Over a million Brits living in financially precarious situations find themselves £2000 poorer annually, according to the Institute of Fiscal Studies (IFS). Their study into the Tory’s implementation of the Universal Credit system revealed that as many people saw an increase in their benefits as those whose fell, indicating a clear case of “winners and losers.”
The Department for Work and Pensions (DWP) has since 2013 steadily implemented the Universal Credit benefit system, reaching over five million new and existing benefit recipients. Almost half of these individuals saw their payments go up by as much as £200 annually. However, approximately one in five households depending on government benefits experienced a drop in income by nearly £2000 every year due to shifting to this new system.
The sweeping changes to the welfare state introduced by the Conservative Party were dubbed by the IFS as “the most significant reform to the working-age benefits system” since the post-war reforms of 1945 by the Labour government. The ambition behind Universal Credit lay in simplifying the welfare system and bolstering the connection between benefits and employment resulting in nearly 40% of all claimants being in low-paid work.
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Parts of these “significant” changes included increased conditionality, such as work coaching and work-search diaries, alongside the reduction of barriers to employment from legacy benefits, where previously earning over a certain amount could result in claimants experiencing a 70 per cent drop in their monthly income. Now, this has been adjusted to a tapered approach to encourage individuals to take up work while still receiving benefits, reports the Mirror.
Yet, with millions now in employment and still on government support, the Institute for Fiscal Studies (IFS) suggests that the system may be subsidising low-paid work. Their report highlighted: “While the incentive to move into paid work has been strengthened, there has been almost no change in the incentive to move from part-time to full-time work.”
A smaller group, about one in ten households, have seen their benefits decrease by up to £4000, amidst escalating costs for food, housing, and energy. These are typically households where one person is below the state pension age and another is above.
The IFS clarified that this affected group are entitled to UC, rather than the ‘much more generous’ pension credit. 70 per cent of these households (180,000) lose out by more than £4,000 per year under the UC system. Households with assets over £16,000 and the self-employed can also face significant losses under the UC regime.
Universal Credit is set to be extended to the remaining 1.2 million benefit recipients who have yet to switch to the new system, following a recent push by the DWP aimed at cutting costs – with a notable one in 25 not transitioning to the new system. Tax credit recipients are particularly hard hit by the changeover, with a third of those scheduled for migration this year having dropped out of the system altogether.
However, the IFS has identified an especially “vulnerable” group due to migrate later in the year. The IFS has highlighted: “The largest group left to be migrated are claimants of employment and support allowance (ESA), a particularly vulnerable group who may face even more acute difficulties with putting in a UC claim. DWP has already pledged additional support to help these claimants, but getting this assistance right will be a critical issue for the next government or large numbers of disabled claimants, often receiving over £10,000 a year in means-tested benefits, may suddenly end up without any of that financial support.”
“The report by the IFS also notes: “We have seen in this report that the UC reform makes large numbers of households worse off, even though the average household gains from it. Families receiving disability benefits, mixed-age couples, the self-employed and those failing a harsher assets test are much worse off under the UC system than under legacy benefits.”
The report continues: “There are transitional protections in place to ensure families do not lose out when moving from the legacy system to UC in the short run. But under current plans, they will still be left worse off in the long run.”
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