Osborne Accused of Putting Universal Credit in 'Very Real Danger'

George Osborne is accused of putting universal credit in "very real danger" after freezing work allowances under the new benefits system for a further year to 2018. The chancellor said the generated savings would enable the government to invest £350 million in increasing the support on offer for childcare costs under the new benefits system.  But Alison Garnham, chief executive of Child Poverty Action Group, said “By cutting universal credit once again, the chancellor is in very real danger of torpedoing Iain Duncan Smith’s flagship policy. Freezing the work allowance will harm work incentives and hit low paid families hard. Two thirds of poor children live in working families; we should be redistributing help towards them, not away from them.” Read more on the CPAG website.

Failure of Universal Credit Would Leave Us with the Worst of Both Worlds

The principles behind Universal Credit need defending – otherwise we risk being left with the worst of both worlds.  While UC strengthens work incentives for some, other groups are not so well off in all circumstances. Families with children would hit a ceiling where, despite working more hours, steep withdrawal of benefits leads to a flat-lining or even a decline in disposable income after childcare costs. In some cases, families would be worse off working full-time than part-time. Many of the design and implementation issues can be solved. But, despite the often-sound principles behind UC, to make a real difference it needs to be linked to industrial and labour market policy to address the barriers that prevent some people from moving out of benefits and into work. This includes the prevalence of low low-paid, insecure jobs, a lack of affordable childcare, insufficient skills and discrimination against some groups in the labour market. Joining up UC to these other vital areas of policy would help it to succeed and encourage the support that it needs from across government. Read more on the Joseph Rowntree Foundation website.

Does Universal Credit Make Work Pay?

The political language of “making work pay” has barely changed since the early 1980s. Yet the realities have changed a lot. Billions poured into tax credits have helped improve returns for going out to work, as has a long-term decline in Income Support rates. Tax credits have helped make work so worthwhile that in the recent recession, there was almost no rise in the number of families without anyone in paid work, unlike in previous recessions. And Universal Credit will go further by removing any hours rules, so that even people working just a few hours a week will be better off than not working. But this help has shifted the work incentive problem. Since in-work support disappears as you earn more, many families with low wages and high childcare costs now find that they are little or no better off working five days a week than working one or two days.  Read more on the Social Policy blog.

Welfare Reforms Will Penalise Working Families

High childcare costs mean the poorest parents could effectively be paying to go to work once the government’s welfare reforms are introduced, a report by the charity Barnardo’s has found. Universal Credit will only provide parents with financial support for up to 70 per cent of their childcare costs.  According to analysis by the charity, a single parent with two pre-school aged children earning the minimum wage in London will be forced to pay £1.61 more than they earn for each hour of childcare, if they work 28 hours or more a week. The same parent in Yorkshire and Humber would have to pay out 50p an hour. The report also found that lone parents with only one young child look set to lose a substantial amount of their pay, potentially only gaining an average of £1.10 an hour for each additional hour they work between 16 and 24 hours a week.  Download a copy of the report - Paying to work: childcare and child poverty – from the Barnardo’s website.