Merging six legacy benefits into a single payment is often cited as the defining characteristic of Universal Credit, but it is the least deserving of attention when attempting to understand the digitisation of the UK’s working-age welfare system. A better definition is that Universal Credit is:

• a dynamic, hyper-means-tested benefit
• it is based on a system of punitive sanctions along with ongoing activity requirements for claimants that may amount to over 140 hours of effort per month
• it codifies a normative view of family, work and financial life in software and legislation
• it is delivered via a digital account designed and operated by the Department for Work and Pensions (DWP)

What follows is a brief overview of the conceptual framework of Universal Credit. The aim is not to be exhaustive, it is to provide enough of an understanding of the key concepts discussed in this report.

Dynamic payments and dynamic activities

Universal Credit is dynamic in two senses: the amount of money claimants receive, and the activities DWP requires of them, change in relation to their earnings, their circumstances and their behaviour. Each month an assessment is made to establish how much a claimant should receive and what activities will be required of them the following month. This combination of dynamic payments and dynamic activities means that, over time, a claimant’s income and the activities demanded of them may change.

Each month a claimant’s earnings are reported to DWP via an automated system called Real Time Information (RTI). RTI is operated by HM Revenue and Customs (HMRC) and was originally designed to collect earnings information from employers for the calculation of tax.¹ Claimants must also report any changes to their circumstances, for example, if they have a child or go into hospital, via a digital account. At the end of the month, the amount of money a claimant will receive is calculated based on:

• the amount they earned from employment
• their financial, health, housing, family and other circumstances
• any deductions for sanctions that have been applied (for example, failure to accept a job offer), money owed to third parties (for example, rent arrears) and any penalties for fraud

If any of these things change month-to-month, the amount of money received will also change.² If a claimant’s earnings increase, but remain below a certain threshold, they get to keep the full amount on top of their Universal Credit payment (this is called the “work allowance”). Beyond this level, the amount of Universal Credit paid is reduced by a certain percentage (this is called the “taper rate”).³

The activities that claimants are required to complete also vary each month based on how much money they are earning and their circumstances. DWP tends to refer to these activities as “responsibilities” and places claimants into one of four so-called “conditionality groups”, each of which has different activity requirements:⁴

• all work-related requirements
• work-focused interview and work-preparation requirements only ⁵
• work-focused interview requirements only
• no work-related activity requirements

These activities generally relate to looking for work or tasks that DWP believe might increase a claimant’s earnings. Those in the first group can be expected to spend up to 35 hours a week doing these activities⁶, while those in the last group are not expected to do anything beyond keep their details up to date. This group includes people who are too sick to work or are earning above a certain threshold. The types of activities required are summarised in a so-called “claimant commitment” that claimants must agree to, but DWP staff can also set more specific tasks for claimants. The threshold for moving between these groups may be dependent on a claimant’s individual circumstances and, as such, it may be hard for a claimant to understand exactly when and how they might change group.⁷

Along with requiring activities from claimants, Universal Credit also operates a regime of punitive “sanctions”. Under this system, payments can be reduced for failure to complete activities, for example, not attending an appointment at a jobcentre. Not all activities carry the risk of a sanction, but sanctionable activities may include “any reasonable, appropriate and achievable work-related activity as specified”. Sanctions can also be the result of cumulative actions by a claimant.⁸

Deductions can also be made for fines, taxation, child maintenance payments and debts owed to government, utility companies and social landlords.^{9 10}

Couples and family life

Universal Credit can be characterised as highly opinionated in how it relates to family and financial circumstances, favouring families with two parents living together, less than three children and couples who jointly manage their finances on a monthly basis.

Assessments of eligibility are made per couple living in a household, and a single payment is made per couple. Critically, this means that the earnings of one partner may change the activities the government requires from the other partner and the amount of money they both receive. It also means that someone who had not previously had to engage with the welfare system, may find themselves having to do so because of the circumstances of their partner.¹¹ In ”very exceptional circumstances”, payments can be split between each member of a couple, including in cases of domestic or financial abuse.^{12 13} The default, however, is to require people to apply as a couple. By default, each payment is paid monthly into a single bank account - the assumption being that couples maintain (or should maintain) a joint bank account and joint responsibility for their finances. The default of a monthly payment cycle is an explicit policy design decision and is intended to “mirror the world of work”.¹⁴

Families with more than two children are penalised by the system, because additional payments are made only for a first and second child. There are a limited number of exceptions to this, in what has become known as the “rape-clause”. ^{15 16 17} Finally, there is a total cap on the amount of benefit that can be paid regardless of the real-world needs of families or individuals.¹⁸

Universal Credit: a hyper-means-tested benefit

Despite the name, Universal Credit sits at the far end of the policy spectrum from the universal benefits of the post-war consensus and from the concept of Universal Basic Income. It requires a large number of data points to maintain a claim and uses this data to calculate a bespoke payment amount and activity regime for each claimant. As such, it can be characterised as a hyper-means-tested benefit. This has implications for the administrative and cognitive burden placed on claimants and complexity for the state, but also for privacy and digital rights. These issues are discussed later in part three.

To understand why Universal Credit takes the form it currently does - why it has these characteristics and opinions baked into it - it is necessary to understand something of the origins of the system. The next section includes an overview of the political intent of Universal Credit and the business case that underpins its development.