Center for American Progress

RELEASE: Report Examines U.K.’s New Welfare System, Cautions Against U.S. Implementation
Press Statement

RELEASE: Report Examines U.K.’s New Welfare System, Cautions Against U.S. Implementation

Washington, D.C. — As policymakers debate solutions to reform the federal safety net, a report released today examines the Universal Credit, a major safety net overhaul implemented in the United Kingdom that merges a half-dozen income assistance programs into a single credit for low-income individuals and families. House Budget Committee Chairman Paul Ryan (R-WI) recently cited this reform as an example that the United States should consider here at home.

The brief highlights differences between the U.K. and U.S. social safety nets that would pose challenges to transplanting this approach in the United States, and notes some of the concerns that have been raised by U.K. implementation. Among other cautionary red flags, poverty is actually expected to increase in the United Kingdom amid implementation of these reforms.

“There are policy reforms that can increase access to benefits and improve the way we provide a hand to low-income people in the United States, but the U.K.’s approach, which is actually increasing poverty rather than combating it, should not be considered as a model here in the United States,” said Melissa Boteach, Vice President of Poverty to Prosperity Program at the Center for American Progress. “While increasing access to benefits is part of the solution, reducing poverty in a meaningful way requires much more. Our nation needs a bigger vision, one that invests in jobs, boosts wages, and provides better education, training, and housing opportunities to move our country forward. As policymakers consider future reforms, it is essential that they commit to the basic principle of not exacerbating poverty and inequality in the name of simplification.”

Fifty years ago, the War on Poverty put in place much of the essential social safety net that has helped keep millions of Americans out of poverty. Recent research shows that without these safety net programs, the poverty rate in America would be nearly double what it is today. However, in recent years, the economic climate in the United States has become one that fosters growth for only those at the very top of the income ladder and increasingly limits access to affordable housing, child care, and jobs that pay well for those struggling to stay afloat.

Low-income families and individuals seeking to access public benefits often face added struggle due to complicated eligibility rules and enrollment processes. As policymakers consider streamlining options, some, including Rep. Ryan, are pointing to the U.K.’s Universal Credit as a potential model.

Published by the Center for American Progress, the Center for Law and Social Policy, or CLASP, and the Center for the Study of Social Policy, the report released today finds that while the concept of the credit may seem appealing in theory, we should take note of cautionary lessons, including the fact that poverty is actually expected to increase in the United Kingdom, underscoring that consolidation of programs is not the answer. The credit carries significant disadvantages including:

  • Benefit caps make the Universal Credit unresponsive to cost of living differences, price increases, and broader economic trends.
  • While the Universal Credit strengthens the incentive for some to accept a part-time job, it encourages others to reduce their work effort.
  • Moving to a predominately online system can compromise customer service and make it difficult for people with less access to the Internet and banking services to get the help they need.
  • Lumping programs with different missions together can obscure accountability and undermine taxpayer confidence in effective investments.

“Over the past decade, the U.K.’s experience has underlined a truth equally applicable to the United States: that policies theoretically aimed at improving the safety net only work if they are backed up by the investments needed to insure that low-income workers can meet their families’ basic needs and succeed in the workplace,” said Elizabeth Lower-Basch, policy coordinator at CLASP. “For a number of years, the U.K.’s commitment to reducing poverty was backed up by such investments and was making a demonstrable difference. Unfortunately, however, the Universal Credit is being implemented in the context of deep cuts to the U.K.’s safety net, and as a result, the combination of policies is threatening to undo years of progress in reducing child poverty.”

The report also recommends alternative reforms to streamline access to safety net programs that are working on the ground in communities across the country and suggests that efforts to streamline access must be accompanied by investments and reforms that provide greater economic opportunities to help low-income families.

“Reforms must take into account the impact on families, particularly families of color, immigrant families, and very poor families,” said Megan Martin, senior associate at the Center for the Study of Social Policy. “Solutions will only be successful in the long term if they promote better coordinated and more comprehensive services for these families, while also focusing on strategies that emphasize multigenerational approaches that help both parents and their children.”

Read the report: Universal Credit: A Primer by Helly Lee, Elizabeth Lower-Basch, Melissa Boteach, and Megan Martin