Universal credit: what it means for parents moving into work and their children Mark Willis, September 2012

Five good things about Universal Credit 1. Simplicity 2. Scrapping hours rules 3. Increased earnings disregards 4. Childcare support extended 5. Six month protection for claims

1. Simplicity Replaces 6 benefits administered by 3 agencies −but not replacing contributory benefits, child benefit, etc But complex rules will remain, e.g. −Right to reside, income/capital, limited capability for work, students, living together, housing costs Introduces new areas of complexity: −In-work conditionality, benefit cap, minimum/maximum earnings disregards, transitional rules Interaction with council tax, social fund, passported benefits, free school meals −how to maintain simplicity and work incentives

2. Scrapping hours rules Currently 16, 24 or 30 hour rule for working tax credit Young workers (under age 25) excluded from working tax credit 16 hour rule for means-tested benefits or partner may work 24 hours Under 16 hours often not worthwhile – lose benefit pound for pound But in-work conditionality with UC – required to look for and be available for more work

3. Increased earnings disregards More generous than current means-tested benefit disregards e.g. £5 a week for single person (£30 under UC?) But complex rule with higher earnings disregard for ‘non-renters’ Is 65% taper still too high? Keep 35p for every £1 earned. Tax credits more generous Job grant, in-work credit, return to work credit payments scrapped 100% disregard of childcare costs in HB/CTB

4. Childcare support extended Currently only available if working at least 16 hours a week Under UC, any hours will be eligible (unless excessive with regard to extent of work) Can include a month prior to starting work, deposits, upfront fees, advance costs But 100% disregard in HB scrapped £300 million extra a year Cut from 80% to 70% from April 2011 estimated to save £380 million a year Is childcare provision available?

5. Six month protection for claims Currently if start/stop work or income becomes too high, need to start/stop benefit/tax credit claims Under UC, once claimed, but income too high, no need to reclaim if income drops within six months Automatic re-claim via Real Time Information on earnings Does this introduce a duty of care to the benefit system?

Five not so good things about universal credit 1. Increased conditionality and sanctions 2. Less money for some groups 3. Reliance on claimant interaction online 4. Payment to one claimant 5. Missed opportunity?

1. Increased conditionality and sanctions Claimant commitment and couples Partner of person over pension age In-work conditionality Sanctions – 20%, 40% or 100% of personal allowance for up to 3 years Housing costs and child allowances not sanctioned Hardship payments may be recovered Do sanctions work?

2. Less money for some groups Claimants with disabilities Claimants with disabled children Young lone parents Large families Couple – one over pension credit qualifying age Owner occupiers in part-time work People in supported / temporary accommodation Self-employed

3. Reliance on online claims ‘Digital first’ principle: online, PC-based access, smart phones, automated telephony HMRC ‘Real Time Information’ system for reporting earnings “Local authorities may also have a role in delivering face to face contact for those who cannot use other channels to claim and manage their Universal Credit” “Improved service delivery, greater transparency and certainty will reduce need for voluntary sector to provide advice and support”

4. Monthly payment to one claimant Promote financial capability and responsibility? Monthly in arrears into bank account Amounts for children not paid to main carer Includes housing costs Payment may be split, or paid more frequently or paid direct to third party if in interests of claimant partner or family

5. Missed opportunity? Is work incentive enough? Original proposal was 55% taper Is it simple enough? There will still be complexity Work incentives: interaction with council tax benefit and passported benefits Have lessons been learned from tax credits, ESA and other recent changes? Couple penalty? Savings penalty? Mortgage penalty?

Will It Reduce Child Poverty? Government’s child poverty strategy gives no figures In debate, said increased take up and entitlement changes would mean child poverty would fall by 350,000 Child poverty to rise by 600,000 due to £18 billion of welfare cuts before UC is introduced Institute of Fiscal Studies: universal credit not enough to prevent a decade of rising poverty

More Information Ebulletins Guide to universal credit CPAG training CPAG in Scotland Advice Line for Advisers Or