A recent report by the Joseph Rowntree trust has suggested that new Universal Credit, due to start in October 2013, could lead to people being worse off in work and struggling to understand a more complex system. UC will replace means-tested benefits and tax credits for people out of work or on low incomes.
Universal credit was introduced by the Conservatives with the aim of cutting costs and ensuring that people were better off in work than on benefits. However, Joseph Rowntree Trust predict key issues that could potentially result in further hardship for many.
Work incentives is a major aspect for UC but the report has found that, whilst the scheme will encourage part time work, it does not provide incentive for making the major leap into full time work. This major flaw prevents the crucial steps that households need to make in order to move out of poverty. As the increases in wages for full-time work are not substantial, they will not cover costs such as travel and child care.
Despite efforts to simplify the benefits system, the Joseph Rowntree Trust has concluded that the opposite effect is most likely. Complexities will be created as a result of the multiple tests applicants will have to make and IT failures and bad service is predicted. The scheme will switch fortnightly payments to monthly which will undoubtedly cause issues for families later on in the month; perhaps meaning they will be forced into relying on charities. Chris Goulden, Head of Poverty at JRF, said It is self-defeating to encourage more people into part-time work, only for them to see their earnings wiped out when they progress into full-time jobs. If Universal Credit is to be successful in helping people out of poverty, it needs to ensure work is truly worthwhile and does not punish people who try boost their hours and income.”
Past attempts at benefit reforms have not always proven to be successful and, affecting 10 million families nationwide, this will be a major adjustment.