Reformed benefits system to cost more, study says

UNIVERSAL CREDIT is set to be more expensive than the system it replaces as Budget changes mean 200,000 more families will be better off as a result of the welfare reform, new analysis suggests.

Moves by Chancellor Philip Hammond will reduce the number of working families losing out because of the changes from 3.2 million to 3 million, with those gaining increasing from 2.2 million to 2.4 million, according to a report by the Resolution Foundation.

Working families with children are now just as likely to be better off under Universal Credit (UC) as worse off, with the net losses concentrated among non-parents, the study said.

The think tank said that the Government’s Budget action should herald the start of welfare changes, not their conclusion.

More reform is needed to prevent people becoming stuck in low-paid, short-hours work, the Resolution Foundation said.

Due to £1.7bn put into UC in the Budget, and the £3.2bn higher benefit take-up projected by the Office for Budget Responsibility, the reform is set to be more expensive than the legacy system it replaces for the first time since early 2015, according to the study.

The Resolution Foundation said: “UC creates strong incentives for workers to match their earnings to their Work Allowance, but relatively weak incentives to work beyond them.

“That’s because they’re able to keep 100 per cent of each additional £1 earned up to their Work Allowance, while every extra £1 earned after that leads to a 63p reduction in benefit income.”

The report called for increases in Work Allowances for single parents and also for the introduction of a new second earner Work Allowance to encourage more people, particularly women, to work. Laura Gardiner, from the The Resolution Foundation, said: “The welcome extra investment in Universal Credit at the Budget means that a further 200,000 working families will now be better off under the new benefit system than the old one.

“This also means that, for the first time since early 2015, UC is set to be more expensive than the legacy benefits it is replacing.”

A Department for Work and Pensions spokesperson said: “Universal Credit is a modern benefit based on the sound principles that work should always pay and those who need support receive it. It replaces an out-ofdate, complex benefits system which often trapped people in unemployment.

“The additional £4.5bn announced in the Budget will support more people as they move onto Universal Credit.”