Frank Field: Universal credit is so badly designed it traps families in poverty
The new Universal Credit system has been so incompetently designed that it will leave working families trapped in poverty, a former welfare minister said.
Frank Field released new research which shows families with two earners could be more than £50 a week worse off under UC than on tax credits.
Mr Field, the chairman of the work and pensions select committee, told i : “It has been designed as an active agent in keeping families poor.
“The very best you can say is that is down to incompetence. The worst is too dreadful to contemplate.”
His intervention comes amid growing calls for the government to suspend the roll-out of UC, which merges six benefits and tax credits with a single payment.
The House of Commons library has calculated that a typical family of two adults and two children making a claim for UC is worse off by £1,144 a year (£22 a week) if the second earner works five hours a week at the National Living Wage, Mr Field disclosed.
The loss rises to £1,612 a year (£31 a week) if the second earner works 10 hours, to £2,028 a year (£39 a week) if the second earner works 15 hours, to £2,444 a year (£47 a week) if the second earner works 20 hours and to £2,756 a year (£53 a week) if the second earner works 25 hours.
The Library concludes: “There is a greater incentive for this example family’s second earner to move into work or increase their hours of work under tax credits than UC […] the family is better off under tax credits than under UC […] under tax credits the family keeps a greater proportion of the income earned by the second earner than under UC.”
Mr Field said the problems stemmed from a basic design flaw meaning that the ‘taper rate’ at which UC is withdrawn as earnings rise is greater than under tax credits.
In addition, the amount that can be earned before it is withdrawn applies to the whole household, rather than individual workers.
Labour has called for the roll-out to be halted, citing separate research suggesting that single parents will be £3,100 a year worse off under UC.
Citizens Advice has also called for the programme to be suspended, warning that families risk being pushed into debt because of a minimum wait of six weeks for an initial payment and processing delays. Foodbanks have also reported record demand because of problems with the new benefits regime.
A spokeswoman for the Department for Work and Pensions said: “Universal Credit offers a range of extra support not available under Tax Credits, so it’s not possible to compare the two. This includes up to 85 per cent childcare costs back for working parents, and help to progress in work.
“Universal Credit ensures everyone in a household is better off in work, and offers slightly higher incentives for the first earner to help households where no one is working.
“The number of workless households is at a record low, and Universal Credit will build on that with millions of households set to keep more of what they earn when one person moves into work.”
Nigel Morris, The i