Universal Credit's right - but we must take stock

6th Apr 2017

Three priorities need immediate action to ensure Universal Credit achieves its goals and helps reduce poverty and increase living standards.

Overnight the benefits system has changed. A family claiming support for children born today will be entitled to less help than a similar family yesterday. This is the case whether they are working or not.

This comes at a time when the rising cost of living and stagnating wages are putting more people at risk of poverty. This is on top of measures already implemented that fundamentally change the support on offer through Universal Credit (UC) – the Government’s major reform that brings six separate benefits into one integrated system.  

Originally the transition from the current benefits and tax credits system to UC was going to result in more people gaining than losing. The reverse is now the case.

The freeze in the value of most working age benefits – while prices are rising – and cuts to the amount people can earn before UC begins to be withdrawn (the ‘Work Allowance’) mark two of the most significant reductions in the amount people get. These affect ordinary working families alongside the most disadvantaged. Single earner families and lone parents working full time on the National Living Wage are likely to see their living standards deteriorate by 2020 – despite their wages going up sharply.

The changes being implemented today include less financial support for all families having their first child (up to £545 less per year), and no additional financial support for families having a third or subsequent child (which is currently worth up to £2,780 per child per year).  The IFS forecast this measure alone will see an additional 200,000 children in poverty in 2020/21.

Despite the recent changes, moving onto the UC system remains the right thing to do. The current system is fragmented and traps people in poverty; the prospect of an integrated benefit system that responds to people’s changing circumstances is a prize worth having. But the time is right to take stock and ensure the reform achieves its goals and helps reduce poverty and increase living standards. To this end, JRF has identified three priorities that require immediate action

  1. Reduce the five-week minimum wait to receive Universal Credit, which puts people at the risk of debt, destitution and eviction. As UC wraps multiple major benefits into one payment, people are left with few, or no, other sources of income to fall back on while they wait.
  2. Reverse the two-child limit on claims for UC (and tax credits), because more money directly improves children’s health and development outcomes. Growing up in poverty scars prospects, resulting in a £6.1bn per year impact on the public finances in lost tax revenue and additional benefit spending. Two-thirds of the families affected by this policy have at least one person in work.
  3. DWP and the new Metro Mayors work together to develop an employment support devolution deal to help get people into good jobs and to get on at work. The creation of Metro Mayors marks an opportunity to better connect employment support and training to the needs of local employers.

Looking ahead to the Budget in the autumn, lifting the freeze on working-age benefits so their value keeps pace with rising prices and reforming UC so low-income working families can keep more of what they earn are priorities. Failure to act risks undermining the Government’s message about being on the side of ordinary working families and the most disadvantaged in society.