From the TUC

Universal Credit could cut poverty – but only if the government will spend money on it

20 Jun 2013, by Guest in Society & Welfare

Ask the government about the poverty impacts of its austerity programme and the answer is always the same: universal credit, the new in- and out-of-work benefit that will be rolled out from October this year, is here to save the day.

But will it? Last week’s new child poverty figures showed that 2.3 million children currently live in poverty in the UK. By the government’s own admission, universal credit (UC) will reduce this by a meagre 150,000 once it is fully implemented – which on current plans will not be until 2017. But this reduction is largely based on improved take-up as it is assumed more families will access their full entitlement once they need make one, rather than multiple, claim for support.

That’s pretty underwhelming but it’s worth acknowledging that UC does have a tough job to do. We know, for example, that many other government policies – most notably the chancellor’s recent decision to uprate key benefits and, in the future, UC at a sub-inflation 1% – are poverty-producing, not poverty-reducing. UC, then, is swimming very much against the tide.

As a result, and after all the upheaval, we are left with a new benefit whose poverty reduction claims are most likely overblown. However, new government figures released in a series of Parliamentary Question answers yesterday showed that it doesn’t have to be that way.

In fact, changing key UC parameters – such as the value of the child elements or the limit up to which families can retain earnings – would have significant poverty-reducing effects. The answers show, for example, that increasing the child elements of UC by 15% would decrease child poverty rates by two percentage points. That sounds like a small effect, but with 13 million children in the UK, this single change would result in 260,000 fewer children growing up in poverty. That would almost triple UC’s poverty impact overnight.

The problem, of course, is that such changes cost money. But as research has shown recently, reducing child poverty has its own economic pay-out (currently estimated at £29 billion a year), alongside the infinitely valuable relief of human suffering. If those in charge of resourcing UC are prepared to take the long view, the poverty-reducing potential of the new benefit could be leveraged significantly. We’ll watch the spending review with interest…