Opinion Former Article

Chancellor announces changes to universal credit – do they go far enough?

In today’s Budget, the Chancellor announced a package of changes to Universal Credit (UC) following growing concerns that the system is leaving people in hardship and not working as well as it should. LITRG welcomes the changes, but are concerned they do not go far enough to deal with the many problems that currently exist in the UC system.
Victoria Todd, Head of the LITRG team said:

‘Although today’s measures in relation to universal credit are welcome, far bigger changes are needed if UC is to work as intended. It is important that the Government review all current concerns about UC and undertake a thorough and comprehensive review of the system.

‘We welcome the increase in work allowances within UC for households with children and some people with disabilities, however not all working claimants will benefit from this change.

‘The migration of existing benefit claimants across to UC from tax credits and other means-tested benefits will be a huge challenge for the Government and there are a number of potential risks for claimants in the proposed plans. The extension of the two week run-on to income based jobseekers allowance, income-related employment and support allowance and income support claimants is good news but it remains crucial that the Government listen to concerns about the proposed managed migration regulations to ensure that people do not end up in hardship as a result of the transition.’

In October 2017, LITRG published a report1 setting out concerns about the treatment of the self-employed in the universal credit system. In particular the report highlighted concern about the minimum income floor which fails to account for fluctuating earnings or one-off large business expenses leading to a situation where a self-employed claimant with fluctuating earnings can receive substantially less universal credit than an employed claimant earning a similar annual income above the level of the current minimum income floor.

Victoria Todd said:

‘It is welcome that those self-employed claimants transitioning to UC are going to benefit from a 12- month grace period (instead of six months previously proposed) before the Minimum Income Floor is applied – however this just offers a stay of execution rather than a reprieve from its harsh effects. It is also welcome that most people will be protected from the ridiculously complex surplus earnings rules until April 2020, however neither of these changes go far enough.

‘Without significant changes to the structure of UC for the self-employed, including abolishing the surplus earnings rules and allowing averaging of income over periods up to one year, there continues to be a very real possibility that people will be discouraged from starting self-employment and existing claimants may be forced to give up their work.’
 

Notes for editors

1. https://www.litrg.org.uk/latest-news/reports/171030-self-employed-claimants-universal-credit-%E2%80%93-lifting-burdens

2. Low Incomes Tax Reform Group

The LITRG is an initiative of the Chartered Institute of Taxation (CIOT) to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.

The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. The CIOT’s 18,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.


Contact: Hamant Verma, External Relations Officer, 0207 340 2702 HVerma@ciot.org.uk
Out of hours contact: George Crozier, 07740 477 374)

More Articles by Chartered Institute of Taxation (CIOT) ...

Disclaimer: Press releases published on this page are from key opinion formers who promote their organisation's activities by subscribing to a campaign site within politics.co.uk. politics.co.uk does not endorse, edit, or attempt to balance the opinions expressed on this page. The content of press releases are wholly the responsibility of the originating company or organisation.

Comments

Load in comments