Welfare Study shows 1.2 million workers face threat to benefits under Universal Credit 5 October 2012 A study published today (5 October) by the Resolution Foundation finds that almost 1.2 million low-paid workers entitled to support under Universal Credit will have to look for extra work or face the risk of having payments withdrawn. The report reveals for the first time how many working people are likely to be affected by a new regime which will require the lowest-paid to show that they are unable to push up their wages any further. Under Universal Credit, which combines benefits and tax credits into a unified payment, conditions will be set on payments to many working claimants who earn less than the weekly equivalent of the minimum wage – £212.80 for a single person. They will be expected to demonstrate that they are making every effort to rise above this earnings threshold, by finding better-paid work, increasing their hours or taking on an extra job. It is the first time that this ‘conditionality’, already applied to claimants of unemployment benefit, has been extended to include people who are in work. The change is being made at a time of chronic national under-employment. There are 1.4 million people working part-time because they are unable to find full-time work – compared to 0.5 million in 2004. The Resolution Foundation report, Conditions Uncertain, suggests that this aspect of Universal Credit could pose a major new challenge to Jobcentre Plus. It represents a large expansion of the existing caseload for advisors who already handle more than 1.5 million unemployed people claiming Jobseeker’s Allowance. The report questions how fair and rigorous the system can be without extra resources for the service, which has a current budget of £2.4 billion. The report uses a model of how Universal Credit will apply to the UK population to predict that almost 1.2 million workers will be affected by ‘in-work conditionality’. As far as possible it seeks to replicate the criteria that the Department for Work and Pensions (DWP), which oversees Universal Credit, is expected to use. The report assumes that a number of exemptions and amendments will be made to reflect personal circumstances, covering carers, parents, and people with physical impairments for instance. Working claimants will be expected to try and meet a higher earnings threshold through a combination of measures that can include: Increasing their hours or their hourly wage with their current employer. Finding one or more additional jobs that they can do alongside their current job. Finding a new job with a higher income. The DWP says that introducing conditionality for working people will: “encourage or push claimants, including some of those working a few hours a week, to work more and reduce their dependency on benefits. This will enable us to apply full work-related conditionality, where we consider that appropriate”. [1] It has not yet said what type and level of checks will be made on working claimants or what sanctions will be taken against people who fail to meet the conditions. Unemployed claimants can face losing payments for three months (or longer for repeat offences) for failing to accept a reasonable job offer, apply for a job or undertake mandatory work placements. Gavin Kelly, chief executive of the Resolution Foundation, said: “Given record levels of under-employment it is a worrying time to be introducing a new system of rules that could result in benefits being withdrawn from low-earners if they can’t secure more hours of work. The introduction of conditionality for a large swathe of working people is totally uncharted territory for DWP – they need to think very carefully about how it will be introduced and whether this can be done in the current economic climate. “We’re surprised that the government has not published estimates of how many people will be affected by this substantial change or given detail on how it will work. There are pressing questions about what the conditions for working people will be. Will they need to attend regular interviews with case workers and, if so, does an already stretched Jobcentre plus have the capacity for this? “Or will there be a lighter—touch approach? In which case there must be doubts over whether it will give claimants meaningful support and advice, and might result in rising expenditure as more people work for fewer hours than DWP expected. Given that Universal Credit is coming fast down the track towards us it is of growing concern that we don’t know the answers yet.” [1] Universal Credit Policy Briefing Note 11, Department for Work and Pensions Notes to editors Conditions Uncertain: assessing the implications of Universal Credit in-work conditionality is written by Matthew Pennycook and Matthew Whittaker and published by the Resolution Foundation. It is available in advance to the media and will be available online when published at www.resolutionfoundation.org Universal Credit is due to be introduced from October 2013 with new claims from people in work being processed from April 2014 and the entire system in place by 2017. The government says the system will cost an extra £2.5 billion a year. It is designed to simplify benefits and credits for working age people by combining them in a single payment. In particular it aims to encourage people back into work and to take on more work by increasing the share of earnings they keep from employment. For the first time working claimants will be eligible for the equivalent of working tax credits even if they work fewer than 16 hours a week (the minimum set under the current system for a single person). While the new system offers financial support to those working very few hours it includes personalised conditionality as a way of discouraging people from settling into this pattern of low-hours work and supporting their efforts to seek out more and better-paid employment and so reduce the costs of Universal Credit. Calculations of the number of people likely to be affected by in-work conditionality are derived from the authors’ analysis of the DWP’s Family Resources Survey 2009-2010 with earnings adjusted to 2012 rates. The Department of Work and Pensions Quarterly Statistical Summary 2012 showed the Jobseekers Allowance Caseload at 1,589,640 people with a further 309,150 in the Employment and Support Allowance work-related activity group. Resolution Foundation analysis of labour market statistics released in September by the Office for National Statistics shows that 1.4 million people are working part-time because they cannot find full-time work.
