Government should overhaul universal credit in Budget, says think-tank

1 Nov 17

A think-tank has called for the government to inject an extra £3bn into universal credit to make it “fit for purpose”. 

Resolution Foundation's report, released yesterday, said “urgent change” is needed to ensure the “bold” welfare reform achieves its original purpose – simplifying the benefits system and incentivising people into work.

It said the autumn Budget was an “opportunity to take stock, resolve the design flaws in universal credit and relaunch the benefit in a way that is unequivocally fit for the challenges of the 21st century”.

The charity stated that rather than relying on additional borrowing, funding for these changes could be provided by delaying a range of tax cuts.

Earlier this month a cross-party group of MPs called on the government to cut the “cruel” six-week waiting time to one month.

The foundation stated that cuts to universal credit meant it was likely to be £3bn a year less generous than the tax credit system it replaces. As a result it will leave working families an average of £625 a year worse off.

David Finch, senior economic analyst at the Resolution Foundation, said: “Single parents are particularly hard hit, with almost twice as many losing as will gain, while second earners in couples will also face weaker incentives to work. Now is the time to put right these significant design flaws.”

The report argued that working single parents lose out, by an average of £1,350 a year. 

The Resolution Foundation urged the government to put forward proposals to reduce the six-week waiting period and rethink the requirement that everyone is paid monthly.

As previously reported by Public Finance, councils have expressed serious concerns about the length of time benefit recipients wait for their payments as this is driving a rise in rent arrears.

In September Citizens Advice warned that in its current form the rapid rollout of the universal credit would be “a disaster waiting to happen”.

Earlier this month the government scrapped the costs for the universal credit helpline after pressure from opposition parties and welfare groups.

A spokesman for the Department for Works and Pensions, said: “This report fails to acknowledge the package of support introduced to help people move into work, including unprecedented support with childcare costs and wider reforms to taxation and the introduction of the national living wage.

“It also assumes benefit claimants’ lives remain unchanged, but the truth is, under universal credit, people are moving into work faster and staying in work longer than under the old system.”

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