The Government introduced Universal Credit to help simplify the current benefits system and make sure that it’s always better to work than not. But according to a recent study, Universal Credit provides less support for working families than tax credits.
One British think tank has said that Universal Credit could leave 2.5 million families worse off by more than £3,000 a year. Workings mums in particular could be the biggest losers under the new benefits system.
The Resolution Foundation, an independent think tank, found that second earners in a family could get to keep less than half of their earnings when the new system comes into place.
As the majority of second earners are more likely to be women, it’s working mums in particular who could lose out. What’s more, there doesn’t seem to be much financial support for part-time workers who want to increase their hours under Universal Credit.
It’s not just working mums that could lose out when Universal Credit is rolled out to all areas, but single mums as well. For example, take the case study of a single mum who owns her own home and has one child.
If she were to work more than 16 hours a week for £9 an hour, she would earn just 35p (before tax) for each extra hour of work that she does under Universal Credit. If the same mum decided to drop her working hours to just 10 hours a week, she’d only lose £17 instead of the £54 she’d lose under the current system.
On the old benefits system, she would have lost her entitlement to tax credits altogether. This would be the same if it was a single dad rather than a single mum. The think tank argue that under the new system, single parents could get trapped in low paid work and find it hard to progress.
It’s not bad news for everyone though. Single people could be better off under the new benefits system. Research by the think tank predicts that by 2020, a single person working full-time and earning the legal minimum with no children could be better off by £1,150.
Universal Credit is a new type of benefit currently rolling out across the UK. Six existing benefits – Jobseeker’s Allowance, Employment and Support Allowance, Income Support, Child Tax Credit, Working Tax Credit and Housing Benefit – will merge together into one single monthly payment.
Under this new system, you’ll receive the money directly into your bank account once a month. You might find this difficult to manage at first, particularly if you’re used to receiving your benefits at different times, spread out through the month.
Another thing you might struggle with is if you receive Housing Benefit. This won’t go directly to your landlord but to an account for you to manage. You’ll need to make sure you budget for your rent payments from your benefits and if you’ve never done this before, it can take a while to adjust to it.
For tips on how to manage your budget when you move to Universal Credit, check out our blog.
Under the current timetable, Universal Credit will roll out to all job centres across the UK by 2021.