New report calls for government action on Universal Credit

A new report into the impact of Universal Credit (UC), by the Resolution Foundation in partnership with the Liverpool City Region Combined Authority, has called on the government to make vital reforms in three key areas.

In its latest research, titled The Long and Winding Road, the Foundation says that the government should build on welcome recent reforms to UC and make further crucial improvements. These include:

  • Helping families overcome the first payment hurdle. The government should increase the proportion of new claims paid on time and in full; help families overcome the first payment hurdle by testing approaches like an interim payment for certain groups and backdating the start of claims; and carry the financial risk from late payments.

  • Ensuring UC fits better with the lives of those who need it. In particular, reforms are needed to make the generous childcare support in UC more flexible and easier to navigate.

  • Making UC more female-friendly. Boosting work allowances for single parents and second-earners would boost their work incentives and increase household incomes.

To help understand the how the roll-out of Universal Credit is being felt in different parts of the country, the Foundation carried out in-depth interviews across the Liverpool City Region (LCR). The area was one of the first areas to receive UC, and a higher proportion of working-age families are on UC than across the country as a whole (31 per cent for LCR, compared to 24 per cent for the UK).

The interviews focused on recipients’ experiences of various aspects of the new system, and uncovered a number of areas where further improvements are needed.

While those with IT skills valued Universal Credit’s digital focus, many said that the five-week wait for the first payment put them under significant financial stress. Some reported that the wait had forced them to use food banks, and worsened existing mental health issues.

Others reported problems with the childcare element of UC – despite it being more generous than tax credits – with 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.

Finally, the interviews revealed a variable understanding among recipients of exactly how taking on more work would affect their incomes. Most understood they would be better off in work, but many felt that the system’s responsiveness to their earnings meant that taking on more hours wasn’t financially viable. This, says the Foundation, risks weakening one of the central claims of UC, that it will ‘make work pay’.

The Foundation adds that policy makers in Whitehall, and, crucially, across the UK, need to consider the impact of Universal Credit at a local level. At exactly the time that policy debates are rightly focusing on what can be done to close economic gaps between parts of the UK, this major welfare reform will be rolled out with very different impacts on those places.

Laura Gardiner, Research Director at the Resolution Foundation, said:

“Welcome recent reforms mean that Universal Credit is now set to be marginally more generous than the benefits it is replacing. But this average hides a complex mix of winners and losers, with families in some areas of the UK faring particularly badly.

“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.”

Metro Mayor of the Liverpool City Region Steve Rotheram said:

“Universal Credit has made life miserable for some of the most vulnerable members of our society.  It is time that the government listens to the warnings by frontline staff and reports, like this from the Resolution Foundation, and implements serious reforms to make our welfare system more humane.

“Rather than forcing to wait five weeks wait for a first payment and penalising people for finding work, UC should be reformed to offer a genuine safety net to struggling people.”

Other key findings in the report

  • In the Liverpool City Region, just 32 per cent of families will be better off under UC, compared to 52 per cent who will be worse off. This compares to a national average of 46 per cent losing out, and 39 per cent gaining.

  • Two-thirds of the six million families who will eventually be on UC moving across during this parliament. The final – and most challenging – phase of the roll-out, involving the transfer of existing benefit and tax credit claimants onto UC, is also due to start later this year.

  • Following welcome reforms, including the recent £1,000 boost to work allowances announced in Budget 2018, UC is set to be slightly more generous than the legacy system it is replacing (as long as take-up gains are achieved), with families receiving £1 a week more an average. However, this masks sizable groups of families that gain and lose out by large sums, and significant geographical variation across the UK.

You can read the full report here

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