Several recent reforms in Europe have set out to simplify their social protection systems and improve access to social benefits in order to reduce non-take-up. Among these reforms, the Universal Credit reform implemented in the United Kingdom since 2012 addresses these concerns: it aims to simplify the British social protection system by introducing a new, general-purpose benefit that combines some of the existing benefits. At the same time, the reform is also characterised by stricter conditions regarding job-seeking and is designed to make social benefit expenditure more active. The reform is also accompanied by a far-reaching overhaul of the social benefits information and management system, which is becoming fully digitised and automated. This reform forms part of a broader context in which the issue of the architecture of social protection is a recurring theme in public debate, taking the form of proposals for a universal income, a basic income, or even a universal activity income. In addition to the content of the UK reform, its scale and the conditions under which it is being implemented all provide food for thought on how to approach social protection reforms. This report offers an assessment of the reform, both in terms of the objectives set and the conditions of its implementation.
The reform of Universal Credit in the United Kingdom
This report aims to outline the UK’s Universal Credit reform, which has been in place in the United Kingdom since 2012 following the Welfare Reform Act.
Reference IPP Report No. 34
Presentation
Key Results
- The Universal Credit reform is the most significant and far-reaching reform undertaken in the UK since the social security system was established in 1948. It introduces a new, family-based, means-tested benefit for people of working age, which replaces six existing benefits.
- The roll-out of a new IT system capable of managing changes affecting several million benefit recipients in real time has proved particularly complex.
- Initial évaluations de la réforme montrent des effets hétérogènes selon les profils des ménages. La réforme entraîne des transferts importants entre ménages, qui bénéficient principalement aux couples avec enfants et aux ménages actifs, tandis que les familles monoparentales sont major Households with no earned income are not affected by the reform, as the basic allowance corresponds to the amount of the benefits it replaces.
- The reform reduces cases of strong disincentives to work to a relatively significant extent. The vast majority of households facing tax rates of over 70 per cent upon returning to work see their financial incentives improve. Conversely, a greater number of households with lower tax rates (between 50 and 60 per cent) find that their incentives remain unchanged.
- The new system coped without difficulty with the surge in the number of recipients during the health crisis linked to the Covid-19 pandemic. Between February and May 2020, the number of claimants almost doubled, with no significant delays in the payment of benefits to claimants.
- Generally speaking, the experience with Universal Credit has shown that merging existing social security benefits does not lead to budgetary savings, at least in the short term. A major reform of the social protection system is more akin to an investment: costly at the outset, but one that ultimately leads to a more efficient system.
- A reform of this scale requires strong political backing. Simplifying the system is a complex undertaking that involves significant financial and human resources, as well as a strong commitment from the administration responsible for the reform.
- The digitisation and automation of benefit payments enabled a swift response during the health crisis, but the experience with Universal Credit also highlights the limitations of automation and the need to maintain human resources to support the most vulnerable members of society.
Partners
This study received funding from the Federation of Social Housing Organisations (ESH) as part of a research partnership with the IPP.