Government needs to prove value of Universal Credit this autumn

The government must get the final most difficult phase of Universal Credit (UC) right this Autumn when it rolls the benefit out to millions of families or risk putting families off claiming the benefit altogether, according to a new report published by the Resolution Foundation.

The benefits of moving focuses on the final phase of UC, which involves moving 2.1 million families currently claiming benefits (such as tax credits and Employment Support Allowance) onto the new system. This includes around a million ‘just about managing’ families who are in work.

The details of the crucial final phase are due to be decided upon in parliament this Autumn and rolled out from July 2019 onwards. The Foundation says this ‘managed migration’ is the most difficult phase yet for UC because it involves people that have not chosen to apply for the new benefit.

The report notes that the principle of Universal Credit has consistently enjoyed cross-party support on the basis of two key advantages – improved financial incentives and higher-take up for the simplified benefit. The Foundation says cuts and weak financial incentives for single parents and second earners have undermined the first.

It says that upholding the second key advantage of UC – encouraging higher take-up – should therefore be a top priority for government. It argues that the potential gains from higher take-up are significant, with the Office for Budget Responsibility estimating that 700,000 families could gain around £2.9bn in total.

The benefits of moving says that a smooth final phase of the rollout, which prevents cash losses and encourages more families to claim their full benefit entitlement, could help to reboot the reputation of UC. However, it warns that further design flaws – which need to be resolved this Autumn – risk further undermining the roll-out and could put people off claiming UC altogether.

The Foundation’s recommendations to make a success of the most difficult phase of UC include speeding up UC payments, ensuring the state rather than individuals bear any financial risk that may arise from teething problems in the managed migration phase and a proposal to introduce an earnings disregard for those being forced to move onto UC to prevent claimants with volatile earnings (such as self-employed workers or those on zero-hours contracts), or who have a short-term boost in pay, from losing out financially from the transition. It also calls for the government should improve incentives by increasing single parent work allowances and introducing one for second earners.

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