Universal Credit explained: What is the welfare reform and why is it being debated on Monday?
Universal Credit #UniversalCredit
The Prime Minister has been urged to give millions of families a “helping hand” ahead of a Commons vote on extending benefit increases worth £20 a week.
Ministers are set to vote this evening on whether the Government will extend benefit increases beyond March 31 to support families facing poverty during the pandemic.
The standard Universal Credit allowance, which is claimed by more than 5.5 million households, was increased by £20 a week in April 2020 as part of Chancellor Rishi Sunak’s early Covid economic response.
Although it was implemented as a temporary add on to help those unable to work or struggling due to the lockdown, opposition parties and charities say failing to extend will cause real hardship for hundreds of thousands of people.
The Joseph Rowntree Foundation, an independent social change organisation, has suggested about 16 million people will be directly affected, with millions of households facing an income loss equivalent to £1,040 a year.
But what is universal credit?
Universal Credit is the Government’s flagship welfare reform for people of working age.
It replaces six means-tested benefits and tax credits and unifies them into one payment:
How does Universal credit work?
A single credit payment is paid directly into claimants’ bank accounts to cover the benefits for which they are eligible.
Video: Universal Credit: The rules on claims if you have savings or you are self-employed (Daily Record)
Universal Credit: The rules on claims if you have savings or you are self-employed
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Claimants must then pay costs such as rent out of their Universal Credit payment. Payments reduce gradually as claimants earn more.
Under the old system of multiple benefits, as soon as claimant started working more than 16 hours a week they would lose all of their benefits – meaning that in some circumstances it was more advantageous to stay out of work.
What are the benefits of Universal credit?
You may be able to claim a reduction in council tax when on universal credit, and get help with childcare costs.
There is also support to pay the rent, which works in different ways across the UK. In time, there may also be assistance in paying the mortgage, although there are some strict criteria involved.
What are some of the issues with the reform?
Not everyone gets the same amount for example those with £16,000 or more in savings, will not be eligible at all.
Others will find what they receive depends on their circumstances, including any income your family has, as well as housing and childcare costs.
The reform has also seen a number of difficulties with some claimants waiting five to six weeks for their first payment, which has been linked to rent arrears and other debts.
What impact will the £20 a week cut have?
A plan to now slash the scheme will have the biggest impact in the poorest towns in England, according to a study by Bright Blue, a liberal Conservative thinktank.
Claims to credit in the most deprived 10% of areas increased by 8.5 percentage points from February to October last year compared to just 4.8% from the most affluent 10%.
The study showed that London boroughs saw an average 8.3 percentage-point increase in those of working age claiming universal credit in the first eight months of the pandemic.
While local authorities outside London that had seen the biggest increases included coastal towns and post-industrial communities such as Blackpool, Middlesbrough and Hull.