Universal credit will hit low-income families, charity warns

http://www.guardian.co.uk/politics/2012/oct/30/welfare-benefits

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The government's flagship welfare policy could leave working people with less cash and increase the complexity of the benefits system, despite ministers' promises that it would be a simpler alternative with no losers, a report by an influential charity has said.

From next year new claimants will get a single payment instead of a series of different ones. The coalition's big idea is to put out-of-work benefits, tax credits and housing benefit into a single benefit for working-age people called the "universal credit".

This single credit, the biggest shake-up in benefits for a decade, will consist of a basic personal amount – with additional elements for disability, caring responsibilities, children and housing costs.

But the Joseph Rowntree Foundation (JRF) says "while the new system does incentivise more people to take 'mini-jobs' – those less than 16 hours per week – it does not encourage the crucial next step into full-time work". Many families could also lose benefits such as free school meals and free prescriptions as their earnings rise.

In its report the foundation says many poor people will be "left to deal with a more complex benefits system than before". It warns that a simple shift from fortnightly to monthly payment in arrears has already raised concerns that low-income families will run out of money before the end of each month.

"Recipients may have to borrow money to bridge the gap, leaving them to start their universal credit claim in debt … it may create an unfair bias against women, with child-related support not necessarily reaching the children it is intended for."

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."

One the main concerns is that the computer systems needed to link millions of payment records, held by tax officials, with benefits, held by benefits agencies, will be too complicated to work in time. The report says: "The DWP is confident that the systems will be ready in time for implementation, despite concerns among IT experts that the timetable is unrealistic".

Tony Wilson, policy director at the welfare thinktank Inclusion, added: "Successive governments have had chequered histories in delivering major benefit reforms. In less than a year, we will start the biggest yet – affecting more than 10 million families nationwide. This report shows it is not too late to get it right."

Labour said the government "must stop pretending there isn't a problem and actually start listening, otherwise universal credit is going to end as a policy that is dead on arrival".

Liam Byrne MP, Labour's work and pensions secretary, said: "Universal credit is becoming a multiple pile-up of problems to which David Cameron and Iain Duncan Smith appear completely incapable of bringing any sense.

"This was supposed to be the silver bullet that was going to end welfare dependency, but now the policy is spinning out of control and world respected organisations like JRF are joining the chorus warning universal credit simply won't be fit for purpose.

The Department for Work and Pensions said 2.8 million people would be better off under the new scheme. "Universal credit will help millions of people by making them better off in work than on benefits. People will have their level of benefit protected when they move onto universal credit, and the £300m spent on extra childcare support will allow more families to move into work.

"We know that people on low incomes manage their money well, but we have always said we would be flexible with people who might struggle and will ensure they get the support they need."