Iain Duncan Smith: the 'grand architect' of universal credit. Photograph: Steve Back/Rex Features

“From a welfare reform policy, then, it is sheer lunacy…..”

This article titled “Why strands of universal credit don’t knit together” was written by Tom Clark, for The Guardian on Tuesday 5th June 2012 13.00 Europe/London

Disabled people cut off cold, Londoners moved to the Midlands, and addicts made destitute for turning down treatments that only work when freely entered into. With so many lurid headlines around social security, it seems almost callous to bring up the engineering. But it is only a matter of months until the universal credit is supposed to start kicking in, and if this grand contraption does not fire on all cylinders, then anyone could find themselves out of pocket – whether or not ministers had intended to swing the axe their way.

From child support to tax credits, new financial systems have a record of going wrong. Talk to officials in Whitehall about whether it will turn out tickety-boo and they make a nervous sucking sound, before muttering something like “We’ll find out soon enough”. Iain Duncan Smith has posed as the grand architect, but what is needed is a site inspector with a keen eye for small cracks in the concrete. I get no sense of ministers spending much time holding officials’ feet to the fire about exactly what’s meant to happen, and what will happen instead if things don’t go to plan. Not every new system is a disaster – pension credit was not, although perhaps only because feet were held so close to the fire with that. Maybe Whitehall will be lucky again – we’ll find out soon enough.

But even if the infrastructure holds up, an IFS report last week drew attention to a devastating flaw in the design itself. It concerns the least-noticed, but most widely applied of all means tests. Council tax benefit affects 5.9 million households, because it goes to young and old, renters and owners, disabled and able-bodied people alike.

Duncan Smith’s big idea with universal credit was bringing all the disparate payments into a single stream so that he could iron out all the perversities that arise when one part of the system runs up against another. Overblown spin suggested that a single credit might promote marriages and iron out every inherent tension between relieving poverty and rewarding self-improvement. But there was a kernel of truth here – overlapping means-tests spell trouble. As I’ve written before, a lone parent paying David Lloyd George’s national insurance, facing withdrawal of Norman Fowler’s housing benefit and seeing Gordon Brown’s tax credits being tapered away might very well be a lone parent for whom work doesn’t pay.

How baffling, then, that ministers came up with a cost-cutting wheeze to lump council tax rebates outside the new system, and ask every town hall to devise their own rules. This is a policy of letting a thousand means-tests bloom – and hoping they will all knit together with universal credit. Like a telly, DVD and set-top box bought from different manufacturers at different times, glitches are inevitable. To name just a few that the IFS anticipate: a return of the 90%-plus effective tax rates, which universal credit is meant to abolish; arbitrarily harsh punishment of poor young families who live close to lots of older people, since pensioners are being exempted from the cuts (and so will consume more of the available funds); and – as straitened councils opt for easy-to-adminster quick fixes – crude rebates for the unemployed alone. The latter would do away with fiddly assessments and partial rebates for low-paid workers, but would also leave them worse off than on benefits.

From a welfare reform policy, then, it is sheer lunacy. But what is even weirder is the unhappy political precedent. Because the grants to fund the new local rebates are being cut, few will any longer get their whole bill written off – the IFS reckons that the average poor family will now have to be chased for about 19% of their council tax. For comparison, the poll tax forced councils to chase poor families for 20% of the notional community charge. And we all know how that ended …

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