UK: Universal credit to make disabled people ‘poorer’

According to a recent report, the ongoing implementation of universal credit (UC) in the UK is projected to have a detrimental financial impact on many working-age disabled individuals. By the end of the next parliamentary term, it is estimated that over 7 million people will have transitioned to this consolidated benefits system, which combines six previous benefits into one. The Resolution Foundation’s analysis highlighted that a single person with a long-term disability preventing them from working could face an annual income reduction of approximately £2,800 once switched to universal credit. This reduction is expected to affect all single individuals with long-term disabilities by the time the UC rollout is completed in 2030.

The report titled “In Credit?” reviews the extensive overhaul of the benefits system initiated by former work and pensions secretary Iain Duncan Smith during the coalition government. This system reform aimed to simplify benefit payments by merging income support, housing benefit, and tax credits into a single unified payment. Despite its intentions, the rollout of UC, which began in 2013, has been plagued by technical setbacks and delays. These issues have drawn criticism from several parliamentary committees and have been linked to increased costs and financial hardships for beneficiaries.

Following the Conservative party’s victory in the 2015 general election, subsequent funding cuts exacerbated concerns, pushing many claimants towards poverty. The Resolution Foundation noted that by 2028, UC entitlements are projected to total around £86 billion annually, which is £14 billion less than what would have been allocated under the benefit system of 2013-14. Consequently, approximately 70% of working-age families eligible for means-tested benefits are expected to be worse off under UC compared to the previous system.

Despite these challenges, recent funding increases to UC have alleviated some of the financial burdens for many claimants and even improved circumstances for others. Notably, working-age renters have benefited significantly from these increases, though the heightened weekly payments predominantly address rising rental costs. For instance, a renting single parent working 30 hours per week at the national living wage is predicted to be nearly £3,800 per year better off in 2024-25 under UC compared to the old system. Across the 2.7 million families in the private rental sector eligible for UC, the average financial gain relative to the old system is estimated at £1,200.

Alex Clegg, an economist at the Resolution Foundation, remarked that UC was originally designed during a period of high unemployment and is now showing signs of strain in addressing the needs of claimants with long-term illnesses and disabilities. With over 2 million UC claimants currently facing health-related challenges, the system’s original framework seems inadequate for today’s landscape of chronic illness and disability. The think tank suggests that alongside ongoing efforts in healthcare, education, and labor market policies, substantial revisions to UC are necessary to address the growing issue of long-term sickness effectively.

In response, a Department for Work and Pensions spokesperson defended the efficacy of universal credit, describing it as a modern benefits system well-suited for the future. They highlighted recent benefits increases and underscored the department’s commitment to assisting individuals, including those with long-term health conditions, in finding and maintaining employment through UC and related back-to-work initiatives.

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