Does Universal Credit need to be reformed?

Universal Credit may need to be reformed in order to provide a proper safety net for the most vulnerable, but the infrastructure around it, such as childcare, also needs to be improved.

Rising Costs

 

Covid Realities, a report published today by the Universities of York and Birmingham and the Child Poverty Action Group, documents the lives of 150 low-income families during the pandemic and shows how Covid has accentuated existing problems in the benefits system. These, when combined with fast-rising inflation which is outpacing earnings rises in many cases, the longer term impact of Covid on family finances, the prospect of escalating fuel bills as well as rent and tax increases which will disproportionately affect the lowest paid are leaving many families in fear as they worry about the very basics needed to live.

The Resolution Foundation thinktank says that the number of households falling into fuel stress, spending at least 10% of their budget on energy bills, will triple overnight in April to 27%.

The removal of the 20 pounds a week extra on Universal Credit during the pandemic assumed that people only needed temporary support and that getting back to work would resolve all their problems. However, it ignored the cumulative effect of years of benefit freezes and other cuts which had, pre-pandemic, forced many to food banks as well as rising living costs and the longer term tail of the pandemic itself.

Single parents are often the worst affected, with the rising cost of childcare making it impossible for them to increase their hours and with many part-time roles being the most subject to Covid fluctuations. During Covid some parents have had to leave their jobs because they could not afford to look after their children for weeks on end on unpaid parental leave during lockdowns, because many employers did not furlough people who had no childcare help or because many people couldn’t afford to live on 80% of the minimum wage. The low rate of sick pay and patchy access to Covid isolation support made for some difficult decisions. All of this has left many families with no ability to withstand even small household changes.

Universal Credit

When Universal Credit was brought it it was always clear that there would be those for whom it would mean income cuts. The benefits system is incredibly complicated and how much you will receive depends very much on your household’s different circumstances.

Even at the outset, the Institute for Fiscal Studies said it would strengthen financial work incentives for some, but weaken them for others, including second earners in couples. And it highlighted that single parents would on average lose out under the system. In 2019, it reported that the poorest were disproportionately affected. Indeed, the Department for Work and Pensions lost a court case last week brought by two severely disabled men who lost out due to moving from legacy benefits to UC.

Benefits expert Sam Royston told workingmums.co.uk in 2018: “There were many good intentions behind Universal Credit, but introducing a reform of this scale on a shoestring has deeply undermined any potential that it had.” Calling for widespread reform of the benefit, he said there is a lack of understanding at policy level about how different benefits interact.

The Government says that it has increased the living wage and has emergency funds for, for instance, heating and rent issues. Its response to Universal Credit issues is one based on tweaks rather than reform. From the end of last year, the Universal Credit taper rate also dropped from 63% to 55%, meaning working households claiming Universal Credit were able to keep an additional 8p for every £1 of net income they earn over their work allowance, if one applied. This was after widespread concerns were raised about the ending of the 20 pounds a week uplift in UC. It was welcomed at the time, but it is clearly not as comprehensive as the uplift.

The Government has always argued that the route out of poverty is work and UC has been designed to encourage more people into doing more hours. But without all the other infrastructure needed, including childcare, this will not necessarily help those who most need support. Moreover, the most vulnerable will always need a safety net and that safety net should surely be sufficient for people to afford the very basics. As a spokesperson from Gingerbread told The Guardian: “It seems to me that there’s something very wrong if people who are working still can’t afford to feed their families.”

*To find out what benefits and other support you can claim go to www.turn2usorg.uk. They have an online benefits calculator where you can put in your circumstances and they will calculate the help you can claim.



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