DWP urged to "reclaim" Universal Credit from the Treasury

Resolution Foundation report says welfare shake-up has "genuine potential" but could be less effective because of cost-cutting

The Department for Work and Pensions' Universal Credit welfare reform risks being undermined by Treasury-imposed cuts, a leading thinktank has warned.

Universal Credit seeks to roll six benefits into one single payment to try to incentivise people to move into work.

A new report by the Resolution Foundation says that while Universal Credit has "genuine potential" to build "simplicity, work incentives and earnings progression" into the welfare system, it may have strayed too far from its “original purpose” because of cost-cutting.

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"Crucially, the latest series of cuts – announced at last year’s Summer Budget – risk leaving UC as little more than a vehicle for rationalising benefit administration and cutting costs to the exchequer," the report says.

"Any ambition for supporting and rewarding work and progression looks very hard to achieve under the revised proposals. Indeed, even some of the welcome progress made over the last 15 years under the tax credit system in reducing worklessness – particularly among single parents – is at risk of being dismantled."

The thinktank says that the original design for UC envisioned it as being broadly as generous as the current tax credits system, but says that the Summer Budget's £3bn in cuts by 2020 mean "the majority of working families with in-work support will be detrimentally affected".

And it warns that one of the key advantages of the scheme – the introduction of work allowances permitting claimants to take on work without suffering a drastic fall in their entitlement – have been "significantly watered down over time", with a particular impact on single parents and second earners.

"To ensure that the introduction of UC supports working families to boost their incomes, financial incentives should be focused on those most likely to respond," the report recommends.

"Rebalancing support towards single parents and second earners could help UC surpass the current system in its ability to help people into work. But with in-work support already stripped back this will require reinvestment – via a reversal of the Summer Budget cuts to work allowances."

The group urges the new work and pensions secretary Stephen Crabb – who succeeded Iain Duncan Smith following the latter's resignation over cuts to welfare spending  – to “reclaim” Universal Credit from the Treasury.

The think tank's senior economic analyst David Finch said: "It is a reform with lots of potential, but it has veered off track over recent years, particularly following a series of sharp cuts in support to working families."

Crabb took to the airwaves on Monday morning to defend the scheme, telling the BBC that Universal Credit was "already working" and "doing what it was originally intended to do".

He said: "We’ve had 500,000 people who have now made a claim through UC. We’ve got 250,000 people currently receiving Universal Credit.

"And when you compare this group of people with similar groups of people receiving the old Jobseeker’s Allowance, you’ll see that those people on Universal Credit are more likely to be spending more hours looking for work, they’re more likely to be finding work and when they find work they’re more likely to be earning more and looking to increase their hours too."

Today's report comes as the government announced that UC is now available to single jobseekers in every jobcentre in the country, with a full rollout for all claimants set for 2021.

On April 27, Universal Credit became available to all new single claimants in Purley, Thornton Heath and Great Yarmouth, the final three jobcentres in the rollout. According to the DWP's timetable, UC will be rolled out in full by the end of 2021.

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