Posted 12.11.12
A new report by the Joseph Rowntree Foundation (JRF) suggests Universal Credit (UC) could see people worse off in work and struggling to manage their finances, with many left to deal with a more complex benefits system than before.
The research, by Inclusion and the University of Portsmouth, takes a first comprehensive look at what implementing UC reforms will mean for recipients facing one of the biggest reforms to the welfare system. UC will replace means-tested benefits and tax credits for people out of work or on low incomes from October 2013.
The report assessed how implementation would affect the three key objectives to be delivered by reform, and found:
Work Incentives
Making work pay is the key aim for UC, however the report finds many households are set to be worse off, or only marginally better off.
While the new system does incentivise more people to take 'mini-jobs' (those less than 16 hours per week), it does not encourage the crucial next step into full-time work and help people move out of poverty.
Although UC makes things better for people who are currently facing a very high rate of effective tax, not everyone will benefit. M
arginal increases in earnings alone are unlikely to be sufficient incentive to move into full-time work, with small financial gains likely to be wiped out by costs, such as childcare and travel.
Simplification
Simplifying the benefits system is severely undermined by the localisation of Council Tax Benefit (CTB) and of Social Fund loans designed to help families in crisis. Separate means tests and eligibility rules for CTB and emergency assistance will create complexity and likely to be so aggressive as to leave some people worse off as their earnings rise.
The knock on effect of UC on passported benefits (free school meals, free prescriptions) being withdrawn as earnings rise could create cliff-edges for those in work and reduce the financial gains of employment.
Improved Delivery for Claimants
The report raises serious concerns about a 'one size fits all' digital delivery system and around potential IT failures that could quickly lead to backlogs, poor service and complaints.
There is little information on the 'stand by' arrangements to ensure claimants are paid - system failure could lead to financial hardship for significant numbers of people, with those affected having to rely on emergency help from councils and charities.
The shift from fortnightly to monthly payment in arrears has raised concerns amongst families on low-incomes that they will run out of money before the end of each month. Recipients may have to borrow money to bridge the gap, leaving them to start their UC claim in debt.
UC may create an unfair bias against women, with child-related support not necessarily reaching the children it is intended for.
The introduction of tougher sanctions and in-work conditionality as part of UC must be fair and the report proposes an agreement between claimants and their Jobcentre Plus advisers. This would outline the actions claimants should take to prepare or look for work, as well as providing a clear statement of the support they can expect in return.
The findings of the report - Implementing Universal Credit: will the reforms improve the service for users? by Amy Tarr and Dan Finn - are available to download from the JRF website.
