Flagship benefit reform has been watered down so much that it risks failing to achieve its original purpose, warns Resolution thinktank
The future of the government’s biggest public sector reform programme, universal credit, rests “on a knife edge” because Treasury cuts have reduced it to an exercise in cost-cutting, potentially leaving millions of working families worse off, experts have warned.
The original aim of universal credit (UC) – to encourage people to work more hours by letting them keep more of their low wage top-ups as their income rises – has been watered down so much that it risks failing to achieve its original purpose, according to the Resolution thinktank.
Resolution, which is chaired by the former Conservative MP Lord Willetts, urged ministers to “reclaim” the troubled policy from the Treasury by correcting its serious design flaws and improving its generosity to claimants.
“The suspicion is that UC has shifted from becoming a vehicle of genuine reform designed to improve jobs and and earnings prospects for lower income workers to a simple exercise in cost-cutting. Any shift must be reversed,” it said in analysis published on Tuesday.
It said the majority of low-paid working families would be “detrimentally affected” by Treasury changes to UC, even when other government policies such as the “national living wage”, cuts to income tax, and extra free childcare for three and four-year-olds are factored in.
On current projections, Resolution estimates that the 1.2 million families who are in receipt of tax credits will no longer be entitled to any help under UC, leaving them £41 a week worse off, while a further 1.3 million will qualify for UC, but will be an average of £46 a week worse off. About 2 million families will be £34 a week better off.
The report says: “Any ambition for supporting and rewarding work and progression looks very hard to achieve under the revised proposals. Indeed, even the welcome progress made over the last 15 years under the tax credit system is at risk of being dismantled.”