Universal Credits “a Cost-Cutting Exercise”? Make Sure You’re Not The One Losing Out…

If you’re a regular reader of the Hylton-Potts blog, you’ll know how important it is to us that we keep you up to date on the latest changes to the law when it comes to your benefits and tax credits. Our experts are always on hand to give you the help and advice you need, but in today’s post, we think it our duty to inform you about the recent claims being made about Universal Credits.

Recently, the government launched its newly reformed version of the six social security payments: income support, jobseeker’s allowance, employment and support allowance, housing benefit, child tax credit and working tax credit. This system was thought too complex, and a singular payment was introduced called Universal credits.

In a recent post, we discussed exactly what this new system is, who is eligible, and why it’s important to apply now. However, according to the government thinktank, Resolution, now is the time more than ever to seek professional advice.

Resolution revolution

The original aim of the new Universal Credits system was to encourage people into employment with longer hours, by allowing them to keep more of their credit top-ups as their income also increased. However, the Resolution thinktank has uncovered that the reform has been watered down so much that it risks failing to achieve even this.

Resolution published their analysis of the new system earlier this month, and reported the suspicion that: “Universal Credit has shifted from becoming a vehicle of genuine reform, designed to improve jobs and earnings prospects for lower income workers, to a simple exercise in cost-cutting. Any shift must be reversed.”

The report states that the majority of low-paid working families would be “detrimentally affected” by changes that the Treasury has recently made to the new credit system. They also state that many families in the UK will be worse off despite the introduction of other government policies, including the national living wage, cuts to income tax, and extra free childcare for three and four year olds.

In light of these discoveries, Resolution Chairman, former Conservative MP Lord Willetts, has urged ministers to correct these serious flaws, and return to the original promises of improved living conditions for claimants.

All of these reports can be confusing though, so what does this mean in monetary terms for the general public who are claimants?

Who will it affect most?

The report by Resolution comes in the wake of changes to Universal Credits that came into effect at the beginning of this month. The major concern here is that tens of thousands of low-paid working families can expect to lose up to £200 a month. This is as a direct result of the first wave of £3billion in welfare cuts, due to affect one million households by 2020.

If we break down these figures further, working households claiming Universal Credit prior to the changes had a work allowance of £222 per month for a couple with children, and £263 for a single parent. When the changes came into effect at the start of this month, these allowances fell to £192, lowering the threshold at which the benefit is withdrawn.

According to a recent analysis by the Child Poverty Action Group (CPAG), after income tax and national insurance are deducted, and taking Universal Credit deductions of 65p in the pound into account, a full-time sole earner couple would have to work an 19 extra days a year to make up the shortfall. Single parents would have to work 46 extra days.

Even more specifically, the Resolution thinktank considered an example of a single mother who owns her own home with one child. If she worked more than 16 hours a week for £9 an hour, she would earn just 35p for each extra hour of work, before she started paying tax on it. Over the course of a year, single mothers would be £1,508 worse off.

Commenting on these changes to the system, senior economic analyst David Finch, told the press: “Some single parents claiming Universal Credits could find themselves £29 a week worse off ,compared to what they would have received under tax credits. They’d have to work another 11 hours a week to get this money back.”

What can I do?

Given all of these shocking statistics, it is no surprise that many MPs and organisations have been quick to publish their own remarks. Owen Smith, the shadow work and pensions secretary, told the press: “This report confirms the devastating impact of Tory cuts to Universal Credit that will leave 2.5 million working families over £2,100 a year worse off. This will completely undermine the work incentives that were supposed to be at the heart of Universal Credit.”

Alison Garnham, Chief Executive of the Child Poverty Action Group, also added: “Universal Credit looked good on the drawing board, but round after round of big Treasury cuts have reduced its ability to help people get better off through earnings.

“The cuts to universal credit will actually hit working families’ budgets as hard as the now-abandoned tax credit cuts would have. The cuts have weakened work incentives and reduced the gains from work for these families.”

As ever, it’s best not to rely on hear-say and speculation, and instead seek legal advice when unsure of your position as a claimant. At Hylton-Potts, it’s the job of our experts to remain up to date on all changes to policies, and they’ll be able to help you figure out exactly where you stand and what you’re entitled to.

Our dedicated professionals will be able to provide you with as much guidance as you need when it comes to claiming tax credits, benefits, and even investigating a benefit fraud claim that you think is unfair or false. If you’d like more information on Universal Credits, or if you are confused about eligibility, then don’t hesitate to get in touch with us. You can call us on 020 7381 8111, or contact us via email at [email protected].

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