The think-tank called on the new work and pensions secretary Stephen Crabb to make changes ahead of the full rollout of the benefit reform to ensure it incentivised both entry into the job market and progression in work.
Full implementation of UC, which combines six existing benefits into a single payment, has been delayed after a series of IT problems.
From today, all single jobseekers can now claim the benefit, with over 450,000 people having made a claim for the payment so far.
However, the government made a series of changes to the structure of UC in the last parliament, including reducing the amount of benefits that people can retain as their earnings rise.
Today’s Resolution Foundation report highlighted it had long supported the reform, but changes in the last parliament, driven by a desire from the Treasury to secure further savings in the welfare budget, meant the plan had “veered off track”.
Unless changes are made, UC risks being reduced to little more than a very complicated vehicle for cutting the benefits bill, senior economic analyst David Finch stated.
“With UC’s main goal of making work pay now under serious threat, the secretary of state should reclaim the project from the Treasury.”
Finch highlighted three key steps: “He should prioritise support on those most likely to respond such as single parents and second earners, ensure UC does more to help those already in work to progress, and iron out some of the practical concerns that have arisen during the initial pilots.”
According to current government timetables, UC is expected to be fully in place by the end of 2021, by which time almost half of all families with children will be entitled to it.
In absolute terms, the new system reduces the returns to work for many families, according to the foundation. Around 2.5 million working households will be worse off by an average of £41 a week, while around 2 million households will be better off by an average of £34 a week. The new system particularly reduces work incentives for those who are most sensitive to such inducements including single parents and second earners in couples.
The reduction in work allowances – the amount claimants can earn before their benefits start to be withdrawn – have deepened the problem.
Responding to the report, Crabb said that other changes since 2010, including higher income tax personal allowances and the introduction of the national living wage would "override" the losses outlined by the Resolution Foundation.
He told BBC Radio 4’s Today programme: “Universal Credit is transforming welfare and is central to our vision for our society where people of all backgrounds can earn a decent wage and provide for their families, with claimants moving into work faster and earning more than under the old system.
“Our focus now is on continuing its expansion to all claimants.”
