Many will be worse off under Universal Credit

By Nicola Smith | Published: November 15, 2010

Last week’s welfare reform white paper included the following graph, claiming to show that “many households will receive more under Universal Credit than under the current system”:

Average-long-run-impact-by-decile-from-Universal-Credit-reform

At first viewing, the graph does appear to show small weekly gains for those in lower income deciles, and insignificant losses for those higher up the income distribution. But all is not as it seems. Left Foot Forward has now ascertained that:

• The graph compares household income in 2014/15 after the introduction of Universal Credit with what household income would be in 2014/15 after the impacts of the welfare cuts outlined in the Chancellor’s June Budget are taken into account.

These cuts included the linking of benefits to CPI (rather than RPI); significant Housing Benefit cuts; and significant Tax Credit cuts. Some claimants will be better off under UC than they will be after the cuts, but many will be worse off under UC than under the current system before the cuts.

• The graph does not include childcare costs. These costs are significant, paying upwards of £10,000 for low-income working families with more than one child.

Given that the Spending Review cut eligible childcare payments by 10 per cent, and that the White Paper warns of further reductions in childcare costs for working families, leaving these costs out of a better-off analysis seems confusing.

• The graph includes all households in the UK, not just those who are claiming benefits or Tax Credits. While most people in the bottom deciles will be receiving benefits or Tax Credits, most people in higher deciles will not (where it is only households with children who receive significant levels of Tax Credit support).

Amalgamating all households in this way arguably distorts the graph – making the losses among middle earners seem far lower than they will be (as including households for whom there is no change – i.e. they continue to receive nothing – distorts the average).

• If the graph was based on an analysis comparing the current system with Universal Credit, if it only considered households in receipt of benefits and Tax Credits and if childcare costs were included, it would show a very different picture. Gains would be far less – and many would be shown to lose significantly.

Important questions remain unanswered about what the real impacts of Universal Credit will be, and exactly which benefits and Tax Credits are being included or excluded from its reach. A Government committed to transparency should be willing to provide more details, and to be clearer about the impacts their changes will have for households across Britain.

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  • Anon E Mouse

    Nicola Smith – Since you conclude by saying “Important questions remain unanswered about what the real impacts of Universal Credit will be, and exactly which benefits and Tax Credits are being included or excluded from its reach”

    If that is the case then how can you title this article “Many will be worse off under Universal Credit”? Your final statement shows you do not know it that is true or not.

    And while I’m at it will you please STOP putting a comma before “and” or “but”…

  • http://www.touchstoneblog.org.uk Nicola Smith

    Hi Anon – always happy to try to improve by grammar but (no comma) can’t agree with you on the first point. The cuts that are being implemented to housing benefit alone are shown by DWP stats to cost families on average £12 a week (http://www.ssac.org.uk/pdf/housing-regulations-2010.pdf). The chart above shows that the greatest average gain under UC is less than £5 a week. There will inevitably be more losers than the chart shows as the impact of the June Budget (compared to the current situation) is to create a lot of losers.

    My final point stands alone – we know there will be more losers than the chart suggests. But what we won’t know is whether there will be even more than we can currently concieve of as benefits and Tax Credits that have not been specified are incorporated into UC (for example what is going to happen to childcare and to Carers Allowance?).

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  • Anon E Mouse

    Nicola – Nice reply re. the comma ;-}

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  • Anon E Mouse

    Nicola – Isn’t the point though that the benefit will be “Universal” eventually?

    We don’t know for sure until 2015 actually since not all benefits are going to be initially included but I must say even Evan Davis at the BBC gave up counting at 32 different benefits so I do think it’s high time the thing was sorted out.

    Whether people will be same or worse off I don’t know but it will be easier to award, easier to uncover fraud and cheaper
    overall…

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  • http://www.touchstoneblog.org.uk Nicola Smith

    Hi Anon,

    In my view the name is deceptive. Benefits and Tax Credits are currently ‘universal’ in so far as those with low enough incomes are entitled to receive them, but this benefit will be ‘universal’ in name but far more tightly means tested in practice. We know now that lots of people will be worse off. Even the DWP’s own misleading graph shows that people in decile 6 and above will lose. These people are not high earners – people in decile 6 and 7 earn live on household incomes of under or around £30k a year.

    Nicola

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  • Super-Pedant

    I hate to cause trouble, but (after commma) if the two phrases could normally be standalone there *should* be a comma.

  • http://wjshgenius@talktalk.net william

    The facts. The welfare budget is being cut,and it’s implementation simplified.It follows that a significant proportion of existing recipients receive less.Why should people earning c£30k or more receive anything?I thought welfare was for the accidental poor,not the’ All of you rely on the state ‘ Gordon Brown view of the state that cost Labour 100 seats at the last election.

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  • Mr. Sensible

    Well I think these figures tell us a story…

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  • Anon E Mouse

    Mr.Sensible – Note what william above states. The story these figures show us is that by benefits, such as child benefit for multi millionaires and the like, cost Labour 100 seats at the last election.

    Take note Mr.Sensible. You may live in a nice house in a posh area but poor people get the vote as well and if Labour wants to govern this country again it needs to reach out to everybody regardless of circumstance. It’s what Mr Blair did…

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  • Mr. Sensible

    Mr Mouse I just think that you are wrong.

  • Anon E Mouse

    Mr.Sensible – No you don’t. You know I’m right but your dogmatic blind zombie like loyalty to a failed useless bunch of liars that were Labour means you are unable to “think outside the box”.

    Before the election you were telling me how great you thought Gordon Brown was – an electoral asset practically – and what I predicted about him being booted out was correct. All I hadn’t got right was Labour’s worst election result since Michael Foot was in charge and the loss of 5 million voters in a decade.

    What the left need to do Mr.Sensible is LISTEN to your leader, Ed Miliband.

    He said you need renewal and he’s right. If you think your view of Labour is correct ask other Labour supporting members of this blog if they support your view on freedom of speech for example…

  • Chris

    @william

    “Why should people earning c£30k or more receive anything?”

    That would be a household income of £30k.

    Redistribution of income from top earners to lower and middle income earners. To promote family and recognise the cost of children. Social solidarity, if everybody puts something into the welfare state then everybody should get something out.

    @mousey the tory press officer

    “You know I’m right”

    Again mousey just because in your drug addled mind you think your right doesn’t make it so in reality.

    “what I predicted about him being booted out was correct. All I hadn’t got right was Labour’s worst election result since Michael Foot was in charge and the loss of 5 million voters in a decade.”

    Yeh, like nobody else foresaw Brown losing the election. FFS Michael Portillo predicted that Brown wouldn’t be liked by the electorate in 2007 before Brown even became PM. And Labour lost 4 million votes from 1997 to 2005, disillusionment with Labour came well before 2007.

    “What the left need to do Mr.Sensible is LISTEN to your leader, Ed Miliband.”

    Ed supports the universality of child benefit.

    “If you think your view of Labour is correct ask other Labour supporting members of this blog if they support your view on freedom of speech for example…”

    I don’t know what Mr Sensible’s view on freedom of speech is but I generally agree with his comments.

    Now go and play in the traffic with your sock puppets.

  • http://wjshgenius@talktalk.net william

    Well, calm down boys,and you in particular,Chris.The cake is only so big.Prop up the accidental poor is not an issue between all three political parties.You will not win an election based on taxing the working middle class of england, only to give them back a small proportion in 32 types of made in fife, i abolished the cycle, benefits.A certain Mr. Blair spotted that.

  • Anon E Mouse

    Chris – Public forum. People watching. You telling lies and smearing people. Sound familiar?

    Stop the strawman on me please: I said “What the left need to do Mr.Sensible is LISTEN to your leader, Ed Miliband.” and continued “He said you need renewal and he’s right.” – I never mentioned Universal Credit in relation to Miliband.

    My point was he understands the need to renew the party – losing elections usually has that effect – but it seems that New Labour Lickspittles like yourself clearly don’t…

    Stop lying about things you say I’ve said please.

  • Chris

    “My point was he understands the need to renew the party – losing elections usually has that effect – but it seems that New Labour Lickspittles like yourself clearly don’t…”

    Moron, I voted and canvassed for Ed during the leadership election precisely because he said we needed to get away from New Labour. Your the one that said only DM would and should win.

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