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03.05.16

Universal Credit has ‘veered off-track’ and risks delivering unsustainable benefit cuts

The Universal Credit benefits reform programme has “veered” away from its original purpose and risks delivering unsustainable benefits cuts for the most vulnerable, the Resolution Foundation has warned in a new report.

The Foundation added that Stephen Crabb, the new work and pensions secretary, should “reclaim” control over the project from the Treasury.

Universal Credit is due to be rolled out across the country this month, with almost half of all households with children entitled to it by 2021. However, the Resolution Foundation warned that although they support the project’s original aim of making it easier and more profitable for the unemployed to get into work, this now looks unlikely to be achieved because of cuts in social welfare spending.

David Finch, senior economic analyst at the Resolution Foundation, said: “As Universal Credit begins the roll-out of its full service this month, now is the right time for the new work and pensions secretary to take stock of progress to date. It is a reform with lots of potential, but it has veered off-track over recent years, particularly following a series of sharp cuts in support to working families.”

The think tank warns that the latest changes to Universal Credit now mean that 1.3 million families will lose all in-work support, leading to an average loss of £42 a week.

In addition, 1.2 million will suffer reductions in benefits of an average of £41, although 1.7 million will receive a £38 increase in income.

When other benefits cuts are included, some families could lose £3,400 a year by 2020.

The Resolution Foundation has recommended that Crabb “should restate and reclaim the role of Universal Credit in supporting more people into work and then boosting earnings, rather than being a source of savings for the Treasury to meet fiscal targets”, by ensuring that the incentives Universal Credit creates are focused on those most likely to respond and most in need of support.

It says that although one of the scheme’s initial goals was to make it profitable for claimants to work part-time, this has been watered down due to a reduction in the scale of allowances available, meaning that it is now less likely to be profitable for single parents to work and hard to incentivise claimants whose partners are already in work to work at all.

The Resolution Found said the Universal Credit system should be revised to meet the needs of these groups.

It also said the reforms need to be updated to take into account the fact that, although employment has risen in the past few years, in-work poverty is a growing problem, with almost two-thirds of children in poverty living in households where at least one parents works.

The issue is likely to get worse if the national living wage leads to compression of pay bands for lower-paying sectors.

The Resolution Foundation also said the Department for Work and Pensions need to eliminate needless barriers to claiming Universal Credit.

At present, claimants have to wait a week before making a claim and a month before receiving their first lot of benefits.

The Foundation also said that the system should be adjusted to allow automatic payments to landlords, and to allow the self-employed to report incomes annually instead of monthly.

Both the Public Accounts Committee and the Institute for Fiscal Studies have warned that Universal Credit will lead to financial losses for low-income families.

(Image c. Kirsty Wigglesworth from PA Wire)

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