Universal credit will only save £1 billion, says OBR

Universal credit – the government’s flagship welfare initiative – will only save around £1 billion – 2% of the welfare budget – despite benefit cuts, according to the Office for Budget Responsibility.

The credit was brought in to simplify the benefits system, bringing six means-tested benefits and tax credits for working people, under one umbrella. Under initial plans which emphasised how it would help people back into work and to increase their hours it would have cost more than the original benefits system, but since then it has been reworked in order to save money through controversial benefits cuts and the rollout has hit a lot of delays.

The OBR says it estimates that the original plans would have cost £63.2 billion in 2022-23 and that the current design will reduce that cost by £1 billion. However, it warns that such schemes are often subject to delay and lobbying on behalf of those who will lose in the transfer to the new system. There is also a lot of uncertainty about wider economic issues, says the OBR.

The DWP has several trials underway to understand how UC will affect claimants’ ability to get jobs or work longer hours and it argues that it will deliver additional savings and economic benefits by getting more people into work and onto higher earnings. However, the OBR says studies to date find only modest, though positive effects.

Universal Credit has attracted a lot of controversy, particularly over delays in new claimants getting benefits which have contributed to a big rise in the use of food banks, says charities. Citizens Advice has called for the national roll-out to be delayed.

Meanwhile, a report by the End Child Poverty coalition says there are now constituencies within the UK where more than half of children are growing up in poverty – compared to one in ten, in the areas with the lowest child poverty rates.

The figures also show that some of the most deprived areas of the UK have seen the biggest increases in child poverty since December 2015 with increases in poverty reported of up to 10 percentage points. The coalition is calling on the Chancellor to end the freeze on children’s benefits – currently in place until the end of the decade – so that families no longer see living standards squeezed as prices rise.

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