Why won’t Amber Rudd the DWP Minister extend Universal Credit to 3 million new claimants? The answer is she can’t afford to do so as it would cost the Government an additional £1.58 billion per year!!
The original Government estimate was it would cost then £173 per year to administer each Universal Credit claim yet the actual cost of administering each UC claim is £699 and £526 per claim MORE than they envisaged. The plan to extend Universal Credit to three million more claimants would cost 3 million times this £526 per year extra cost, which is the £1.58 billion figure.
The number who will eventually claim UC is 8.5 million and each will cost Government the same £526 more per year in administration costs and which amounts to £4.47 billion more per year and £22.4 billion more over a 5-year parliament. That £22.4 billion over 5 years extra cost of UC is hugely significant as it is AN ADDED COST to Government that needs to find the money from somewhere to pay for their flagship welfare benefit reform and to put this massive added cost into its correct context look at a report in the Guardian a few months back which detailed the £37 billion of cuts between 2010 and 2021:
Some of the most striking cuts are in disability benefits – personal independence payments (PIP) and employment and support allowance (ESA) – which together will have shrunk by nearly £5bn, or by 10%, since the start of the decade.
A new measurement of UK poverty published last week by the Social Metrics Commission highlighted that more than half of families living below the breadline contained at least one person with a disability.
Other cuts include: tax credits (£4.6bn), universal credit (£3.6bn), child benefit (£3.4bn), disability benefits (£2.8bn), ESA and incapacity benefit (£2bn) and housing benefit (£2.3bn). By contrast, spending on the state pension will be £1.7bn higher by 2021.
With around 7.5 million still to move to Universal Credit the Government needs to find 7.5 million lots of £526 per year just to administer UC – a sum of £3.95 billion each year and almost £20 billion over a 5-year parliament. The Government as part of its welfare cap policy has to say where it is going to get the money from for any new welfare policy and (I presume) this must cover the wider roll outs to its Universal Credit policy.
Even if the Government can offset some of this by the reduced amounts that Universal Credit pays out this is still nowehere near enough to cover the £4.47 billion per year added administration cost of UC. The cuts that Universal Credit will make are outlined but shamefully not detailed in a BBC website article of today …
2.2 million families are expected to gain under the system, with an average increase in income of £41 a week according to analysis by the Resolution Foundation think tank. However the same analysis found that 3.2 million households could loose an average of £48 per week.
3.2 million losing £48 per week is a cut of £153.6 million per week and 2.2 million gaining £41 is an increase of £90.2 million per week for an overall weekly cut of £63.4 million which is a yearly cut of £3.31 billion.
Thus a full roll out of Universal Credit cuts £3.31 billion yet costs £4.47 billion extra to administer meaning UC actually costs Government £1.16 billion per year to run – and as the National Audit Office has stated it gets 20% of its decisions wrong (see here) and £1.16 billion per year is £5.8 billion more per parliament.
So in summation Universal Credit will cost an additional £5.8 billion every 5 years in which time it will have got 100 million UC decisions wrong! I remind that this is the Government flagship welfare benefit reform that costs so much more and doesn’t work!