Many benefit recipients will lose money after Universal Credit is rolled out fully – a fact that is being “ignored” amid the government claims working families will be better off overall, a leading think tank has said.
The flagship welfare reform is set to be rolled out fully over the course of this parliament. The Department for Work and Pensions has said the combined benefit, which replaces six separate working-age benefits, will mean some families receive up to £1,000 more a year.
The Resolution Foundation said in a report today that Universal Credit is “slightly more generous” than its predecessor – with families set to receive £1 a week more than under the legacy benefits system.
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But this average figure “masks sizable groups of families that gain and lose out by large sums, and significant geographical variation across the UK”, it said.
Nearly half – 46% – of all working-age families transferring to the new welfare system will lose out under Universal Credit, while 39% will see their benefits go up, it said.
And some areas of the country could end up “significantly worse off”, the think tank warned.
In Liverpool, 52% of people who receive Universal Credit will be worse off than they are now – compared with 32% who will be better off. Just under a third of families in the region will end up receiving Universal Credit, compared to around a quarter nationally.
This is largely because Liverpool has a higher proportion of single parents, out-of-work single people and disabled people, “all of whom fare badly under UC”, according to the Resolution Foundation.
Many of the people who stand to gain from the transition to UC will do so because it provides more support for working families with high rents than the previous system, the think tank said. However, it noted that this “greater generosity” has less impact in areas like Liverpool, where rents tend to be lower.
The report also reiterated a number of concerns that been identified by groups examining the Universal Credit rollout, including the “significant financial and mental stress” caused by the five-week wait for the first payment.
During interviews the think tank carried out with benefit recipients in Liverpool, some people said this delay had forced them to turn to food banks and exacerbated mental health problems.
Earlier this year the Trussell Trust, the UK’s largest food-bank operator, called on the government to end the wait after it published research linking the Universal Credit rollout to a 30% rise in demand across its network.
Interviewees also highlighted problems with the childcare element of UC. Payments are “more generous than tax credits”, but parents must pay these costs upfront before being reimbursed by the department.
“One single parent explaining how paying childcare costs up front was hard, and that reimbursements could be withheld if they forgot to obtain receipts on time,” the report said.
The comments echoed warnings by the Work and Pensions Committee of MPs, which called for payments to be made directly to childcare providers to alleviate “prohibitive” upfront costs that they said discouraged people from working.
The Resolution Foundation repeated demands to address these concerns and also called on the government to make the benefits system “more female friendly” by increasing work allowances for single parents and second earners.
And Laura Gardiner, RF’s research director, added: “As well as making reforms at a national level – such as helping families to overcome the first payment hurdle and offering more flexibility for those with childcare – policy makers across the country need to better understand the effect Universal Credit will have in different places.
“That understanding should be central to policy debates that are rightly focusing on what can be done to close economic gaps between parts of the UK.”
A DWP spokesperson said: "Universal Credit supports more than 2.7 million people across every part of the country, introducing tailored support to replace a complicated old system.
“This report rightly recognises improvements we’ve made, like boosting work allowances for some families by £1,000 and making it much easier to apply online.”