Dr. Mike Brewer:

I will reflect on the problems we were trying to solve with the universal credit. Members can then decide how applicable those are to the situation in Ireland.

In terms of incentives, there were two issues we were trying to solve. The first was the fact that, when people moved from being out of work to being in work, they had to stop claiming under the out-of-work programmes, be those jobseeker’s allowance or social assistance, and start claiming under a different programme. Ireland’s nearest equivalent would be the working family payment programme. Governments were worried that this approach was imposing too much of a burden on claimants and made it difficult for them to see how much better off they would be in work. There was a gap between being out of work and in work.

The second issue we were trying to solve was that some people who were in work would be getting support from more than one programme at the same time and those programmes interacted with one another. Someone in work might receive a payment from the working tax credit programme and, if he or she was eligible for rent support, that rent support would depend on his or her earnings and how much he or she was getting from the working tax credit programme. If the person’s earnings changed, his or her working tax credit payment changed and both of those changes would then go into the formula for deciding his or her rent support, which would eventually change as well. This was a nightmare. It would take months to work through it all. These programmes were administered by different bits of government.

The second problem could only really be solved by ripping up the system and starting again. We had two programmes being run by different bits of government that interacted with each other. We could not solve that just by changing withdrawal rates or allowances. We had to start from scratch again.

It could well be that some of the problems that the member was talking about at the beginning could indeed be solved or tweaked. Some of the incentive problems can be solved just by tweaking the parameters in Ireland’s existing programmes. That was not really what we set out to do with universal credit. As Professor Millar said, universal credit is still highly means tested. People still face high deduction rates when they move into work and they are still subject to high marginal rates when they are in work, so we have not really solved the issue of people facing weak financial incentives. Instead, we have tried to solve the operational or logistical difficulties that arise when there are multiple programmes that interact with one another.