Reforms to Universal Credit

“Reforms to Universal Credit” is a new report, published by the TUC and the Child Poverty Action Group, showing that far more children could be lifted out of poverty by enhancing Universal Credit instead of raising the income tax threshold – and at a fraction of the cost.

The report, based on original research commissioned from Landman Economics, looks at 12 reforms of the new benefit, as well as increasing the income tax personal allowance. The 12 options investigated would improve Universal Credit to varying degrees in one of three ways:

  1. Increasing the amount parents receive for each child;
  2. Increasing work allowances (the amount you can earn before your UC starts to be reduced); and
  3. Reducing the taper rate (the rate at which Universal Credit is reduced when a claimant’s earnings rise).

The research found that increasing the child element would have the strongest impact for reducing child poverty, while cutting the taper rate is the most effective way to increase work incentives. A ‘second earner disregard’, to help two-earner families, was a particularly efficient way to encourage people to enter employment. Raising tax allowances – the government’s favourite policy – cost by far the most, yet came bottom of the list for its child poverty reducing potential.

The report looks at package of measures that cost similar sums to raising the personal allowance. For example, a £13.6bn package of improvements that cut the taper,  increased work allowances by £80 a month, and increased both the child element and the disabled child element by would reduce child the number of children in poverty directly by 460,000 children and the improvement to work incentives would probably bring this to well over half a million

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Posted in In the Community, Pay/The Cuts

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