A think tank has described the £20 uplift to Universal Credit (UC) as a poorly targeted ‘blunt policy instrument’ and proposed its replacement with a ‘coronavirus hardship payment’.
A briefing paper from the Centre for Policy Studies argues that with the £20 uplift to UC those who had relatively low entitlements before the lockdown benefit much more in percentage terms than those with families and children to support.
The paper cites research which shows the standard allowance for a single UC claimant under 25 increased by 36% thanks to the extra £20 compared to just 19% for a couple over 25 years old.
The think tank argues that a hardship payment, put in place from April when the furlough is due to come to an end, would support families more and would do more to incentivise work.
The hardship payment would be a temporary measure that would last a further six months, with an additional three-month phasing-out period at half the value to prepare for its eventual withdrawal.
The Centre for Policy Studies says it should be combined with a one-off uprating of UC (currently set to rise by just 0.5%) of 2.5%, in line with the rate being applied to the State Pension. This would amount to an extra £100 a year on the standard allowance for a single claimant over 25.
In addition, the briefing paper proposes the Government should improve the work incentives within UC through an 8p cut to the taper rate and increased work allowances. Claimants currently lose 63p of every £1 they earn in work, which can make it less worthwhile for claimants to take up employment.
‘The Government has backed themselves into a corner with the £20 uplift in Universal Credit – it’s much harder to take something away once it’s in place,’ said James Heywood, head of Welfare and Opportunity at the Centre for Policy Studies.
‘However, they do have the opportunity now to make significant changes to the system to benefit claimants and ensure it always pays to work.
‘Replacing the uplift with a clearly defined temporary support mechanism, combined with other reforms, would offer the intended financial support while making it easier to prepare claimants for its eventual withdrawal.’
