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Universal Credit, Welfare That Works Best

Updated on April 9, 2012

The UK Government will make work pay and support you. These are the words of Iain Duncan Smith on the white paper 'Universal Credit, welfare that works'.

But what does this mean for you?

How will these welfare reforms be put into practice?

The benefits system has created dependency on a welfare budget that has spiraled out of control.

By withdrawing support with a single taper or relief it is hoped to create more dynamic and productive people.

The system has been designed to help individuals get what they are entitled to without having to jump through hoops in times of need and, claims the work and pensions secretary, reduces administration whilst cost cutting a strangled benefits operation.

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In 2013, the UK Government is introducing a radical reform to the welfare benefits system. This will come in the guise of Universal Credits. So, what is this about and how will it effect you?  This article intends to give you an informed choice.

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Did You Know?

  • The UK Government currently spends nearly £420 million a day more than it earns!

Universal Credit Combines The Major Benefits

Starting as a pilot scheme in May 2013, followed by a nationwide release in October of the same year, Universal Credit is intended to simplify the UK's present benefit system.

Although the new system will only affect six of the major benefits, this overhaul focuses upon getting people into work by topping up low paid jobs.

The six benefits that are to be packaged and replaced under 'Universal Credit' are thus:

  • Income related employment and support allowance.
  • Income based jobseekers allowance.
  • Income support.
  • Housing benefit.
  • Council tax benefit.
  • Working tax credit.
  • Child tax credit.

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Announcement On Universal Credit And Sceptism

Citizen's Advice Welcomes Welfare Reform

“We broadly welcome the direction of welfare reform proposed by the Coalition Government and we support the intention to make the benefit system simpler and clearer for recipients, and to make work pay.” Citizens Advice

Did You Know?

  • The Tax Credits bill has risen from £52 billion in 1996/97 to £74 billion in 2009/10?
  • That spending on working-age Housing Benefit is £14.2 billion and has increased by 25% between 1996 - 2010?

The Previous System Has Failed The Poorest And Most Vulnerable Of Our Society

It has been outlined in the white paper report 'Universal Credit: welfare that works' that the previous welfare system has been expensive and has failed the poorest and most vulnerable of UK society:

'The welfare bill has become unsustainably expensive, but the real price of this failure has been paid by the poorest and the most vulnerable themselves. Today, five million people are on out-of-work benefits in the UK, and 1.4 million of them have been receiving out-of-work benefits for nine out of the last ten years. Not only that, but we now have one of the highest rates of workless households in Europe, with 1.9 million children living in homes where no-one has a job.'

Reference: Universal Credit: welfare that works, 11th November 2010. For the full document, please click on the resource box at the end of this article.

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Administration Cost Cutting With New System

The Institute Of Fiscal studies highlighted in the report to the Government that there were substantial savings that would be made in administration costs by implementing an integrated system for welfare benefits.

The white paper also states that the Government are committed to ensuring that people do not lose out as a result of the benefit reforms, after it has recognised the disconnect between working for less money than claiming from benefits.

By removing the current system of specific numbers of hours in order to qualify for tax credits, the Univesal Credit will reward all amounts of work, thereby, decreasing work inactivity.

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Those claiming benefits will do so on condition and claimants will be required to make a claimant committment. These sanctions will be introduced to existing benefits and Universal Credit:

  • Full conditionality on those on Jobseekers. These people are required to actively seek and be available for work. Jobseeker's officers are empowered to 'target stronger conditionality on Jobseekers where they think this is necessary to help them move into work'.
  • Work preparation for those with disability or health condition
  • To keep in touch with the labour market, particularly aimed at lone parents, lead carer for children above the age of one but below the age of 5 years.
  • No conditionality aimed at people with a disability or health condition which prevents them from working, carers, lone parents or lead carers with a child under the one years old.

These changes are set to take effect in the current benefits system in the near future and will be integrated into the Universal Credit system in 2013.

Merging Benefits Into A Universal Credit Simplifies Systems

The white paper summarises the following in the executive summary section:

'Universal Credit will merge out-of-work benefits and in-work support. This means that people will no longer have to take a risk in moving from one system to another.'

  • Payments will be automated, electronically and controlled by the Pay As You Earn Tax system, Department of Work and Pensions and local authorities. The computer system will be upgraded to handle the new capacity and within budget. The fluidity of this centralised, automated computer process, hopes to make changes easier to implement, therefore benefiting claimants. Continuity of payments when reporting a change of circumstances has always been a problem within the benefits system - this is hoped to address the problem.
  • The new administration system will calculate more instantaneously on a month by month basis as opposed to the current yearly system.  This benefit has been cited as paid online on a montly basis.
  • People will be much more clearer about their entitlements.

Jobseeker's Sanctions

Those on Jobseekers who do not comply with conditionality will be penalised by:

  • Having their allowance cease for periods of one week and rising up to four weeks for failure in preparing for work.
  • Should claimants fail to comply by actively seeking work or non availability will be sanctioned with a one week cease of benefit, followed by a three months for the second failure.
  • Failure to apply, accept a job and/or attend mandatory work activity will lead to Jobseekers benefit being forfeited for a minimum of 3 months.
  • There is flexibility for lone parents and those with young children through no fault of their own can not attend work-based interviews.

It has been highlighted that people on Jobseekers who are penalised by these sanctions will have the right to appeal.

  • £2 billion pounds has been budgeted and allocated in order to implement the said changes. It is hoped that this investment will save vasts amounts on present administration costs of £3.5 billion a year from Departmenf of Work and Pensions, Local Authorities (Housing Benefit and Council Tax Benefit) and multiple outside agencies.

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Universal Credit, according to the white paper, will provide a simpler user experience (administered mainly via the internet); will consist of a basic amount (currently £64.45, Jobseeker's Allowance) with additional payments associated with disability, caring responsibility, housing costs and children. There will also be a constant 65 pence in the pound deduction on the Universal Credit allowance on net earnings.

These changes will only effect new claimants to start with in 2013 and will be phased in for existing users by 2015.

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What About Those Who Are Self Employed?

Starting up a business takes time. Many 'start up's' report very low levels of income. The Universal Credit, welfare that works white paper acknowledges this. However, once the business is established, the Government expects to see an income stream from that business activity.

The Government are thinking of introducing a floor for assumed income (what is considered as the National Minimum Wage) for those who are registered as self-employed. If self-employed people who engage in only a few hours of activity, and do no other form of paid employment then the conditional requirements will apply.

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The Media and Universal Credit - Assumptions?

How has UK society responded to social reforms in the benefits system? It has been a mixed bag that has ignited controversy, fear and hope.

The introduction of the Universal Credit as a way to contain costs within a very difficult world economy is a brave move by the coalition Government. The intentions are to get Britain back to work and create a system that unravels the complexities of the present benefits system. Much of the media's doom mongering is emphasising facts that aren't there. These are assumptions. It is directly from the white paper 'Universal Credit, welfare that works' that I have created this article from. Presently, from the evidence, it doesn't seem to be as bad as the media would like us to think, especially as regards to conditionality and Jobseeker sanctions. Why don't you take a look at the facts and make your own mind up? Check out the resource box.

© This work is covered under Creative Commons License

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Resource Box

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    • shazwellyn profile image

      shazwellyn 7 years ago from Great Britain

      CMHypno - what can I add, when you have been so eloquent! Thank you for your contribution :)

    • CMHypno profile image

      CMHypno 7 years ago from Other Side of the Sun

      We have to start somewhere with reforming welfare benefits in this country. Too much human potential is going to waste, and the burden is getting too heavy on the tax payer. No system is ever perfect, so a beginning has to be made and the system can be developed and altered over time. The media just find the concept a convenient whipping boy, and in general people are scared of change. I think we need a culture change where people start to believe again that they have to make some kind of contribution to society if they are at all able, and that with rights come responsibilities.

    • shazwellyn profile image

      shazwellyn 7 years ago from Great Britain

      Aidan - it is a difficult one, isn't it? The report states that vulnerable people with disability and unable to work will not be affected.

      It is the media that seems to be exaggerating the penalties more than anyone. They are like rotweillers with lock-jaw sometimes and I never really trust what they say. This was why I found it beneficial to go to the source and really see what the plan is. One thing for sure, Universal Credit is not means tested and doesnt have a minimum of how many hours are worked - so even if a little is worked, then that is ok.

      I would really recommend anyone that this targets, give the white paper a read - it really is fairly easy reading (surprisingly!).

    • Aiden Roberts profile image

      Aiden Roberts 7 years ago from United Kingdom

      Once again another informative hub, well done.

      In theory the Universal Credit sounds useful in breaking welfare dependancy, we will have to wait to see it in action; I only hope that vulnerable people by way of disability don't suffer.

      I am aware that DLA claimants are all to be retested 2012, again it will get rid of some fraudsters but inevitably hurt some genuine claimants in the crossfire.