Universal credit could make those in work worse off

By Charles Maggs

The government's flagship welfare reforms could be making people in work worse off, in a move which would discourage longer working hours.

Making work pay has been a key aim of the new universal credit, but a report by the Joseph Rowntree Foundation suggests it could the opposite effect.

The report suggests the new benefits system will encourage more people to work part time, but the effective tax rate of working more than 16 hours a week will remain very high.

"The principle of universal credit is sound, but our research has found the actual roll out could unintentionally trap people in poverty and hardship," said chief executive Julia Unwin.

"Universal credit reforms are approaching at break-neck speed, so the DWP [Department for Work  and Pensions] must show similar urgency to address the very serious concerns outlined in this report."

The report suggests that the new system will help many people who are currently facing, some will see little difference or even be worse off, mainly household's secondary earners.

Labour jumped on the report as another example of government incompetence, with shadow work and pensions secretary Liam Byrne suggesting they need to get a grip of the policy.

"Universal credit is becoming a multiple pile up of problems to which David Cameron and Iain Duncan Smith appear completely incapable of bringing any sense," he said.

"This was supposed to be the silver bullet that was going to end welfare dependency, but now the policy is spinning out of control and world respected organisations like the Joseph Rowntree Foundation are joining the chorus warning universal credit simply won’t be fit for purpose."

The welfare budget is bearing the brunt of austerity, and George Osborne has planned as much as £10 billion more in cuts from the department after the next election.

Last week Iain Duncan-Smith suggested that families on benefits should be limited to only receiving extra money for their first two children, causing a rift with their Liberal Democrat partners.