Universal Credit’s systemic flaw(s) – and strong SRS steer!

Yesterday I released a blog which said there is a fundamental and systemic flaw in Universal Credit and would have devastating consequences (and/or impacts) for larger families who are not working.

My initial thoughts on this saw 4 immediate consequences and ended with an open question: –

“It will mean:-

  • The SRS or social rented sector (council and housing associations) landlords will be unwilling and unable to accommodate larger families with 4 or more children – even if they are working!
  • SRS Tenants will need to make up £99.49 per week out of their benefits to pay their rent by 2015 and up to £174.97 by the end of the next parliament.
  • All SRS tenants as at today typically get all of their rent paid by the end of the next parliament some will get none of their rent paid at all and will need to pay it themselves out of welfare benefits!
  • The private rented sector (PRS) wont accommodate large families either as their rents are even higher.

The question becomes where will families with 4 or 5 children live?”

Where will larger families then live was one of many consequences and impacts of the systemic flaw and an obvious question that came from the flaw in Universal Credits theory and use of differing inflation rates for the Overall Benefit Cap (OBC) that I identified.

As at 11.30 am today when starting this blog it has attracted 10+ times the normal level of blog views and my email inbox and direct messages on twitter are all congratulatory and, as yet, nobody has unearthed a fundamental flaw in my reasoning or figures as I was in part expecting.  This can’t be true or valid I was thinking as the impacts and consequences are devastating I must have made a schoolboy error.  Either that or IDS and the Coalition has made a fundamental error and not thought this through.

Yet the fact that when UC is introduced in 2013 will see larger families go from having their full social rent paid to having to pay towards rent from their welfare benefits, which would also happen if it was introduced today supports my view.  The difference with my argument compared to earlier ones is that this would happen nationwide.

It is not just a London phenomenon as others have argued previously as a London 5 child family would need to make-up £99.46 per week of their rent from benefit and a 5 child family in Liverpool or Hull or anywhere else would have to find £82.93 per week out of their welfare benefits to pay the rent!

The previous arguments were all in relation to the HB caps which are already in place and largely believed, although errantly, by the housing sector to (a) just affect the private rented sector (PRS) and not the social rented sector (SRS); and (b) to be restricted to high rent areas such as London.  My argument in exposing the systemic flaw goes way beyond this thinking, Universal Credit is universal devastation applied across the entire country.

The earlier HB caps alone argument minded of is an article in the Guardian in April this year.  Not the typical Guardian article as it is almost an apologia for the private landlord who is troubled and doesn’t want to evict families but is forced to do so. It said that because the 4 bed HB cap was set at £400 pw and the rent was £450pw that the private landlord evicted this 4 child family in East Acton.  A larger family and pertinent to my argument of the impact and open question where will larger families live?

The upshot in financial terms was the family were re-housed in temporary accommodation as they were correctly deemed homeless and in priority need in two rooms in a Premier Inn at a cost of £69 per room per night.  In summary a weekly cost of £966 to the public purse for not being able to pay the additional £50pw to cover the rent. The public purse pays for this and is paying over £50k per year for this unsuitable accommodation because of a rigid cap!

I had focused on this cost in earlier arguments I had made over the HB caps.  Yet on re-reading the same article today as homelessness is not just about being roofless – having no roof over ones head – it is much more than that.  The article says: –

“Across London, Janet Townley said she had been forced to split up her family temporarily after being evicted from her home in East Acton on Monday. She was preparing to spend her second night with her husband, her 12-year-old daughter and her seven-year-old son in the Premier Inn in Hanger Lane. She had sent her three-year-old daughter and eight-year-old son, who has ADHD, to stay with her mother.

She had been receiving £450 a week in housing benefit for the four-bedroom house she lived in, but this was capped at £400 a week earlier this year under the new regulations. She was unable to make up the difference, fell into rental arrears, and bailiffs arrived to remove the family on Monday. Because of her son’s disability she has been told the council will try to find her something cheaper within the borough, but for the moment nothing suitable has been found and the hotel room has been booked until next week, costing Hammersmith and Fulham council about £69 a night for each of the two rooms.

“It’s very difficult. There are no cooking facilities,” she said, adding that she doesn’t have much money to buy ready made meals because she has spent all her spare cash on paying for a removal van and for storage for her belongings until something is found for her.

“My three-year-old just says ‘Mummy, I want to go home’. It’s horrible.”

The family was split up:  The family luckily had extended family for this to happen:  The initial and ongoing added cost factors such as removal costs and storage: The unsuitability of the temporary accommodation: The added costs of food: The impracticality – no cooking facilities and not big enough: And the impact on children, to name a few consequences are horrific and devastating.

These impacts and more will be felt by all large families in the SRS as well as the PRS and right across the country due to the systemic flaw in Universal Credit.

Before I am labelled as some left-wing commentator it is useful to read an earlier blog I posted in February on the OBC element of Universal Credit and its rigid £500pw cap.  In this I said the inclusion of rent costs in the £500pw cap was wrong, that rent shouldn’t be included in any cap and that Liam Byrne the then Shadow DWP Minister and the Labour Party generally was inept to argue that rent should be included and have a variable cap.

Somewhat ironically Liam Byrne used my research figures in the HoC debate on this which said that council rents were to rise by 41% by the end of this parliament.  There is another relevant point here.  My figures I used in the systemic flaw of UC yesterday used much lower figures or rent inflation than these official government projections (the 41%) and so understated the problem and its costs.

Instead of a 5 child London family having to find £99.46 towards rent in 2013 it would be £124.60 and in the provinces £106.08pw instead of £82.93 – I deliberately kept my figures conservative and understated the extent of this systemic flaw!

Will we see more and more of another example and already known impact of the HB cap alone – the exporting of homeless cases across the country as most notably but far from exclusively is remembered as the Newham to Stoke issue.  That was just London boroughs moving homeless cases “Oop North” to seek lower temporary housing costs such as the £966pw mentioned above.

Yet because the systemic flaw in Universal Credit will affect larger families nationwide in all forms of tenure, the SRS as well as the PRS,, will it mean all councils will be looking for cheaper temporary hotel / B&B accommodation in other parts of the country to fulfil their statutory homeless duties at the cheapest cost possible?

I think the answer to that must be yes.  But it will be even worse than that and more prolonged such is the enormity of the problem.

Ordinarily expensive temporary accommodation such as B&B hotels is used until more permanent accommodation becomes available.  Yet that more permanent accommodation will still not be affordable will it?  The same non-working large family will still have to pay for their rent out of their benefit but will be unable to do so. The PRS wont house and the SRS can’t afford to do so.  The apparent route out of high-cost temporary B&B or hotel accommodation is to secure employment.  So can anyone tell me where there are jobs that will pay more than benefit as this government superficially states is the key aim and almost a guarantee of Universal Credit?

To make work pay more than benefits including rent a family with 4 children need to find a very well paid job paying £60k a year or more.  Yet if they do I see Grant Shapps will increase their rent to market levels as he maintains they shouldn’t be in social housing and he is going to legislate his ‘pay to stay’ ideas! So the larger family will need to find employment paying earn £80k a year or more which will definitely see Grant Shapps want to charge them market rent and label them as indolent scroungers taking advantage of the privilege of social housing!!

The perversity of the Coalition housing policy readily becomes apparent.  It flagrantly contradicts itself in the above example and that is one example of many.

Yet there is a solution which perhaps exposes the real intent of Universal Credit as being in receipt of Working Tax Credit exempts the family from the overall benefit cap cuts.  Yet to all intents and purposes WTC is only paid when you take-up low paid or minimum wage employment.    Getting a minimum wage job is therefore the only way a 4 child family can be housed at least in theory and exclusion a swathe of £80k per year jobs appearing out of the ether.  The WTC that follows will see Universal credit pay much of the rest of welfare benefits and pay more towards if not all of the rent – what HB now pays.

Over £8bn per year of WTC goes unclaimed as I commented upon back in January which adds to the known and admitted unclaimed £6.7bn of Housing Benefit making over £15bn of added cost from the impact of Universal Credit which will assess all claimants for all benefits.  Yet Universal Credit is purportedly the grand idea to save the public purse – so in general terms it has many systemic flaws and contradictory ones.

However the strong steer to the SRS is clear.  Develop programmes to get your non-working tenants on benefits into low paid minimum wage jobs as it’s the only way to reduce the risk of arrears.  This is a fundamental change for the SRS landlord who for decades has sought to maximise tenant welfare benefits a part of their ‘housing plus’ role they have taken upon themselves to do.  The huge paradox in Universal Credit’s OBC is the more you maximise tenant welfare benefits the less is left out of the cap to pay for rent!

These are just some of the consequences and impacts of Universal Credit which has many fundamental flaws.  As WTC currently is known to be under-claimed by £8bn+ per year and Universal Credit encourages its take-up significantly and goes beyond that and encourages low paid employment, then the WTC bill will rise by more than £8bn and Universal Credit will cost every taxpayer more in welfare benefit payments!

My blog yesterday simply exposed another fundamental systemic flaw that has previously not been seen.  There are many more endemic ones and I strongly suspect many more will appear the more you look at this huge but inept and dangerous piece of social policy. If the reader has any doubts on that last comment this overlong blog is just one small discussion of dozens of issues my blog raised yesterday.

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