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Wednesday, 29 July 2015

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Fears that welfare reforms ‘could see people worse off’

A RECENT report by the Joseph Rowntree Foundation suggests Universal Credit (or UC) could see people worse off in work and struggling to manage their finances, with many left to deal with a more complex benefits system than before.

UC is one of the biggest reforms to the welfare system, and will replace means-tested benefits and tax credits for people out of work or on low incomes from October 2013.

Making work pay is the key aim for UC, however the report finds many households are set to be worse off, or only marginally better off. While the new system does incentivise more people to take ‘mini-jobs’ (less than 16 hours per week), it does not encourage the crucial next step into full-time work and help people move out of poverty.

Marginal increases in earnings alone are unlikely to be sufficient incentive to move into full-time work, with small financial gains likely to be wiped out by costs such as childcare and travel.

Julia Unwin, chief executive of the Joseph Rowntree Foundation, said: “The principle of UC is sound, but our research has found the actual roll-out could unintentionally trap people in poverty and hardship.

“UC reforms are approaching at break-neck speed, so the Department for Work and Pensions must show similar urgency to address the very serious concerns outlined in this report.”

The report raises serious concerns about potential IT failures that could quickly lead to backlogs, poor service and complaints. System failure could lead to financial hardship for significant numbers.

The shift from fortnightly to monthly payment in arrears has raised concerns among families on low incomes that they will run out of money before the end of each month. Recipients may have to borrow money to bridge the gap.

Chris Goulden, head of poverty at the Foundation, said: “If Universal Credit is to be successful in helping people out of poverty, it needs to ensure work is truly worthwhile and does not punish people who try boost their hours and income.”

CHILDREN AND POVERTY: According to the Joseph Rowntree Foundation’s child poverty programme, the proportion of children living in poverty has risen considerably in the last 30 years. In 1968 one in ten children (1.4 million) lived in poverty. By 1995 it was one in three (4.3 million children). In 2010/11, 2.3 million children were living in poverty in the UK.

The Foundation estimates that child poverty costs £25billion each year in costs to the Exchequer and reduced GDP.

It says that ending child poverty requires action in a wide range of areas including childcare; skills; the availability, quality and flexibility of jobs; and benefits.

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