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Poorest 400,000 families worse off under universal credit, finds report Poorest 400,000 families worse off under universal credit, finds report
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Hundreds of thousands of low-income working families will be worse off, and in many instances cannot improve their condition by increasing the hours they work, under the government's flagship universal credit scheme, a report has said.Hundreds of thousands of low-income working families will be worse off, and in many instances cannot improve their condition by increasing the hours they work, under the government's flagship universal credit scheme, a report has said.
The Chartered Institute of Housing said on Thursday that 400,000 of the country's poorest families – among them those in poverty and on the minimum wage – will have less income in 2015 than they did in 2010, despite ministerial assurances that no one would lose out under its plans. The CIH calculations show that "the government's aim for households to be better off in work than out of work under universal credit is not the case for all families."The Chartered Institute of Housing said on Thursday that 400,000 of the country's poorest families – among them those in poverty and on the minimum wage – will have less income in 2015 than they did in 2010, despite ministerial assurances that no one would lose out under its plans. The CIH calculations show that "the government's aim for households to be better off in work than out of work under universal credit is not the case for all families."
Universal credit, which will replace six of the seven main means-tested benefits and tax credits for those of working age, is due to be rolled out over the next five years. Pilot projects will start in spring and it is planned to start nationally next autumn.Universal credit, which will replace six of the seven main means-tested benefits and tax credits for those of working age, is due to be rolled out over the next five years. Pilot projects will start in spring and it is planned to start nationally next autumn.
The report says households that earn £247 or less a week will see a fall in real income in 2015, and lone parents with up to three children will always be worse off if universal credit remains in its current form.The report says households that earn £247 or less a week will see a fall in real income in 2015, and lone parents with up to three children will always be worse off if universal credit remains in its current form.
Grainia Long, CIH chief executive, said: "This is a critical time – 400,000 of the lowest earning working households in the UK could see a real drop in income under universal credit. Changes to address this need to be made now. The principles underpinning universal credit are the right ones, but as our report sets out, it is imperative that the detailed design of universal credit ensures that low-income working families are not disadvantaged."Grainia Long, CIH chief executive, said: "This is a critical time – 400,000 of the lowest earning working households in the UK could see a real drop in income under universal credit. Changes to address this need to be made now. The principles underpinning universal credit are the right ones, but as our report sets out, it is imperative that the detailed design of universal credit ensures that low-income working families are not disadvantaged."
According to Sam Lister, head of policy at the institute: "All those on minimum wage and officially in poverty lose out. Also all lone parents – it does not matter what they earn: lone parents across the piece lose out under the current form of universal credit. We want the government to rethink the measures."According to Sam Lister, head of policy at the institute: "All those on minimum wage and officially in poverty lose out. Also all lone parents – it does not matter what they earn: lone parents across the piece lose out under the current form of universal credit. We want the government to rethink the measures."
The complexity of the scheme means "single people aged under 25 across the whole income range will be better off than under the 2010 system," Lister said, adding that this might explain why Conservative ministers talk about removing housing benefit from young people.The complexity of the scheme means "single people aged under 25 across the whole income range will be better off than under the 2010 system," Lister said, adding that this might explain why Conservative ministers talk about removing housing benefit from young people.
Other CIH calculations show that most two-children families with a single earner who makes less than the living wage will be worse off under universal credit, while couples with three children will be worse off if their earned income is less than £300 a week. Assuming a weekly rent of £80, childless couples always benefit while a couple with one child needs to earn £292 a week before the new scheme would boost their incomes.Other CIH calculations show that most two-children families with a single earner who makes less than the living wage will be worse off under universal credit, while couples with three children will be worse off if their earned income is less than £300 a week. Assuming a weekly rent of £80, childless couples always benefit while a couple with one child needs to earn £292 a week before the new scheme would boost their incomes.
The report said the proposed structure of universal credit runs counter to the idea underlying the scheme – that work should pay for the poor. It notes that "a single earner with a partner and two children cannot make themselves better off under universal credit than they would have been under the pre-reform system by increasing the number of hours they work – they would need to get a much better paid job." The report said the proposed structure of universal credit ran counter to the idea underlying the scheme – that work should pay for the poor. It noted that "a single earner with a partner and two children cannot make themselves better off under universal credit than they would have been under the pre-reform system by increasing the number of hours they work – they would need to get a much better paid job."
The Department of Work and Pensions said the report was flawed, pointing out that there was transitional relief to ensure no one would lose out under universal credit - unless their circumstances changed. The government is investing an additional £300m into childcare support on top of £2bn already spent under the current system. This will mean that around 80,000 families with children benefit from childcare support for the first time.
A DWP spokesperson said 2.8 million households will be better off under universal credit, with around 80% of these households in the bottom 40% of the income distribution. "These claims ignore that fact that universal credit will make millions of people better off, including 700,000 lone parents and 400,000 working people currently ineligible for working tax credit. People will also see their level of benefit protected when they switch to the new benefit."