Universal Credit: towards an effective poverty reduction strategy

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Universal Credit: towards an effective poverty reduction strategy

New Report Launched today

Report Cover

The report was written by Deven Ghelani and Lisa Stidle of Policy in Practice, and supported by the Joseph Rowntree Foundation.

  • The report asserts that people will have to work fewer hours to escape poverty under Universal Credit.
  • The report recommends short, medium and long-term reforms to Universal Credit to make the policy truly transformative.
  • The Minister for Welfare Reform will receive the report and respond to the findings of the report at a launch event on Wednesday evening.

Download the Report

The objectives of the report are to:

  • provide and accessible review of the literature, from official and independent sources, on the expected impact of Universal Credit on poverty and work incentives, as it is currently configured.
  • Conduct original illustrative analysis on the impact of Universal Credit at a household level.
  • Provide a literature review of policy issues within and related to Universal Credit.
  • Identify the policy levers within and related to Universal Credit that can best be deployed to cost-effectively tackle poverty and improve work incentives.

The key findings of the report are that Universal Credit will have a net positive impact on poverty through both ‘pockets’ and ‘prospects’. However we find that the impact varies by both household type and income level – you can use the Universal Benefit Calculator to see how Universal Credit will affect you and your residents. The report 

Household incomes are expected to increase by £16 per month per household on average (DWP, 2012a). This is through a combination of increased take up of benefits, and higher entitlements due to the higher work allowances and lower withdrawal rate of Universal Credit. Universal Credit is expected to improve ‘prospects’ through simplicity and smoothing, and conditionality.

Policy in Practice’s own analysis at household level supports these findings. Three out of four of our typical households types escape poverty with a lower level of earnings under Universal Credit than the current system. However, the analysis finds that the impact for most households is complex, varying by income level and household type. Some will need transitional protection, while others risk losing entitlement altogether.

In Chapter three, we identify a number of concerns with Universal Credit raised within the literature. Some of these concerns are found to be valid, and we analyse and propose recommendations in Chapter four. Others are found to be necessary trade-offs, and we compare these options using the balanced scorecard shown below. We conclude by looking at ways in which Universal Credit could be improved to more effectively tackle poverty.

Policy Scorecard for Universal Credit produced by Policy in Practice. Many of the findings are equally applicable to the current benefit system.
Policy Scorecard for Universal Credit produced by Policy in Practice.
Many of the findings are equally applicable to the current benefit system.

 

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