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September 21, 2012 / politicsbitesize

Universal Credit

The Work and Pensions Secretary, Iain Duncan Smith, revealed on Monday 17th September that his initiative to reform the British welfare system will now go ahead.  In one of the biggest changes to welfare in decades, Mr Duncan Smith will introduce Universal Credit in 2013, which he claims will be much simpler to administer than the current arrangement.   Under the new system one single payment will be paid monthly to people who are looking for work or on a low income.

Universal Credit will replace a myriad of other benefits such as: income-based Jobseeker’s Allowance, income-related Employment and Support Allowance, Income Support, Child Tax Credits, Working Tax Credits and Housing Benefit.  At present all of these benefits are paid separately to each individual who is entitled to them, but under the new system they will be rolled into one monthly payment.

Critics of Universal Credit have identified a number of areas for concern.  Family Action gave evidence before the Work and Pensions Select Committee in order to aid the inquiry into the pros and cons of the new system.  The concerns raised focussed on how the rolling of several different benefits into one, and the single monthly payment, could cause difficulties for many families.  According to the results of research conducted by Family Action, the lumping of many separate benefits into one could result in catastrophe for some families if the circumstances surrounding one element (such as Working Tax Credits) changes.

Under the current system, if you are in receipt of, say, Tax Credits, Housing Benefit and Child Benefitand your hours at work increase (and therefore your wages increase), the Tax Credit payment could stop, but the other payments would continue.  At the Work and Pensions Select Committee meeting, Family Action raised the concern that if one of the components that make up the Universal Credit payment stops, they all stop.  The group also voiced anxieties about the ability of some families to budget on a monthly income, which may be particularly true for parents with mental health problems.

When he gave evidence to the Work and Pensions Select Committee on Monday, Mr Duncan Smith was warned by Anne Begg, who chairs the committee, that ‘there is huge concern about monthly payments. There are going to be people who don’t manage their monthly payments. What arrangements are going to be in place for those people?’ The Minister’s response was to insist that by paying people monthly it was preparing them for the world of work, where 75% of employees’ wages are paid in such a manner.

Beginning in April 2013, the Department for Work and Pensions and HMRC will deliver a pilot scheme in certain areas of the north-west of England in order to ensure that the system is ready to be rolled out across the rest of the UK later in the year.  By October 2013, existing claimants of the benefits mentioned above will be moved onto the new system with a phased approach, whilst new claimants will only be able to claim Universal Credit.  The aim is to have the process completed by 2017.

The image is taken from the front cover of the book Universal Credit: what you need to know, published by the Child Poverty Action Group and can be bought from their website for £10: http://www.cpag.org.uk/bookshop/uc

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