Credit by a future social democratic government, and argue that understanding its background allows us to distinguish between the desirable and undesirable elements of the policy.
How does Universal Credit work?
The most obvious intention of Universal Credit is to simplify the benefits system. It is intended to replace income-based job seekers allowance (JSA), income-based employment and support allowance (ESA), income support, working tax credit, child tax credit and housing benefit. A single form will allow claimants to apply for benefits, and will usually be filled out online.
Because Universal Credit will replace existing in-work and out-of-work benefits, it will be able to smooth the transition from benefits to employment. Payments will be withdrawn as earnings from work increase, after a certain earnings point. This earnings disregard will depend on the circumstances of the claimant, such as whether they have children or are disabled. The rate of withdrawal will be sixty-five per cent; that is to say, for every pound a person earns in work, they will lose sixty-five pence in Universal Credit. Importantly, the rate of withdrawal can be altered by policymakers, as George Osborne had originally planned to do in the 2015 Autumn Statement; of course, the higher the rate of withdrawal, the less significant the policy becomes. The system allows a more gradual transition from benefits than the current system, which reduces benefit after a smaller amount of earnings and at the rate of a pound for every pound earned in work. The replacement of in- and out-of-work benefits also means that it will no longer be necessary for claimants to sign on and off as they move in and out of employment. Combined, these changes are supposed to provide incentives to claimants by ensuring that anybody in work will be better-off than anybody out of work, and that there will be no fear that by taking up work and signing off a benefit the claimant will lose any form of income if they are suddenly made unemployed again.
Universal Credit will be assessed and paid on a monthly basis, in order to simulate pay received for work. (3) Cohabiting couples will no longer apply for benefits individually, but will apply for and receive Universal Credit together. (4)
There are strict conditions on receipt of Universal Credit in most cases, which will be laid out in a 'claimant commitment', usually drawn up by a 'work coach' in a local Job Centre, setting out precisely what a person is expected to do in return for payments. Out-of-work claimants will be expected to look for or prepare for work for thirty-five hours a week. The penalties for failing to comply with the 'claimant commitment' will be more severe than under the old system. As part of the stricter conditionality of Universal Credit, Job Centre advisers will be able to refer a claimant to a work experience placement. Failure to comply with this, as with breaking any of the terms of a claimant commitment, could lead to a benefit sanction, though as will be seen below this part of the reforms has come under legal challenge.
'Pathways to Poverty' and the 'Welfare Society': compassionate Conservatism or Thatcherism with a human face?
The year after he resigned as Conservative leader, Iain Duncan Smith founded the Centre for Social Justice, along with Tim Montgomerie, who had been his chief of staff during the last few months of his leadership, and Philippa Stroud, who went on to work as a Special Adviser to Duncan Smith in the Department for Work and Pensions (DWP). The CSJ was intended to provide support for 'compassionate conservatism', and so was a useful resource for David Cameron as he set himself the mission of 'modernising' the Conservative Party. On the day he was elected leader in 2005, Cameron commissioned the CSJ to conduct a thorough investigation into the causes of poverty in the UK. An interim report, Breakdown Britain was published in 2006, followed in 2007 by the final report Breakthrough Britain. The idea that would be developed in government as Universal Credit was first proposed in 2009 in the report Dynamic Benefits, which built on the findings of this earlier work.
All three publications are guided by a belief in the importance of what the CSJ calls 'pathways to poverty': family breakdown, educational failure, worklessness and economic dependence, addictions and indebtedness. The Times has described these five 'pathways' as a twenty-first century equivalent to William Beveridge's five giants, a description that the CSJ is more than happy to accept. (5) All five pathways are interconnected, and where the researchers found one they could be fairly sure that another was close by. Sometimes the relationship could be causal--addiction, for example, might lead to family breakdown--but the reports rarely raise the question of causality more generally; they are instead happy to accept the pathways as fundamental.
In the CSJ's view, the left, in trying to help the poor and unemployed, have simply added to their miseries. This is not just an attempt to borrow 'social justice' from the left, but rather to wrest it from them completely--this is not a conservative alternative to progressive policy on welfare, but rather a claim that only Conservatism can offer a solution to social issues. The idea of 'pathways to poverty' serves as a way for the right to explain growing economic inequality and falling social mobility without recourse to a critique of free market capitalism; social breakdown is seen not as the result of an economic model which fails the poor, but as the cause of poverty in itself, sustained by a welfare state that prevents people from escaping these pathways.
The key importance of the pathways to poverty is that they can only be blocked off with Conservative values. Though this is never stated explicitly, the ideology informing the analysis offered by the CSJ is easy to detect. The Conservative Party has long prided itself on not being an ideological party, a claim to normativity arguably more ideologically ambitious than anything attempted by the Labour Party. The CSJ sees itself as moderate and almost...