Special Report: The Institute of Fiscal Studies

Green Budget: February 2013 – Welfare benefit changes

Universal Credit

Universal Credit is set to replace six means-tested benefits and tax credits for working- age claimants with a single integrated benefit. Specifically, it will replace Income Support, income-based Jobseeker’s Allowance (JSA), income-based Employment and Support Allowance (ESA), Housing Benefit, Working Tax Credit and Child Tax Credit. The roll-out of Universal Credit is planned to begin in some pilot areas in the North West of England in April 2013, and in the rest of the country from October 2013. New claimants of Income Support and income-based JSA will be the first group to be treated under the new system. Existing claimants will begin to be moved onto Universal Credit from April 2014.

Although relatively few families will be affected by the change during 2013–14, over time Universal Credit will represent one of the biggest changes to the structure of the welfare system for working-age people since 1948.

A single benefit claim

Whereas under the current system many claimants have to submit claims for a number of different benefits to different agencies (such as local councils for Housing Benefit, the Department for Work and Pensions (DWP) for Income Support, and HMRC for tax credits), Universal Credit will require a single claim for a single benefit. This should be simpler for claimants – saving them time, and possibly reducing error and increasing take-up – and be easier to administer and check (reducing error and fraud). By integrating the systems of out-of-work benefits and in-work tax credits, it might also encourage more people to enter paid work by smoothing the transition.

Less frequent payments

Most families will receive Universal Credit on a monthly basis, with entitlements based on circumstances during the previous month and calculated using ‘real-time’ information from employers. This should result in far fewer under- and over payments than the current system and may reduce the amount of fraud and error. The flip side is that using information from the previous month (rather than self-reported information) may mean payments do not respond to changes in circumstances as quickly as they can now.

Concerns have also been raised about the ability of Universal Credit recipients to budget properly on a monthly, as opposed to weekly, basis and to manage payment of rent to landlords (Housing Benefit is generally paid directly to landlords in the social rented.