A central part of the Department for Work and Pension’s case for
the benefit of Universal Credit is their assertion of its effect
on employment. In to a request for an estimate of the magnitude
of that effect, DWP stated it has ”determined” that UC
will result in 250,000 more people in employment once it
is fully implemented.
In a follow up letter to Employment Minister (FF-Alok Sharma MP
23.02.18, attached) the Chair asked a set of specific
questions about how the Department had arrived at each of the
stated constituent parts of that figure:
- 150,000 more due to “increased financial incentives to work”
- 50,000 more due to “increased conditionality”
- 60,000 due to “simplification of the benefit system”
The Department’s response (12.03.18 Letter to FF, attached) did
not answer any of the Chair’s specific questions, although it did
supply an account of academic research papers that have informed
the Department’s work on UC, and restated the principles
underlying those three ostensible benefits of the reform. DWP
concluded by stating: “The approach to our analysis underpinning
these estimates was reviewed by the Institute for Fiscal
Studies.”
Accordingly, the Committee wrote to the IFS (FF-Paul Johnson IFS
12.3.18, attached) asking if, in that review, it had found those
three estimates reasonable, and what the margin of statistical
error might be on the numbers.
The IFS’ reply (Letter from Paul Johnson re Universal Credit
190308, attached) starts out “clarifying the role we had in
reviewing DWP’s approach” in coming up with the numbers:
“Note that at no stage did we review their approach to
estimating the impact of increased conditionality or
simplification, to which they attribute 50,000 and 60,000
respectively of the overall 250,000 forecast effect on
employment”.
The IFS goes on: “Neil Couling’s letter to
on 16 November states
that the 250,000 figure is based on the same methodology we
reviewed in 2012. For the reasons given above, that can only be
true of the element (150,000) which is a result of changes to
financial incentives. And we are not in a position to confirm
whether and to what extent DWP took on board our comments and
implemented our recommended improvements before applying the
methodology….”
“The employment impact of UC is highly uncertain. The move to
UC involves a number of changes for which it is hard to find
comparable precedents (especially UK precedents)” —
casting doubt on DWP’s use of academic evidence to substantiate
its estimates — “It is not even possible to
produce statistical margins of error for estimates of the
employment impact, as the nature of the uncertainty is not
conducive to standard statistical analysis...”
“Sadly, it will be difficult even after the event to produce
convincing estimates of the overall employment impact of UC. The
early impact estimates that DWP have published – cited in the
Minister’s letter of 12 March – apply only to a small group of
claimants who are not affected by UC in the same way as most
other claimants […]”and;
“We emphasise that the overall employment impact of UC will
conceal very different effects for different groups in the
population, with employment rates likely to rise for some and
fall for others.”
Rt Hon MP, Chair of the Committee,
said: “The ongoing lack of evidence to back up the much-vaunted
employment impact of Universal Credit was already extremely
disappointing. But to have our specific queries about basis of
this claim answered with airy, irrelevant and, it appears,
plainly inaccurate assertions adds insult to injury. The IFS’
letter shows that Old Mother Hubbard hasn’t got much in the
cupboard, despite the bragging of the Department. This clumsy and
ill-judged attempt to piggyback on one of the most trusted,
unimpugnable authorities on public policy and finance would be
farcical if it was not so deeply worrying.”
