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Friday, December 14, 2012

The Universal Credit Is Not Universal

The UK government is introducing a ‘universal credit’ to replace a raft of government benefits. The idea is that fewer benefits will be simpler to manage. But that is highly debateable, as while there are less benefits in name, in reality the assessment of benefit (aka credit) will still be made, taking into account individual and household incomes, rent and other factors.

The continuing high complexity of assessment means there are unlikely to be great efficiency gains from the move to a universal credit. The only way to remove assessment is to remove conditionality, and this is not happening with the universal credit.

The new universal credit will also have a smoother progressive scale and be more responsive to income variations. However, this element is not unique to a universal credit, it could just as well be introduced within the current variable benefits system. The smoother sliding scale will be better for incentivising work over dependency than the current scale (as less of the benefit is lost as paid income rises), but it won’t be as effective as a base income that is never lost regardless of paid income levels (like a universal basic income).

The universal credit is similar in idea to a negative income tax, where below a certain level people receive supplementary income (tax credits) from the government on a sliding scale. In a similar manner to the negative income tax, the universal credit could be confused with a universal basic income or shared base income, but it most certainly is not, as it is highly conditional, and, therefore, not (in fact) universal.

The ‘universal’ credit is highly conditional because it is both means tested - the credit paid depends on paid income according to the level and scale created by government - and because it is subject to financial sanctions (reductions to the credit) if people do not meet the government-mandated requirements, most particularly for employment availability.

The first and second conditions mean that it cannot be considered a universal basic income or shared base income, or even universal. And the second condition also divorces it from being a true negative income tax – as most conceptions of a negative income tax remove government requirements in order to reduce government intervention and lower costs, which the universal credit does not.

So what good is the universal credit? Not much. Will it make things simpler for the general public? I seriously doubt it, because replacing the titles of the individual benefits, while still retaining the complexity of means testing and conditionality behind the scenes, is more likely to baffle the public than simplify things.

If I were a UK citizen, I would be concerned about this policy. As an advocate of universal basic incomes, I am also a bit alarmed, as giving this scheme the title of universal credit, when it is anything but universal, is going to harm the public perception of truly universal schemes.

Ben Wallace
Author The Common Purpose Manifesto
LinkedIn - http://nz.linkedin.com/in/benwallace13
Twitter - http://twitter.com/BenDWallace

Universal Credit, Department of Work and Pensions (UK)
Negative Income Tax
Basic Income Guarantee (Universal Basic Income)
What About A Shared Base Income?
Income & The Common Purpose

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