The Problem With Universal Credit – The Usual Government Incompetence


The basic idea behind Universal Credit is a good one – those who receive assistance from the rest of us should face a simple and complete system of assistance. The secondary goal, of making the system provide better incentives is good too. The old system – with its interlocking benefits and taxations – leaves people at certain income levels with marginal tax and benefit withdrawal rates of over 100%. Universal Credit tries, at least, to reduce that to 60% or so. Still too high, over the Laffer Curve peak, but still an improvement.

Then we’ve got the twin problems with Universal Credit. The first being that it’s not generous enough to which we say Fie! That’s always going to be an allegation about any welfare system so bugger off. But the other complaint does have merit. The complete incompetence of government to run such a system:

Slow response to universal credit errors ‘bizarre’, says council
DWP officials took months to correct payment mistakes, says Tower Hamlets council

Entirely true.

A council has criticised the “bizarre” reluctance of welfare officials to act after it alerted them to benefits overpayments worth hundreds of thousands of pounds caused by universal credit system errors. Tower Hamlets council said the Department for Work and Pensions (DWP) would regularly take months to rectify incorrect payments despite repeated written reminders, even when they were told people ineligible for benefits were claiming universal credit. In one case, the DWP reportedly insisted on paying a claim despite a warning that not only was the claimant most likely ineligible for benefits, as they had been living abroad for 10 months, but that police had recently raided their address and closed down a brothel.

However, do note that this isn’t something specifically about Universal Credit. As anyone who has ever had any interaction with the welfare state will know such errors proliferate throughout the current and past systems:

The mayor of Tower Hamlets, John Biggs, said the dossier of costly blunders showed that universal credit was “riddled with errors and systemic faults” and was causing chaos and misery for many claimants. In 2018-19, £194,000 of universal credit overpayments were made to Tower Hamlets residents by the DWP. The average overpayment was £4,500 and about £150,000 of underpayments were made at an average of £104. The council currently has 197 universal credit queries lodged with the DWP.

The system has always been like that. One of the worst aspects being that with 6 different systems, each with their own eligibility criteria, a change in one cascades through to changes in the others but the systems rarely talk to each other to make that plain. One system should get this done better.

But to the larger point. Look at the difficulty government has with handing out free money. At which point, we want them to be running the health service? The education system? The economy? That is, the best argument against government doing more things is how government currently does things. Badly.