Iain Duncan Smith just repeatedly “guaranteed” to the Commons that there would be no losers from the introduction of the Universal Credit. But that of course depends on how you define a loser.
This graph makes clear that there will be losers from this benefit reform, at least in terms of entitlements. It hits a relatively well off section of society. But they are losers nonetheless.
IDS is right in one sense. No one currently claiming benefit will see their income fall when Universal Credit is introduced. Households in the transition will receive protection. But — here’s the kicker — not all those on the new system will have the same level of entitlement as under the old regime. Their income will fall on average.
The White Paper is quite clear:
“This simplification means that, in the long term, some households will be entitled to less under Universal Credit than they would have been had the current benefits and tax credits system continued.”
A long run impact assessment is provided, which calculates that on average only households in the income deciles 7 to 10 will be hit. Even then it will be at most around £25 a year and at best 15p a week. But that of course is the average. It could be more for some families. Most of the losses are down to the removal of the £30 hour premium on working tax credit for high earners.
The department should be commended for being relatively open about this issue, whatever the political message may be. But the white paper is quite opaque on marginal tax rates. It is unclear how many people will see their relative tax rate rise. Will post again once I’ve worked it out.
Jim Pickard
Kiran Stacey