Universal Credit will go ahead

Further plans to overhaul the benefit system announced today aim to provide greater incentives for people to return to work and also create further sanctions for those reluctant to take up opportunities for work where these exist.

The white paper on Welfare Reform aims to simplify the benefits system into one Universal Credit. The aim is to address the ‘poverty trap’ and make work pay. Penalties for not accepting work and proposals for compulsory voluntary work are also likely to be implemented between 2013 and 2015.  A sliding scale of sanctions will see those refusing work on three occasions having their benefits taken away for three years.

Changes already announced in the June Budget and the ensuing Comprehensive Spending Review will reduce the level of some existing benefits and appear to be creating further obstacles to getting in-work benefits like Working Tax Credit.  For example, a couple with children will have to work at least 24 hours per week in order to claim the benefit from April 2011. The amount of tax credits will be reduced slightly for all who claim and the 50 plus element is to be abolished.

Interestingly, a report by the Joseph Rowntree Foundation has suggested that the gap between the minimum wage and income needed for a basic household budget has widened. An adult on the minimum wage would have to work 40 hours per week to receive an annual gross pay of £12,334. However, the estimated ‘minimum income standard’ to afford a socially acceptable standard of living is £14,400 per year.

Citizens Advice gave an initial cautious welcome to the more simplified benefit system. However, after the announcement to reduce current in-work benefits we are concerned about the resulting amounts of benefit people will be expected to live on. To date the coalition Government has not provided any figures on how the Universal Credit will be calculated and we will be monitoring this closely during the consultation process.

Current sanctions and expectations required of jobseekers are already quite thorough so these additional moves are less likely to alleviate unemployment and are more likely to create further obstacles to claiming benefits.

For full details of the benefits affected click on our Factsheet Welfare Changes here