Reform Universal Credit to help more back to work, says Resolution Foundation

8 Jun 15

The Universal Credit programme to merge six benefits into one payment should go ahead, but a series of changes are needed to maximise the number of people helped into work, the Resolution Foundation has concluded.

Its nine-month examination of the controversial scheme found that it could help as many as 460,000 people into employment if alterations were made.

This would nearly double the employment gains currently projected from the reform. These had to be reset by the Department for Work and Pensions last year following problems with the technology needed for the changes.

UC is intended to ensure people are always better off in employment by allowing for benefits to be adjusted quickly in response to earnings, and today’s Making it work report agreed this would bring significant cash benefits to working families with children.

However, work incentives in the single payment should be strengthened by introducing a “triple lock”, similar to that which applies to the state pension, to uprate benefit entitlements.

Under the current plan, “work allowances” will allow people to retain all their full benefit entitlement as they enter work and earn up to a certain level, which will be based on individual circumstances. This is intended to make it more attractive for people who are only able to work a few hours a week to enter the job market.

Today’s report called on the government to commit to uprate the allowances every year by whichever is highest of average earnings growth, increases in the minimum wage or CPI inflation.

It also recommended a reduction in the rate at which benefits are withdrawn so that claimants keep more of their income as their earnings rise. The proposed level of the taper is currently 65%, but this should instead be set at a maximum of 55%.

Review chair Nick Timmins said these proposals were intended to build on the existing strengths of Universal Credit.

“But the current design of UC contains flaws and it also carries some risks – for example that some people might reduce their hours of work at the taxpayer’s expense,” he said.
“A new government provides the perfect opportunity to address such issues before millions of people are moved on to the new system.”

Other recommendations included a call for the current system of local council tax support schemes to be rolled into UC. This could reduce overall administration costs by up to £500m.

A number of practical changes were also called for, including offering recipients flexibility over the timing of their benefit payments from the planned monthly schedule, and making it easier for tenants to have their Housing Benefit paid direct to landlords.

David Finch, a senior economic analyst at the think-tank, said UC held many advantages over the current benefit system. However, it needed to reflect big changes in the UK’s labour market, such as rising in-work poverty.

“The government’s flagship welfare reform programme needs a reboot so that it can deal with the big labour market challenges of the next decade and beyond, such as helping people escape low pay, rather than try to tackle the problems of the past,” he added.

The report is published as the Department for Work and Pensions confirmed the rollout of UC to all jobcentres in Glasgow, meaning it was now available in more than half of those across Scotland.

A departmental spokesman said: “Universal Credit is simplifying the welfare system to make work pay, and research shows that it's getting claimants back into work faster and helping them earn more.

“When fully rolled out, Universal Credit will make 3 million people better off with a £7bn boost to the economy every year.”

Did you enjoy this article?