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| Universal credit to save taxpayers just 2% in spite of benefit cuts | Universal credit to save taxpayers just 2% in spite of benefit cuts |
| (about 1 hour later) | |
| Welfare scheme a ‘significant risk’ to public spending, warns Office for Budget Responsibility | Welfare scheme a ‘significant risk’ to public spending, warns Office for Budget Responsibility |
| Patrick Butler | Patrick Butler |
| Thu 25 Jan 2018 09.53 GMT | Thu 25 Jan 2018 09.53 GMT |
| Last modified on Thu 25 Jan 2018 11.01 GMT | |
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| Universal credit is on course to deliver only marginal taxpayer savings despite driving through huge cuts in benefit payments to many claimants, according to the Office for Budget Responsibility (OBR). | Universal credit is on course to deliver only marginal taxpayer savings despite driving through huge cuts in benefit payments to many claimants, according to the Office for Budget Responsibility (OBR). |
| The independent forecaster warned that even these relatively slender £1bn savings – amounting to just 2% of the social security budget – could be knocked off course if ministers were forced to reverse potentially unpopular cuts built into universal credit affecting tax credit recipients, disabled people and self-employed claimants. | |
| It said political uncertainties and problems with the design and implementation of the much-delayed project, currently around five years behind schedule, meant universal credit presented a “significant risk” to public spending. | It said political uncertainties and problems with the design and implementation of the much-delayed project, currently around five years behind schedule, meant universal credit presented a “significant risk” to public spending. |
| The OBR pointed out that some of the gross savings from universal credit were predicated on driving through cuts to relatively large numbers of families. The Resolution Foundation has said cuts to the generosity of universal credit will leave 1m working households an average of £2,800 a year worse off by 2022. | The OBR pointed out that some of the gross savings from universal credit were predicated on driving through cuts to relatively large numbers of families. The Resolution Foundation has said cuts to the generosity of universal credit will leave 1m working households an average of £2,800 a year worse off by 2022. |
| Public anger over cuts to tax credits, disability benefits, and changes to national insurance contributions for self-employed workers have driven the most significant government welfare policy U-turns in recent years. | Public anger over cuts to tax credits, disability benefits, and changes to national insurance contributions for self-employed workers have driven the most significant government welfare policy U-turns in recent years. |
| “The experience of past – typically smaller – welfare reforms is that they often take longer than expected to deliver, save less than anticipated and create political pressure to compensate losers,” the Welfare Trends report published this morning said. | “The experience of past – typically smaller – welfare reforms is that they often take longer than expected to deliver, save less than anticipated and create political pressure to compensate losers,” the Welfare Trends report published this morning said. |
| Universal credit is expected to consume around £63bn of expenditure by the time its rollout is completed in 2022-23, accounting for around two-thirds of working age welfare spending. Currently around 660,000 people claim universal credit, a number expected to rise to 7m. | Universal credit is expected to consume around £63bn of expenditure by the time its rollout is completed in 2022-23, accounting for around two-thirds of working age welfare spending. Currently around 660,000 people claim universal credit, a number expected to rise to 7m. |
| Although its aim of simplifying social security by rolling up six working-age benefits into one payment – including tax credits, housing benefit and jobseeker’s allowance – has attracted wide political support, it has been dogged by design and administrative flaws that have left poorer claimants homeless, hungry and in debt. | Although its aim of simplifying social security by rolling up six working-age benefits into one payment – including tax credits, housing benefit and jobseeker’s allowance – has attracted wide political support, it has been dogged by design and administrative flaws that have left poorer claimants homeless, hungry and in debt. |
| The OBR report states: “The move to universal credit has been – and remains – an enormous design and delivery challenge for the government, notably the Department for Work and Pensions (DWP). The rollout has already been delayed repeatedly. And universal credit is now designed to save money, relative to the legacy system it replaces, rather than to cost more, as in the original vision.” | The OBR report states: “The move to universal credit has been – and remains – an enormous design and delivery challenge for the government, notably the Department for Work and Pensions (DWP). The rollout has already been delayed repeatedly. And universal credit is now designed to save money, relative to the legacy system it replaces, rather than to cost more, as in the original vision.” |
| It adds: “A welfare reform of this scale and nature is also a huge forecasting challenge and a source of significant risk to the Treasury in terms of public spending control.” | It adds: “A welfare reform of this scale and nature is also a huge forecasting challenge and a source of significant risk to the Treasury in terms of public spending control.” |
| The OBR estimates that, based on the current design, universal credit will deliver £1bn of net savings to the social security budget by the time it is fully rolled out in 2022 – equivalent to just 2% of the total amount it would have spent on existing benefits had the new system not been introduced. | The OBR estimates that, based on the current design, universal credit will deliver £1bn of net savings to the social security budget by the time it is fully rolled out in 2022 – equivalent to just 2% of the total amount it would have spent on existing benefits had the new system not been introduced. |
| The system has made an estimated £11bn in savings, mainly through cuts to the generosity of universal credit – most notably through reductions to work allowances, which will save around £3bn, and the removal of £2bn in disability premium payments – but it has also incurred £8.5bn in expenses. | The system has made an estimated £11bn in savings, mainly through cuts to the generosity of universal credit – most notably through reductions to work allowances, which will save around £3bn, and the removal of £2bn in disability premium payments – but it has also incurred £8.5bn in expenses. |
| These include higher take-up of benefits – the “one-stop shop” nature of universal credit means that £2.5bn currently unclaimed by social security recipients who fail to take up all of the benefits they qualify for will be automatically paid – and £1.5bn in transitional protections for people moving over to the new system. | These include higher take-up of benefits – the “one-stop shop” nature of universal credit means that £2.5bn currently unclaimed by social security recipients who fail to take up all of the benefits they qualify for will be automatically paid – and £1.5bn in transitional protections for people moving over to the new system. |
| It said shortcomings with tools used to measure and monitor the progress of universal credit were “far from ideal”. Many elements of monitoring architecture are “opaque, poorly integrated and take too long to produce robust results”. | It said shortcomings with tools used to measure and monitor the progress of universal credit were “far from ideal”. Many elements of monitoring architecture are “opaque, poorly integrated and take too long to produce robust results”. |
| The report also undermines ministerial claims that universal credit will deliver improved job market outcomes. Although early trials suggest claimants are more likely than those on legacy benefits to move into work, or increase their earnings, the OBR points out that these “modest but positive” effects were based on older iterations of the system, not the more complex full system currently being rolled out. | The report also undermines ministerial claims that universal credit will deliver improved job market outcomes. Although early trials suggest claimants are more likely than those on legacy benefits to move into work, or increase their earnings, the OBR points out that these “modest but positive” effects were based on older iterations of the system, not the more complex full system currently being rolled out. |
| Universal credit | Universal credit |
| Benefits | Benefits |
| Office for Budget Responsibility | Office for Budget Responsibility |
| Budget deficit | Budget deficit |
| Economic policy | Economic policy |
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