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The £20 uplift in Universal Credit is a blunt policy
instrument, which is poorly targeted.
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A cash increase means those who previously had
relatively low entitlements, like claimants who are single,
childless, and younger, benefited much more in percentage terms
than those with families and children to support.
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Extending the uplift indefinitely would add more than
£6 billion to the annual welfare bill - and do so in a way that
is far from optimal.
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However, it would be unreasonable to
end this extra support in April, when pandemic restrictions
will still be in place and furlough is due to end.
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Replacing the uplift from April with a "coronavirus
hardship payment" would ensure claimants do not see a sudden
fall in income while restrictions are still in place.
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This move should be accompanied by a much more generous
uprating of the standard Universal Credit allowance and other
reforms which would be more generous and meaningfully improve
the scheme overall.
Reforms to the Universal Credit system could make it more
generous post-Covid than it was going into the pandemic, and
significantly better at rewarding work.
A new briefing
paper by the Centre for Policy Studies suggests replacing the
controversial £20 uplift introduced in March last year with a
Coronavirus Hardship Payment to support families through the
pandemic.
This would ensure claimants do not see a sudden fall in income
while restrictions are still in place, while being clearly
defined as a temporary measure to last a further six months, with
an additional three-month phasing-out period at half the value to
prepare for its eventual withdrawal.
Simply maintaining the uplift would be poorly targeted, as it
means those who previously had relatively low entitlements
benefit much more in percentage terms than those with families
and children to support.
Research shows the standard allowance for a single claimant under
25 increased by 36% compared to just 19% for a couple over 25
years old.
The think tank suggests the hardship payment should be combined
with a more generous one-off uprating of Universal Credit
(currently set to rise by just 0.5%) of 2.5%, in line with the
rate being applied to the State Pension. This would amount to an
extra £100 a year on the standard allowance for a single claimant
over 25.
In addition, the Government should improve the work incentives
within Universal Credit through an 8p cut to the taper rate and
increased work allowances. Claimants currently lose 63p of every
£1 they earn in work, which can make it less worthwhile for
claimants to take up employment. These proposed changes would
mean those who move back into work after the pandemic would keep
more of their earnings, and would make the benefits system more
generous overall.
James Heywood, Head of Welfare and Opportunity at the
Centre for Policy Studies, said:
"The Government has backed themselves into a corner with the
£20 uplift in Universal Credit" it's much harder to take
something away once it's in place. However, they do have the
opportunity now to make significant changes to the system to
benefit claimants and ensure it always pays to work.
"Replacing the uplift with a clearly defined temporary
support mechanism, combined with other reforms, would offer the
intended financial support while making it easier to prepare
claimants for its eventual withdrawal."
Notes to Editors
- The CPS briefing paper is available here
