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17.09.12

Universal Credit could backfire – Social Market Foundation

The Government’s flagship welfare policy, the introduction of Universal Credit, has been criticised in a new report that suggests it could endanger the people it seeks to support.

The Social Market Foundation has published a report, ‘Sink or Swim’, which highlights concerns with switching to a once-monthly benefit, and the impact this will have on low-income claimants as they attempt to budget for household spending.

Universal Credit will replace the means-tested elements of six different benefits, including jobseeker’s allowance and housing benefit, and will be paid once a month rather than weekly or fortnightly as a consequence of being integrated with the tax system. Roll-out begins from October 2013, with final implementation from 2017.

People living in social housing will be required to make their own rental payments, but the SMF recommends that the Government should introduce an online budgeting tool to help people move towards better management of their benefits.

The think tank believes people may run out of money towards the end of the month, although the Government has stated it will be ‘flexible’ with those who struggle to cope.

Nigel Keohane, the think tank’s deputy director and co-author of the report, said: “The Government’s laudable aim that Universal Credit should prepare families for work, boost their resilience to financial shocks, and simplify the system is at risk of backfiring.

“By moving to a single monthly payment for all benefits, the Government is removing the markers and aids that families currently rely on to budget effectively. Our research shows that this will throw people in at the deep end leaving them either to sink or swim.

“This laissez-faire approach will create real problems not only for families themselves, but also for public service organisations, such as social landlords and childcare providers, that families will end up owing money to.”

A Department for Work and Pensions spokeswoman responded: “Universal Credit will be paid monthly because most people in work are paid that way and the system should help people get used to the patterns of working life.

“But we will make sure that no one falls through the cracks, and we are working with local authorities and the financial industry on how best to support individuals. We have always said we would be flexible with people who might struggle to manage their money.”

There have also been concerns over a lack of clarity in the details of how Universal Credit will work. The Government expects 80% of people to claim online, despite a growing ‘digital divide’ between those with the knowledge and access to the internet and those without.

Labour has called for the introduction of UC to be delayed for a year to ensure the policy is effective.

Dame Anne Begg, who chairs the cross-party work and pensions select committee, said: “We have found Treasury officials complacent. They don't understand how people lead their lives. Their expectations of employers and individuals are unrealistically high.”

The report is at: www.smf.co.uk/research/welfare-reform/sink-or-swim-the-impact-of-the-universal-credit

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