Universal Remedy: Ensuring Universal Credit is fit for purpose

The full Universal Credit (UC) system is now being initiated at scale across the UK and will continue to roll out across Northern Ireland over the coming months.

Resolution Foundation has published research that warns the government of the danger posed by certain system design flaws which will create major challenges for the very low and middle income families UC was created to help. Resolution Foundation makes a series of recommendations, which identify these current design problems, and urges the government to rectify them as part of a relaunch of UC.

Key findings

• Cuts to UC mean it is set to be almost £3 billion a year less generous than the tax credit system it replaces. As a result, it will leave working families an average of £625 a year worse off. However, this masks a significant mix of outcomes across family type.
• The report notes that paying benefits monthly in arrears may work for those with steady jobs, but the timing of benefit payments needs to be more flexible to fit the diverse needs of different families. Analysis, using actual bank transaction data, shows that the majority (58%) of new claimants moving onto UC after leaving employment in the last tax year were paid either fortnightly or weekly in their previous job.
• The net impact on all two-parent families in work is broadly neutral, though 1.1 million will lose an average of £2,770 a year.
• Working single parents lose out, by an average of £1,350 a year. Almost twice as many lose (0.7m) as gain (0.4m), losing almost twice as much (£2,955 average annual loss v £1,600 gain).

Recommendations

The first of the research’s recommendations has now been actioned, with the scrapping of the seven day waiting period announced in the Autumn Budget 2017.

Other key recommendations are:

• a faster payment of housing support
• a simplified process for claiming childcare support
• reinvestment of £3 billion a year into in-work support to ensure at a minimum parity of overall generosity with the tax credit system