Universal credit a ‘leap into uncharted territory’

The coalition's new universal credit system has been described as a 'leap into uncharted territory' in a paper from the OECD in Paris. The positive impact in reducing poverty and increasing equality will probably be more than offset by previous benefit cuts, it points out.

Key points

  • The universal credit reform represents a radical overhaul of the incentive structure compared with the existing system, and is in many ways a 'big leap into uncharted territory'. It is therefore impossible to say with certainty how far universal credit will reduce so-called 'welfare dependency'.
  • The number of workless households could be reduced by 45,000–240,000, thanks to better work incentives. This is lower than the DWP's own estimate of 300,000.
  • The combined impact of take-up and increased entitlements for low-income families should have a positive impact in reducing poverty and increasing equality. But this improvement will probably be more than offset by previous cuts to the benefit system.
  • Childcare expenses will continue to be a particular problem, even after the universal credit reform, creating a hurdle to progress in work for second earners and lone parents.

Source: Jon Kristian Pareliussen, Work Incentives and Universal Credit: Reform of the Benefit System in the United Kingdom, Economics Department Working Paper 1033, Organisation for Economic Co-operation and Development
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