Universal Credit

I want to talk about Westminster’s new benefits mechanism, called universal credit. It involves condensing six of the claimant’s benefits into one lump sum, paid directly into their account. This includes housing benefits, which was previously paid to the claimant’s landlord. It has been rolled out in Inverness recently, acting as Scotland’s test subject.

The universal credit system has faced a number of setbacks and controversies, mostly related to failed IT systems, rising costs and political back biting. But even if it has been pulled off smoothly, I think that the universal credit system would be detrimental to society. I also think it shows up some of the deficiencies of our current government, since it is not an intrinsic problem with universal credit that is to blame, but rather trying to introduce it into modern day Britain.

We are living in a recession. We can ignore all the positive indicators we are told show that the economy is back on track. The economy and many peoples’ incomes are smaller than they were before this whole mess started. Debt is a major issue facing millions. The most concrete sign about how desperate people are for money is the proliferation of payday loan companies that have sprung up. Just walk around any British city and you will see payday loans, along with pawn shops and bookies have sprung up like fungus, often in the premises vacated by shops that have fallen casualty to the financial crisis.

All of these establishments seek to prey upon people’s financial weakness. The rationale behind universal credit is that it allows people to take control over their finances. With all their money in one place, people are free to make their own choices about how to spend their money. As if people on benefits, choosing between heating and eating have many choices. Consider what Parliamentary Under Secretary of State for Work and Pensions Baron Freud’s has to say on the matter:

“…the main thing about universal credit is to give responsibility for their lives back to people. The evidence that we have from the pathfinder so far is that people really like the freedom that they have with universal credit.”

He comes off like a condescending and indulgent parent, dolling out pocket money to teach his erring children a little responsibility. People don’t want the freedom to manage their own finances. They want money. They want their finances to be solid, their basic necessities taken care of.

Consider the choices people on benefits are faced with. The housing benefit just sat there, whilst the heating is switched off and your belly is rumbling. Even just five pounds won’t go amiss. It’s easy to imagine that that five pounds can be replaced. The mental trap that payday loans are built on.

Is it any wonder why gambling and payday loans thrive? We live in a world where rationality isn’t in charge, desperation is. When survival for some excludes the concept of spontaneity, of flexibility, of even a momentary indulgence, outside of constant financial planning, even the smallest luxury becomes a necessity. Gambling and payday loans are a mirage to tempt people.

This is the world that universal credit takes place in. Baron Freud has admitted that it will be a culture shock, that people will need to adapt their behaviour to fit in with the universal credit model. But when their behaviour changes, it will change exposed to any number of temptations. The Guardian published an article, citing research that claimed under the universal credit model, claimants “will face debts, arrears and eviction, leading to a rise in homelessness”.

The new regime puts some of society’s most vulnerable people at risk. People with serious debt, the article points out, often have trouble seeking help. It is called a depression for a reason. When 74% of people in debt say they are unhappy, the reason becomes clear.

Not only has our national debt grown, but our idea of its importance. America has its national debt clock, and reducing the UK’s national debt has been a flagship policy of the coalition government. However, the national debt has obscured an equally pressing, if not even greater issue, that of a country’s personal debt, the combined debt we all owe as individuals. The UK’s national debt will be around £1.24 trillion by the time this is published. The UK’s personal debt is around £1.4 trillion.

The economies of western countries are largely driven by consumer spending. Two thirds of the UK’s economy is built on consumer spending. By exposing more people to debt, universal credit will hold back economic growth for decades to come. Even when the financial crisis is over, it is very likely that we will find that payday loans and pawn shops have become an entrenched part of our high streets.


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