The ‘Universal Credit parliament’ has finally arrived, but UC’s very different impact across the country is being ignored 21 January 2020 Press release from the Resolution Foundation Embargo – 00:01hrs Tuesday 21st 2020 The ‘Universal Credit parliament’ has finally arrived, but UC’s very different impact across the country is being ignored The impact of Universal Credit (UC) will be felt very differently in different places: something currently being ignored amid growing debates about how to level up economic outcomes across Britain, according to new Resolution Foundation research published today (Tuesday). The long and winding road notes that the new parliament will be a critical period for Universal Credit’s (UC) roll-out, with two-thirds per of the six million families who will eventually be on UC moving across during this parliament. The final – and most challenging – phase of the roll-out, involving the transfer of existing benefit and tax credit claimants onto UC, is also due to start later this year. The Foundation notes that following welcome reforms, including the recent £1,000 boost to work allowances, the benefit is set to be slightly more generous than the legacy system it is replacing (as long as take-up gains are achieved), with families receiving £1 a week more an average. However, this marginal average figure masks sizable groups of families that gain and lose out by large sums, and significant geographical variation across the UK. Thanks to factors such as local rent and earnings levels, and the characteristics of local populations, some parts of the country will be left significantly worse off as the switch to UC goes ahead. In the Liverpool City Region (LCR) – one of the areas that has experienced the biggest UC roll-out so far, and in which a higher proportion of working-age families will end up on UC than across the country (31 per cent compared to 24 per cent) – just 32 per cent of families will be better off under UC, compared to 52 per cent who will be worse off. This compares to a national average of 46 per cent losing out, and 39 per cent gaining. 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 UC. In addition, UC’s greater generosity towards working families with high rents has less impact in LCR, which has below-average rent levels. To help understand the localised impact of the transition to UC, the Foundation carried out in-depth interviews in LCR, focusing on recipients’ experiences of various aspects of the new system. These interviews uncovered a number of areas where further improvements are needed. While those with IT skills valued UC’s digital focus, many said that the five-week wait for the first payment put them under significant financial and mental stress. Some reported that the wait had forced them to use food banks, and worsened existing mental health issues. Other reported problems with the childcare element of UC – despite it being more generous than tax credits – with one single parent explaining how paying childcare costs up front was hard, and that reimbursements could be withheld if they forgot to obtain receipts on time. Finally, the interviews revealed a variable understanding among recipients of exactly how taking on more work would affect their incomes. Most understood they would be better off in work, but many felt that the system’s responsiveness to their earnings meant that taking on more hours wasn’t worth their while financially. This, says the Foundation, risks weakening one of the central claims of UC, that it will ‘make work pay’. The Foundation says that now is the time for the government to make vital improvements. These reforms, which must take place at a national level, should include: Helping families overcome the first payment hurdle. 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 Foundation adds that policy makers in Whitehall, and, crucially, across the UK, need to consider the impact of UC at a local level. At exactly the time that policy debates are rightly focusing on what can be done to close economic gaps between parts of the UK, this major welfare reform will be rolled out with very different impacts on those places. 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.” Notes to Editors This report was supported by the Liverpool City Region Combined Authority.
