NEWS
31/10/2017 02:31 GMT | Updated 31/10/2017 10:11 GMT

Universal Credit: Government Urged To Take 'Urgent Action' To Fix Scheme In Budget

A 'major risk'.

Toby Melville / Reuters
The Government has been urged to take 'urgent action' to fix and re-launch the Universal Credit scheme

The Government needs to take “urgent action” to end waiting times and a myriad of other issues impacting those on Universal Credit, which an independent think tank says is not “fit for purpose”.

While not rubbishing the scheme altogether, the Resolution Foundation suggested the “simpler system that consolidates six benefits into one is a prize worth fighting for” and should not be given up on and suggested the upcoming Budget “provides an opportunity to relaunch Universal Credit – making it fit for purpose in 21st Century Britain”.

In a report published Tuesday it urged the government to streamline the system to end six week waits, recognise not everyone is paid monthly and to avoid “big losses looming” for lone parents. 

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“Universal Credit (UC) needs urgent change if it is to be fit for purpose and become the bold welfare reform originally planned,” it said, adding that the scheme is “currently at risk of both failing those most in need and losing the potential to be a welfare system fit for modern Britain”.

The Foundation suggested a “fit for purpose” relaunch of the scheme, better aliening it with “the reality of 21st Century Britain”.

It called for the following changes:

  • Immediate procedural fixes, with concrete proposals to reduce the six week waiting period and rethink the requirement that everyone is paid monthly when new evidence shows that this is not the case for many people.

  • Tackling major design flaws, with action to improve the work incentives for lone parents and second earners, and a recognition that the problem facing us today is progression out of low pay rather than worklessness.

The Foundation said concerns had “rightly been raised” about the current six week wait for claimants to receive the benefit, given “the reality that only one-in-seven working-age families reliant on such benefits have savings worth more than a month’s income”.

It wants waiting times to be shortened “considerably” by scraping the seven day waiting period and “compressing” processing days to ensure payments happen a week and a half earlier. The Foundation estimated that would cost between £150-£200 million a year.

Paying benefits monthly, in arrears, was cited as another problem with the foundation saying, it “may work for those in steady jobs”, but not claimants who were often (in 58% of cases according to its research) coming from jobs where they were paid weekly or fortnightly. 

The Foundation also called for faster housing support payments, a simplified process for claiming childcare support and assessing the Minimum Income Floor, that limits support for the self-employed, annually rather than monthly.

Beyond these changes, the Foundation said there were “design flaws that undermine” the tole of Universal Credit in supporting family living standards and the labour market. 

“At a time when working poverty has become a major challenge facing the country, cuts to UC mean it is set to be almost £3 billion a year less generous than the tax credit system it replaces. As a result it will leave working families an average of £625 a year worse off. However, this masks a significant mix of outcomes across family type”.

According to the Foundation those outcomes are: 

  • The net impact on all two parent families in work is broadly neutral, though 1.1 million will lose an average of £2,770 a year.

  • Working single parents lose out, by an average of £1,350 a year. Almost twice as many lose (0.7m) as gain (0.4m), losing almost twice as much (£2,955 average annual loss v £1,600 gain).

The foundation said that stronger work incentives, “meant to be created” by the scheme had been “weakened by these cuts”, meaning the incentives for lone parents and second earners “risk being undermined by the current structure of UC”.

“Large cuts to work allowances for single parents, meaning they can work far fewer hours before losing any benefits, risk leaving too many trapped at low levels of pay. Meanwhile over two thirds of potential second earners with children will keep no more than 40 per cent of their gross pay if they enter low paid part-time work,” the report found. 

The Foundation argued the cuts may “discourage some low paid mums, and increasingly dads, from working longer hours or at all” which it said was a “major risk” given the importance of being a dual earner household in boosting incomes,

It said, to ensure “parity” with the tax credit system it replaces, a £3 billion re-investment in Universal Credit support for working families, including higher work allowances for lone parents and a new allowance for second earners, is “therefore vital to making a success of UC”, arguing that was a better option than “relying on additional borrowing, funding could be provided by delaying a range of tax cuts that disproportionality affect the richest”.

The Department for Work and Pensions disputed the Foundations assertions, with a spokesman saying: “This report fails to acknowledge the package of support introduced to help people move into work including unprecedented support with childcare costs and wider reforms to taxation and the introduction of the National Living Wage.

“It also assumes benefit claimants’ lives remain unchanged, but the truth is under Universal Credit people are moving into work faster and staying in work longer than under the old system.

“The majority of people are comfortable managing their money but advances are available for anyone who needs extra help and arrangements can be made to pay rent direct to landlords.”