MPs have accused the Department for Work and Pensions of “cherry-picking” the most positive scenario in its analysis of the labour market economic benefits of the rollout of Universal Credit.
A report by the Public Accounts Committee, published on Friday, also raises concerns about the levels of support the government is providing to help claimants migrate from legacy benefits to UC.
The department has predicted that UC will generate £10.4bn of benefits a year once fully rolled out, including £6.1bn from increased employment and the related impact on economic output, and £0.5bn in operational savings.
PAC said the department has “some evaluation evidence” to show Universal Credit is having a positive impact on the labour market, but has “cherry-picked positive facts and also made other assumptions not supported by empirical evidence”.
The MPs said DWP’s estimate that UC will bring an extra 200,000 people into the labour market is based solely on evaluation of lone parents, and ignores the department’s research into claimants without children.
DWP carried out four evaluations of the short-term impact of UC, which looked at single claimants without children. The most recent of these, based on data from 2018, found new UC claimants were two percentage points more likely to have been in employment at any point in the six months after starting their claim than new Jobseeker’s Allowance claimants.
In February, the department completed a fifth evaluation, also based on data from 2018, which found single parents were five percentage points more likely to have been in work within six months of making a new UC claim compared with being on legacy benefits.
DWP used only the findings from its evaluation of the impact of UC on lone parents to come up with the figure of 200,000 extra entrants to the labour market. It said there would be eight million people on UC when it was fully rolled out, around half of whom would be in work, and then applied the impact of five percentage points to four million people to produce a figure of 200,000.
In making this argument, PAC said the department “chose to use the most positive of its evaluation findings and made a number of other assumptions”.
The committee said the department “should make clear the limitations of its evidence base and the assumptions it has applied so people understand the degree to which the claims are supported”.
And it said the Treasury and the Cabinet Office, working with the Evaluation Task Force, should “reflect on the experience of Universal Credit, and the ability of departments to assure parliament and the public about the extent to which economic benefits included in business cases to justify government investment have been achieved”. They should include the lessons identified in revised guidance, the report adds.
The report also calls for the department to go further with its studies of the impact of UC on the labour market by carrying out a longitudinal study and publishing results at least once a year. The department’s assessments so far have only measured the impact up to six months from a UC claim starting.
A DWP spokesperson said: “Universal Credit is having a sustained positive impact on the jobs market, with people on Universal Credit more likely to be in work within three, six and nine months of their claim.”
DWP ‘must not let bureaucratic change cast thousands into financial hardship’
The report also calls for the department to provide more assurance that it is doing all it can to ensure more legacy claimants move to UC and do not fall into hardship.
DWP has said around one in five households on tax credits that received a migration notice have not moved to UC and so have had their benefit stopped, with PAC estimating they will lose out on £3,200 a year on average. The department has also estimated that around 4% of households claiming other legacy benefits will not move to UC.
The report warns that even a small proportion of people not transferring to UC could mean “substantial numbers facing financial hardship”.
DWP has said it is “reassured” at only receiving 20 complaints about the migration process from April to December 2023. But PAC said this “does not provide sufficient assurance that people are not falling into hardship”.
Dame Meg Hillier, chair of PAC, said: “We must not forget how massive a change it is to how benefits are delivered, impacting millions of people. This means if the transition from legacy benefits to UC fails even an apparently small proportion of people, it will lead to real world misery for thousands. The DWP must make sure that people are not cast into financial hardship due to a bureaucratic change, and that robust support is in place for those vulnerable claimants who need it most.”
The report warns that the department is reducing funding for its Help to Claim service – which is provided by Citizens Advice – despite saying it expects more people to use the service in the next two years. And it raises concern that DWP’s in-house support for claimants moving to UC has been “too limited”, with just 23 home visits carried out.
The department has said it will increase home visits and recruit more visiting officers to enable this. The report asks DWP to set out what it will do to monitor the adequacy and effectiveness of its in-house support, “particularly whether it has sufficient capacity to meet the need for face-to-face support”.
A DWP spokesperson said: “We disagree with these findings, which do not acknowledge that the vast majority of tax credit customers have successfully moved to Universal Credit. There is a range of support to help people move, including dedicated helplines, extensions and transitional protection for those who need it.”