Universal Credit will mean cuts and chaos

Submitted by Matthew on 23 February, 2015 - 12:06 Author: Matthew Thompson

Universal Credit, the benefit which is to replace six payments to working-age claimants (Income Support, income-based Jobseekers' and Employment and Support Allowance, Housing Benefit and Child and Working Tax Credit), has now been introduced nationally for all new claims.

The Department for Work and Pensions has been piloting Universal Credit since 2013, albeit on a smaller scale than initially intended as a result of IT problems. The new system has been trialled in just four towns in the North West, Ashton-under-Lyne, Oldham, Warrington and Wigan, and only on non-complex claims from single people without children. It is supposed to be extended to existing claimants of the benefits it is replacing by the end of 2017, although the DWP has already said that this deadline is likely to slip, with transitional arrangements to protect them, but it is unclear what these will be and how long they will last.

So how will Universal Credit work and how does the Government think that it will cut the cost of welfare?

Unlike Working Tax Credit, Universal Credit is fully means-tested. It reduces if you or your partner's savings amount to over £6,000, and isn't payable if they're over £16,000. The rate at which payments are reduced if your working hours increase is also steeper than with Working Tax Credit. All payments will be monthly and paid directly to claimants, unlike Housing Benefit which until now has mainly been paid to landlords, supposedly to replicate the discipline of budgeting a monthly wage.

As well as reducing the amount payable to part-time workers whose hours increase, Universal Credit will also penalise self-employed people with low earnings. In addition to means-testing any savings they might have, they will be assumed to have an income from self-employment, equivalent to the minimum wage for the hours they work, of around £200 a week (many unemployed people have been transferred from JSA to Working Tax Credit in recent years by jobcentres and private providers encouraging them to turn hobbies into, often largely fictional, self-employed occupations, the former to reduce the number of people signing on and the latter to trigger target-based payments for getting claimants into work).

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