William Eichler 12 November 2018

Universal Credit reforms to help 200,000 families

The Universal Credit reforms announced as part of the budget means an additional 200,000 families will be better off under the new benefit system, compared to the old one.

A new report has calculated that the £1.7bn investment in UC at the budget, coupled with the £3.2bn higher benefit take-up projected by the Office for Budget Responsibility, means that UC will be more expensive than the legacy benefits system.

Published by the think tank Resolution Foundation, the report said that £1,000 work allowances, which will deliver an income boost of up to £630, will mean an extra 200,000 working families will be better off under UC compared to the legacy system.

Overall, the think tank found, this has reduced the number of losing working families from 3.2 to 3 million, and increased the number of gaining families from 2.2 to 2.4 million.

However, the report notes that more needs to be done to incentivise single parents and second earners within a family to work.

Under UC, according to the think tank, a single parent renting and earning the National Living Wage could halve their weekly working hours from 16 to 8, and lose just £24 per week.

Second earners have no separate Work Allowance so, in most cases, will lose benefits from the very first pound of their earnings.

‘The welcome extra investment in Universal Credit at the Budget means that a further 200,000 working families will now be better off under the new benefit system than the old one,’ said Laura Gardiner, research director at the Resolution Foundation.

‘This also means that, for the first time since early 2015, UC is set to be more expensive than the legacy benefits it is replacing.

‘But if the government wants to make Universal Credit fit for the challenge of tackling 21st century poverty in Britain, these recent changes should mark the start of reforms, rather than the end.

‘The Government should now prioritise reforming Work Allowances so that they do more to incentivise higher earnings for single parents, and encourage more second earners into work. This would make Universal Credit more female-friendly, and a better vehicle for driving down poverty.’

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