Universal Credit is not going to be the coalition’s poverty fig-leaf
A new report published today shows that Universal Credit is not the answer to rising poverty the government hoped. The evidence that poverty and inequality are set to rise substantially by the next election has been accumulating for some time: in 2011, the Institute for Fiscal Studies calculated that, by 2015-16, the coalition’s policies would have increased the number of children in relative poverty by 200,000 and the number of working age adults by 200,000.
Since then we have had the Welfare Benefits Uprating Act and the government itself estimates that the 1 per cent uprating cap in 2013/14 – 2015/16 “will result in around an extra 200,000 children being deemed by this measure to be in relative income poverty compared to uprating benefits by CPI (consumer price index)”.
In response, coalition politicians have two defences: Universal Credit and the increased income tax personal allowance. Will Universal Credit Work?, written for the TUC by Lindsay Judge of the Child Poverty Action Group, is an honest and open look at Universal Credit.
It isn’t a hatchet-job – the report points to the strengths of the new benefit as well as the problem areas. Some groups, especially people doing just a little paid work, will be significantly better off.
But the problems are going to be substantial:
- Thousands of disabled people will lose from the abolition of the Child Tax Credit’s disability element, the Working Tax Credit’s Disabled Worker Element and the Severe Disability Premium. People losing any of these will be more than £50 a week worse off.
- All claims for Universal Credit will be on-line, causing extra problems for vulnerable people with no or limited internet access. And there are worries that the IT system Universal Credit runs on is very fragile.
- We know that families are more likely to be able to escape poverty if they have more than one earner, but two-earner families are among the biggest losers from Universal Credit. Will Universal Credit Work? reveals that 94 per cent of two-earner couples with children will be worse off under Universal Credit than they would have been if the old system had been kept.
- Lone parents will lose heavily too – 75 per cent of working lone parents and 91 per cent of those not working will be worse off.
There are some people on very low incomes who will gain from Universal Credit, some of them substantially, But the report draws on research for the TUC by Landman Economics that shows that, right across the income distribution, at every level, there are more people losing out than gaining:
The TUC has already looked at the claim that the increase in the personal tax allowance rescues the coalition’s reputation for caring about poverty. In March, we published A Bleak Future for Families, showing that the people with low incomes gain much less than better off people from this policy.
And, of course, the personal tax allowance isn’t the only coalition tax policy. For people on low incomes, the increase in VAT to 20 per cent is at least as significant and politicians who emphasise the higher personal allowance often forget to mention the 1 percentage point increase in employees’ National Insurance Contributions. Taken together, the coalition’s tax policies have made all income groups worse off; but, as a proportion of their income, the poorest groups have lost most:
On poverty, the government looks exposed. Universal Credit is a less and less credible fig-leaf.