Families with children are the biggest losers under universal credit, with some families left thousands of pounds worse off, according to a new analysis.
The study by the Child Poverty Action Group (CPAG) and the IPPR thinktank says that a series of cuts and changes have left the government’s flagship welfare overhaul failing to meet its original aims.
Lone parent families will be on average £2,380 a year worse off, while families with two children lose £1,100 on average and those with three youngsters lose £2,540.
Although universal credit was intended to boost household incomes by strengthening incentives for claimants to move into work or take on more hours, most families will be worse off than under the current system of tax credits and benefits, it says.
Lone parents and couples where one parent works part-time to care for young children are hit particularly hard and face having have to find up to two days’ extra work a week to meet the shortfall in income from the cuts.
Ministers predicted in 2011 that universal credit would take 900,000 individuals out of poverty, including 350,000 children, an assessment the study says the government now refuses to revisit in light of the changes.
The chief executive of CPAG, Alison Garnham, called on ministers to use next week’s budget to make universal credit “fit for families” by reversing cuts to work allowances announced by the former chancellor George Osborne in 2015.
She said: “Universal credit was meant to improve incentives for taking a job while helping working families get better off. But cuts have shredded it. And families with kids will see the biggest income drops.”
However, a spokesman for the Department for Work and Pensions said work was the best way out of poverty and people on universal credit moved in to work fast and stayed in work for longer. “Starting work is the best way for people to improve their lives,” he said, “and this report mistakenly assumes that people on benefits will never progress in work.
“The number of children living in working households is at a record high and by increasing the national living wage and taking millions of people out of paying any income tax, we are ensuring it always pays to be in work.”
There have been nine changes to universal credit since 2013, most of which have reduced its overall generosity, including cuts to work allowances and a four-year freeze on universal credit rates. Further changes next month will include restricting child credit elements of universal credit to two children per family.
Currently just 450,000 people are on universal credit, which is not expected to be fully operational across the country until 2022. At that point, according to estimates by the Institute for Fiscal Studies, 2.1 million families will be worse off under the new system, and 1.8 million better off.
guardian.co.uk © Guardian News & Media Limited 2010