Universal Credit ‘will make many worse off’, says JRF

30 Oct 12
The introduction of Universal Credit next April will do little to encourage welfare-dependent families to seek work, researchers have found.
By Vivienne Russell | 30 October 2012

The introduction of Universal Credit next April will do little to encourage welfare-dependent families to seek work, researchers have found.

A report published by the Joseph Rowntree Foundation today warned that many households would be worse off under the single benefit system. In addition, the changes would do little to support people into fulltime work, as their increased earnings were unlikely to be sufficient to offset childcare and travel costs.

It also found that the simplification promised by Universal Credit would be ‘severely undermined’ by the exclusion of Council Tax Benefit and Social Fund loans from the system. Means tests for these benefits, which are being devolved to councils, were likely to be ‘so aggressive’ as to leave some people worse off as their earnings rise.

The research, which was conducted for JRF by the think-tank Inclusion and researchers at the University of Portsmouth, also raised concerned about the planned ‘one size fits all’ digital delivery system for the credit. IT failures could quickly lead to payment errors, backlogs, complaints and financial hardship for some claimants.

Plans to pay claimants monthly and in arrears raised fears among some low-income families that they would run out of money before the next payment date, forcing them to borrow to bridge the gap.

JRF chief executive Julia Unwin said: ‘The principle of Universal Credit is sound, but our research has found the actual rollout could unintentionally trap people in poverty and hardship. Universal Credit reforms are approaching at breakneck speed, so the Department for Work & Pensions must show similar urgency to address the very serious concerns outlined in this report.’

Chris Goulden, head of poverty at JRF, added that it was ‘self-defeating’ to encourage more people into part-time work if their increased earnings would be wiped out once they became full time.

‘If Universal Credit reforms are to be successful in helping people out of poverty, it needs to ensure work is truly worthwhile and does not punish people who try to boost their hours and income.’

But welfare minister Lord Freud today cited findings from the DWP’s own research, which he said showed the majority of claimants were ready for the increased financial responsibility that came with Universal Credit.

In a related change, the DWP is running six direct payment demonstration projects, which pass Housing Benefit directly to claimants rather than to their landlords. Initial findings show that 54% of claimants are confident that they can manage the money paid into their bank account.

‘These findings show most people on low incomes manage their money well and for most tenants the switch to direct payments under Universal Credit will be straightforward,’ said Freud.

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