William Eichler 06 September 2018

Universal Credit entering ‘most difficult phase’, think tank warns

The Government should speed up Universal Credit payments if it wants its flagship welfare reform to be successful, think tank says.

This Autumn will see the final stage of the roll out of UC decided upon in Parliament - a phase which will involve moving 2.1 million families currently claiming benefits onto the new system.

A report from the think tank Resolution Foundation warns this will be the ‘most difficult phase’ because it involves people that have not chosen to apply for the new benefit.

Entitled The benefits of moving, the report notes the welfare reform enjoys cross-party support because of two key advantages: improved financial incentives and higher-take up for the simplified benefit.

However, it argued the first advantage has been undermined by cuts in the 2015 Summer Budget that reduced the generosity of the scheme.

It also warned the financial incentives for single parents and second earners to enter and progress in work are weak.

The think tank stressed that upholding the second advantage of UC - higher take-up - should be a top priority for the Government.

It argued that the potential gains from higher take-up are ‘significant’, with the OBR estimating that 700,000 families could gain around £2.9bn in total.

The benefits of moving argued that Whitehall needs to sort out the ‘design flaws’ in the new benefit system in order to encourage take-up.

This, it recommended, could be done by speeding up UC payments, reducing the financial risks to claimants that might come from the new system’s teething problems, and by boosting the financial incentives.

‘Universal Credit enjoyed almost universal support when it was first announced. But its reputation has been undermined in recent years by significant cuts and payment delays that have left too many claimants in difficult financial straits,’ David Finch, senior economic analyst at the Resolution Foundation.

‘But despite these problems, the rollout of Universal Credit is still going ahead and is in fact about to enter its most difficult phase as two million families already claiming benefits start to be moved onto the new system – including one million just about managing families.

‘Get this final phase of the rollout right and it could help to reboot Universal Credit’s reputation, but get things wrong and UC’s reputation risks taking another battering, and worryingly some families could be put off claiming UC altogether.’

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