By Richard Johnstone | 9 December 2013
Introduction of the Universal Credit will lead to a £600m reduction in welfare spending after the government announced that allowances in the benefit would be frozen for three years, an analysis of the Autumn Statement has revealed.
The Institute for Fiscal Studies said on Friday that implementation of the coalition’s flagship reform – which will merge six benefits into one payment –would be ‘significantly delayed’. The Office for Budget Responsibility now expects only 400,000 people to be in receipt by 2015/16, down hugely from the 4.5 million in initial projections. This comes after Work and Pensions Secretary Iain Duncan Smith admitted the nationwide rollout would not be completed by 2017.
Chancellor George Osborne’s Autumn Statement also stated that allowances in the new benefit system, which are designed to ensure people are always better off in work, would be frozen for three years from next April. The so-called ‘work disregard’ sets the amount a claimant can earn before any of their benefits are reduced.
Not increasing this allowance in line with inflation means that, when Universal Credit is fully in place by 2017/18, £600m will be saved from welfare spending, IFS senior research economist James Browne said.
Overall, this means low-income working families will receive less.
‘The effect of this is to weaken work incentives for single people and those whose partners are not in paid work,’ Browne said.
‘But it strengthens the incentive for both members of a couple to work, rather than just one, because there’s less for the second earner to lose in terms of Universal Credit if they go into work.’
