Ministers will be warned today that families could lose £3,000 per year under Universal Credit.
A report by the Resolution Foundation, an independent think tank, claims that the scheme, which has been constantly delayed and plagued with problems, has been altered so much that it no longer serves its purpose of encouraging people into work.
The analysis arrives as Stephen Crabb, the Secretary of State for Work and Pensions, launches the next stage of Universal Credit, which will extend the scheme to families and couples.
Universal Credit combines six benefits into one monthly payment. Landlords should note that under the scheme, housing benefit is no longer paid to them directly, but becomes the tenant’s responsibility.
Until now, the scheme has only applied to single people. From today, it will be rolled out to families in several regions throughout the country, including Bath, Newcastle, Rugby, Inverness and Hammersmith.
Under the current timetable, the scheme will be completely rolled out by 2021, by which time almost half of all families with children will be entitled to benefits. Crabb reports that 450,000 single people have made a Universal Credit claim so far, with more than 9,500 new claims made every week.
However, the Resolution Foundation – whose chairman is David Willetts, the former Conservative cabinet minister – will argue today that decisions to cut work allowances and defer cuts to working tax credit have made the new scheme less attractive to potential employees. It calls on Crabb to boost work incentives, particularly for second earners in a family.
The report states: “Unless changes are made, it [Universal Credit] risks being reduced to little more than a very complicated vehicle for cutting the benefits bill.”1
The think tank has calculated that around 2.5m families will lose an average of £41 per week, while about two million households will gain £34 a week. The majority will gain or lose between £10-£50 a week, but a small minority could lose up to £100 per week. The new system particularly reduces work incentives for single parents and second earners in couples, according to the Resolution Foundation.
The shadow work and pensions secretary, Owen Smith, comments: “This report confirms the devastating impact of Tory cuts to Universal Credit… completely undermining the work incentives that were supposed to be at the heart of Universal Credit.”1
Many concerns have been raised about Universal Credit, with changes to the way housing benefit is paid causing worries for landlords. It has been reported that some tenants are being forced into long-term debt by the crossover times between the old and new systems.
If you are worried about changes to your tenants’ financial circumstances, remember to protect your rental income with Rent Guarantee Insurance.