The impact of Universal Credit will be felt very differently in different places, according to new research by the Resolution Foundation which has been published today. The “Long and winding road” report notes that the new parliament will be a “critical period” for the roll-out of Universal Credit, with two-thirds of the six million families who will eventually be on Universal Credit moving across during this parliament.
The final phase of the roll-out involves the transfer of existing benefit and tax credit claimants onto Universal Credit, which the think-tank said is due to start later this year.
A pilot scheme for the movement of existing legacy benefits claimants who have not had a change in circumstances is currently taking place in Harrogate, North Yorkshire.
The Resolution Foundation notes that following welcome reforms, which include the recent £1,000 boost to work allowance, the benefit is set to be “slightly more generous” than the legacy system it is replacing – provided take-up gains are achieved.
Changes to the work allowance levels which came into effect from April 2019, means Universal Credit recipients have since been able to earn an additional £1,000 a year before their Universal Credit is affected.
Universal Credit is replacing six types of legacy benefits in the UK
It said families are set to receive £1 a week more on average.
That said, the left-leaning think-tank suggested the average figure “masks sizeable groups of families” who gain and lose out by large sums, in addition to significant geographical variation across the UK.
The report found that some parts of the country “will be left significantly worse off” as the switch to Universal Credit goes ahead.
Factors cited include local rent and earnings levels, and the characteristics of local populations.
The research found that in the Liverpool City Region (LCR) – which is one of the areas that has experienced the biggest Universal Credit roll-out so far, and in which a higher proportion of working-age families will end up on Universal Credit (31 percent) than across the country (compared to 24 percent) – just 31 percent of families will be better off under Universal Credit.
This compares to 52 percent who will be worse off in the region, the Resolution Foundation said.
In comparison, the national average is 46 percent losing out, and 39 percent gaining.
According to the Resolution Foundation, the difference is largely driven by the fact that LCR has a “relatively high proportion of single parents, out-of-work single people and disabled people, all of whom fare badly under Universal Credit”.
Furthermore, Universal Credit’s greater generosity towards working families with high rents has less impact in this region, which has below-average rent levels.
The Resolution Foundation has carried out in-depth interviews in LCR, focusing on recipients’ experiences of various aspects of the new system.
And, while those with IT skills valued Universal Credit’s digital focus, many said that the five-week wait for the first payment had put them under significant financial and mental stress.
Some reported that this wait had forced them to use food banks, and worsened existing mental health issues.
Others reported problems with the childcare element of Universal Credit, despite it being more generous than tax credits, the Resolution Foundation said.
Universal Credit UK: A pilot scheme for the switch for those who have not had a change in circumstances is taking place
Among the interviews, one single parent explained that paying childcare costs up front was hard, and said that reimbursements could be withheld if they forgot to obtain receipts on time.
Furthermore, the interviews revealed a “variable understanding” among recipients of exactly how taking on more work would affect their incomes.
Laura Gardiner, Research Director at the Resolution Foundation, said: “Welcome recent reforms mean that Universal Credit is now set to be marginally more generous than the benefits it is replacing.
“But this average hides a complex mix of winners and losers, with families in some areas of the UK faring particularly badly.
“As well as making reforms at a national level – such as helping families to overcome the first payment hurdle and offering more flexibility for those with childcare – policy makers across the country need to better understand the effect Universal Credit will have in different places.
“That understanding should be central to policy debates that are rightly focusing on what can be done to close economic gaps between parts of the UK.”
Steve Rotheram, Metro Mayor of the Liverpool City Region, said: “Universal Credit has made life miserable for some of the most vulnerable members of our society.
“It is time that the government listens to the warnings from by frontline staff and reports, like this from the Resolution Foundation, and implement serious reforms to make our welfare system more humane.
“Rather than penalising people for finding work and forcing them into crisis with the five week wait for a first payment, it should be reformed to offer a genuine safety net to struggling people.”
A DWP spokesperson said: “Universal Credit supports more than 2.7 million people across every part of the country, introducing tailored support to replace a complicated old system.
“This report rightly recognises improvements we’ve made, like boosting work allowances for some families to £1,000 and making it much easier to apply online.
“People can find out how Universal Credit could help them at the Understanding Universal Credit website.”
The Resolution Foundation has said that now is the time for the government to make “vital improvements”. It proposed reforms, to take place at a national level, which should include “helping families overcome the first payment hurdle”.
The report authors added:
- “The government should increase the proportion of new claims paid on time and in full; help families overcome the first payment hurdle by testing approaches like an interim payment for certain groups and backdating the start of claims; and carry the financial risk from late payments.
- “Ensuring UC fits better with the lives of those who need it. In particular, reforms are needed to make the generous childcare support in UC more flexible and easier to navigate.
- “Making UC more female-friendly. Boosting work allowances for single parents and second-earners would boost their work incentives and increase household incomes.”
The think-tank also said that policy makers need to consider the impact of Universal Credit at a local level.