Low-income families set to be poorer under universal credit – study

The average low-income family in the UK’s most deprived areas – including “left behind” communities in the north of England – is likely to be worse off under universal credit, according to a study by the Resolution Foundation.

Although the government’s reversal of some of the cuts it made five years ago to universal credit will make the average UK family £1 a week better off than under previous benefits, the study says those living in the poorest areas will be on average worse off.

The thinktank says the economies of those areas with high numbers of disabled, unemployed or single-parent claimants – all groups likely to lose out under the new system – will see falls in spending power when universal credit is fully rolled out.

Official data indicates that the deprived areas most closely matching this profile and where, on average, families will be worse off under universal credit, include places that unexpectedly voted for the government at the last election such as Blackpool, Middlesbrough, Redcar, Hyndburn and Wolverhampton.

After its victory, the government promised to regenerate fragile post-industrial economies in the Midlands, the north and north-east of England where it won a swath of previously staunch Labour-voting parliamentary seats known as the “red wall”.

Other areas where families are on average likely to be worse off when they move on to universal credit include Liverpool, Birmingham, Glasgow, Burnley, Kingston-upon-Hull, Blaenau Gwent, Knowsley and Hartlepool.

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Universal credit will pay out more than £60bn a year nationally by 2023. That many of the UK’s poorest local areas will be net average losers under universal credit is “something currently being ignored amid growing debates about how to level up economic outcomes across Britain”, says the foundation.

Laura Gardiner, research director at Resolution, said some areas of the country would fare particularly badly under universal credit and understanding that “should be central to policy debates that are rightly focusing on what can be done to close economic gaps between parts of the UK”.

The foundation also called for further changes to the design and generosity of universal credit to make the system easier for claimants to use and to ensure it meets its original aims of simplifying benefits, improving incentives to move into work and cutting poverty.

“With the reputation of universal credit under significant threat, now is the time for the government and the Department for Work and Pensions (DWP) to really understand how it is working on the ground in order to make necessary changes,” it says.

While overall UK benefit spending will be maintained under universal credit, this masks a “substantial redistribution” of support between different areas of the country, says Resolution, with resources skewed towards families in high-rent areas like London and the south-east over the north and Midlands.

The thinktank illustrates this by highlighting the effect on Liverpool and its surrounding boroughs, where 52% of all claimants will be worse off on universal credit by 2024, compared with a national average of 46%. This rises to 65% for Merseyside families with a disabled member (60% UK-wide). On average, Merseyside families will lose £7 a week.

With the return of a Tory government, the foundation concludes that universal credit, despite its turbulent history, is now “definitely going ahead”. Labour had promised a root-and-branch overhaul of what it had called a “cruel and inhuman” system. The foundation warns ministers against complacency, saying that universal credit remained a “negative symbol” of a decade of conservative welfare reform and that some of its central features – like the controversial minimum five-week wait for an initial payment – remained intensely disliked by claimants.

Its qualitative research with claimants in Liverpool – supported financially by Liverpool city region – found that despite official insistence, there was no evidence that claimants believed that digitally administered benefits under universal credit were an improvement on the old system.

Responding to the report, a DWP spokesperson said: “Universal credit supports more than 2.7 million people across every part of the country, introducing tailored support to replace a complicated old system. This report rightly recognises improvements we’ve made, like boosting work allowances for some families to £1,000 and making it much easier to apply online.”

Universal credit, which rolls six working-age benefits into a single monthly payment, was initially due to be fully rolled out in 2017, but a series of blunders means it will not be completed until at least 2023, by which time approximately 6 million families will have been signed up.

Ministers originally argued the new system would reduce poverty by improving incentives for people to work. But Gardiner said the “jury was still out” on this as wider benefit cuts such as the benefit freeze and the two-child limit, which apply to people on universal credit, were likely to push up poverty rates.