Universal Credit Welfare Reforms Leaving The 'Poorest Families Running Up The Down Escalator'

The introduction of Universal Credit (UC) is having a damaging effect on millions of working families, leaving the "poorest running up the down escalator", it has been claimed.

UC, which combines six benefits into one monthly payment, has faced increased criticism after three reports published separately by MPs, campaigners and a respected economic think tank claim that promises about the new system have been left in "tatters".

A study from the Institute for Fiscal Studies (IFS) found that more claimants will be worse off than better off in the longer term.

Working families will be worse off, the Institute for Fiscal Studies claims

The Government was accused by a powerful Commons committee of being "unable or unwilling to level" with the public about the benefit.

Campaigners at The Equality Trust claim that the new system fails to make work pay for families who pay income tax and national insurance. They face losing up to 76p in every additional £1 they earn when moving onto universal credit, according to the charity.

Duncan Exley, director of the charity, said: "For all the talk of universal credit making work pay, it does nothing of the sort in its current guise. In fact, many recipients will keep even less of what they earn than under the current system of tax credits. So it fails on its own terms, and leaves the poorest running up the down escalator, struggling to keep pace with others.

"We can't keep pretending that our taxes and benefits system is fair when the rich are given all the ladders and the poor all the snakes."

Around 2.1 million will get less in benefits as a result of the introduction of universal credit, with the average loss totalling £1,600 a year - but 1.8 million will come out £1,500 better off on average, the IFS found.

Some 1.1 million working age homes with no one in paid work will lose out by around £2,300 a year, while 500,000 are expected to gain of £1,000 a year, according to its research.

Working single parents are likely to be hit hard by moving from the current system to universal credit, losing an average of £1,000 a year.

The IFS said that the changes will "dramatically" reduce the number of claimants facing weak incentives to move into work, with the 1.4 million fewer people set to lose more than 70% of their pay in taxes and withdrawn benefits.

Robert Joyce, an associate director at the IFS and an author of the report, said: "The long run effect of universal credit will be to reduce benefits for working families on average – a reversal of the original intention.

"However, the potential gains from simplifying the working-age benefit system remain mostly intact: universal credit should make the system easier to understand, ease transitions into and out of work, and largely get rid of the most extreme disincentives to work or to earn more created by the current system."

Work and Pensions Secretary Iain Duncan Smith

Work and Pensions Secretary Iain Duncan Smith's plan to wrap up most means-tested benefits into one payment have been dogged by problems and the date for moving all claimants onto the new system has been put back to March 2021.

Shadow work and pensions secretary Owen Smith said: "This IFS report leaves Iain Duncan Smith's claims for Universal credit in tatters.

"Everyone can now see that successive cuts to universal credit have destroyed many of the work incentives that were supposed to be the very reason for the scheme, hitting single parents particularly hard."

A progress report on the universal credit by the Public Accounts Committee said the "impacts on claimants remain very uncertain" and warned there "remains a long way to go".

Meg Hillier, who chairs the PAC, said: "The lack of transparency surrounding a programme with such wide-reaching implications for so many people is completely unacceptable.

"The Department for Work and Pensions appears either unable or unwilling to level with Parliament and the public about universal credit."

Imran Hussain, director of policy at the Child Poverty Action Group, said: "Parents doing the best they can for themselves and their families need and deserve a decent return for putting in extra hours, but instead they find the rug is being pulled from under them."

PCS general secretary Mark Serwotka said: "We warned years ago that universal credit could not succeed if it was driven by a political agenda to cut support, rather than offering genuine help for unemployed people.

"It is clear to everyone that this supposedly flagship project is in disarray and is exposed as just another political attack on people who are out of work or on low incomes."

A Department for Work and Pensions spokesman said: "Universal Credit is transforming lives across the country, with claimants moving into work significantly faster and earning more than under the old system. UC is on schedule and will be in all jobcentres by Spring. Once fully rolled out it will generate £6.7bn in economic benefit every year.

"We welcome the IFS analysis which shows that UC will make work pay and increase financial incentives for people to work more, while also bringing the welfare bill under control. Universal Credit also includes a wide range of additional benefits - including increased childcare and more support from a dedicated work coach - both things that were ignored in the IFS's analysis."

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