Universal Credit (UC) promises a more streamlined system but, unlike its original intention, will offer less benefits for those in work as well as losses for disabled people says the Institute for Fiscal Studies (IFS) in a new study.
Robert Joyce, an Associate Director at the IFS and an author of the report, said:
“The long run effect of universal credit will be to reduce benefits for working families on average – a reversal of the original intention. However, the potential gains from simplifying the working-age benefit system remain mostly intact: universal credit should make the system easier to understand, ease transitions into and out of work, and largely get rid of the most extreme disincentives to work or to earn more created by the current system.”
Disabled people are one of the groups facing the biggest reduction in benefits:
“The group that sees the biggest average reduction in its benefit entitlements is non-working couples without children. This is despite the fact that most are unaffected; the average losses result from some very large losses for a small number of these households. These include couples where one individual is aged above the state pension age and the other is not, who are entitled to pension credit under the legacy system (which is more generous than working-age out-of-work benefits) but who will have to claim UC instead following its introduction; and households with someone claiming the middle or higher rate of the care component of disability living allowance, who will no longer receive the severe disability premium under UC.”
Overall, in the long run, the study says:
- Introducing UC will cut annual benefit spending by £2.7 billion in total.
- Among working households, 2.1 million will get less in benefits as a result of UC’s introduction (an average loss of £1,600 a year) and 1.8 million will get more (£1,500 average gain). Among the 4.1 million households of working age with no-one in paid work, 1 million will get less (average loss of £2,300 a year) and 0.5 million will get more (average gain of £1,000 a year).
- Working single parents and two-earner couples are relatively likely to lose, and one-earner couples with children are relatively likely to gain. Among those currently receiving one of the benefits being replaced by UC, working single parents would be over £1,000 a year worse off on average if the long run UC system applied now, but one-earner couples with children would gain over £500 a year on average.
- Owner-occupiers and those with assets or unearned income are relatively likely to lose, but working renters are relatively likely to gain.
- There are many other changes associated with UC which could also be significant. Expanding job search conditions to more people and removing the need to start new benefit claims when moving into work could act to increase employment and earnings.