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Concerns re Universal Credit - TUC Report

A report, Will Universal Credit Work?, by the TUC and the Child Poverty Action Group has highlighted the danger of Universal Credit failing to deliver on its key objectives.

While Universal Credit will improve some aspects of the benefits system, the report suggests that its ability to lift families out of poverty and remove barriers to working will be severely undermined by the government's wider tax credit and benefit changes - with 90 per cent of families gaining nothing overall from its introduction.

Unsurprisingly the report warns that the generosity of Universal Credit is often overstated by ministers!

The report looks at Universal Credit's three main objectives - to reduce poverty, make work pay and simplify benefits.

On reducing poverty: disabled claimants in particular who currently receive the disabled workers' element of the working tax credit are likely to see a huge drop in their annual incomes of over £2,800.  Analysis by economist Howard Reed suggests that around 50 per cent of households will see their income fall compared to what they would have received under the benefit and tax credit system the government inherited.  Among those most likely to see a reduced entitlement are two earner couples with children, 94 per cent of whom will lose out by the end of the parliament, and working lone parents, 76 per cent of whom are set to lose.

On making work pay: second earners whose partner is already in work, those who pay high childcare fees or who have mortgages, will gain very little and may find that taking a job or increasing their hours may not always be worthwhile.   Under Universal Credit, people working 16 hours a week or less will now be able to claim support for childcare - a move welcomed by the TUC and CPAG.  However, most working families will only receive support for 70 per cent of their childcare costs. It will not reverse the 10 per cent cut to childcare support introduced by the government in 2010. In addition, couples with children are entitled to only one income disregard (the amount of money that is allowed to be earned before benefit payments start to fall) and as a result the incentives for second earners to find employment are diminished.


On benefits simplification: requiring people to claim online and make joint claims with their partners will make the process more complicated for many at a time when cuts to the independent advice sector means it is unlikely to have the capacity to help claimants understand the new changes.

Child Poverty Action Group Chief Executive Alison Garnham said: 'Universal Credit seeks to address many of the shortcomings of the current benefits system by being simpler and providing incentives for claimants to earn more.  But Universal Credit lets itself down on many fronts. It introduces new complexities into the benefits system such as joint payments and new rules on savings. In addition, the financial gains for many are underwhelming, and the new system will rely as much on the stick as the carrot to incentivise claimants into work.  Universal Credit is also blind to conditions outside of the benefits system: a lack of suitable jobs, the high costs of housing, and expensive childcare to name a few. Taken in isolation, Universal Credit may increase some households' incomes, but what financial gains they receive are more than wiped out as a result of the government's broader programme of cuts.'

She goes on to say that 'Many of Universal Credit's shortcomings can be fixed but if the government wants to reduce poverty, it needs to take a long, hard look at its broader policies rather than expect Universal Credit to save the day.'

Will Universal Credit Work? concludes by calling on the government to make a number of changes to Universal credit, including:

  • Introducing a second earner disregard to ensure that non-earning members of a couple have the same work incentives as the main earner.
  • Increasing support for childcare from 70 to at least 80 per cent of the actual costs, thereby going some way towards reducing the barriers to employment for parents.
  • Recognising the real costs of disability by ensuring that levels of support for adults and children with disabilities are not lower than those provided under the current system.
  • Drawing up an exceptions policy that is informed by evidence to ensure that the needs of those who cannot manage online applications, joint claims, monthly payments or direct payments are accommodated.
  • Ensuring that robust independent systems are put in place to monitor and review decisions to sanction.

9 May 2013

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