Cuts may undermine work incentives in universal credit

19 June 2014

A cross-party review of Universal Credit (UC) is being launched amid new evidence that funding for the project has been cut so severely that its original aim to provide incentives for people to get into work could be undermined.

The scheme, which has created deep cynicism as a result of technology flaws, implementation delays and Whitehall infighting, is due to be fully implemented in 2017-18 and will cover as many as eight million households.

An expert review, which will be chaired by the welfare expert Nicholas Timmins, is being launched by the Resolution Foundation think tank, and will focus on structural redesigns that may be required to restore work incentives.

Initial work by the Resolution Foundation shows that by 2018, cuts to the basic and work allowances will mean UC is £685 a year less generous for a couple with one child, saving the government £1.8bn a year.
They also found that the structure of UC may be badly targeted to protect second earners: at present, a second earner under UC can lose as much as 76 per cent of their earnings once they make enough to pay income tax.
Despite fierce criticism of the scheme from the Labour Party, the shadow work and pensions secretary, Rachel Reeves, has not yet said she would scrap the reforms