Universal Credit (not to be confused with Social Credit, which is an entirely different system) is officially a simplification of the UK benefits system and unofficially - out of fairness - constitutes the Conservative Party's first attempt at a Universal Basic Income. It was created by former Welfare Reform Minister Lord David Freud and is also associated with Conservative MP Iain Duncan Smith and to a lesser extent, Esther McVey. It was adopted as Conservative policy at the Conservative Party conference in 2010 and was implemented as the major part of the Welfare Reform Act 2012.
Making work pay
Officially Universal Credit has just three stated objectives, which are:
- to make work pay
- to reduce child poverty
- to simplify the benefits system
Universal Credit replaces six preexisting benefits which are also known as 'legacy' benefits. These are Child Tax Credits, income-related Employment and Support Allowance (ESA), Housing Benefit, Income Support (IS), income-related Jobseekers Allowance (JSA), and Working Tax Credits. Also as part of the Welfare Reform Act 2012 Disability Living Allowance (DLA) is to replaced by Personal Independence Payments (PIP) but Personal Independence Payments are not affected by Universal Credit. This means that many people who receive Universal Credit also receive Personal Independence Payments.
Unlike these benefits which were often paid separately Universal Credit is a single monthly payment which is made shortly after an assessment period over a calendar month and is paid in the form of different elements, such as a Housing Element and Personal Element. The Housing Element doesn't cover your entire rent and the typical Personal Element is £317 a month for people aged 25 and over and £251 a month for anyone who is younger. You can work and claim Universal Credit and your income is deducted from the amount of support you receive for the month you receive additional income. If you have a disability or a long term illness some £198 of additional income is disregarded as an incentive to make work pay.
Universal Credit was estimated to cost £2 billion to implement and it was implemented initially as a trial in four selected Job Centre areas before being 'rolled out' which means it is being gradually implemented throughout the United Kingdom between 2013 and 2023 when it will completely replace the legacy benefits. In 2017 3 million claimants were expected to be on Universal Credit.
Aspects of Universal Credit
A major aspect of Universal Credit is that it is an 'online only' benefit which means that you need to have access to the internet in order to claim it, to maintain a journal and to interact with not just a Job Centre, but also various websites and call centres.
Another aspect of Universal Credit is that once you start to claim it you don't receive any income for a period of at least five weeks. You also need to have photo ID or two forms of ID. You can claim your first month's entitlement as an advance payment to help you get through those five weeks but this must be paid back.
Universal Credit has the same conditionality and Claimant Commitment as legacy benefits but the conditionality under Universal Credit is often much harsher. Similar to a typical JSA Claimant Commitment you need to actively seek work for 35 hours a week and be able to provide sufficient documentary evidence in digital and paper form to 'prove' your job-seeking activity. If you find work and start working you are often still required to seek work which offers better pay or more hours and provide evidence or you can face a benefit sanction, losing your entitlement to Universal Credit for a period of between 7 days and 3 years. If you give up your job without a valid reason you can be sanctioned and also, if you are dismissed without a good reason, you can also be sanctioned.
Universal Credit and self-employment
You can become self-employed while claiming Universal Credit and start your own business or enterprising activity. However your self-employment must become viable within 12 months because after 12 months the DWP will assume that you are making the equivalent of the National Minimum Wage over 40 hours a week and will reduce your Universal Credit accordingly. If your self-employment isn't viable after this period you can be made to cease your self-employment and be made to seek employment instead.