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900,000 worse off amid universal credit system shake-up

·Finance Reporter, Yahoo Finance UK
·3-min read
Universal Credit File photo dated 26/04/16 of stocks of food at the Trussell Trust Brent Foodbank, Neasden, London, as one in three (33%) people on Universal Credit had more than one day in the last month where they did not eat at all or had only one meal, the Trussell Trust said.
Universal Credit: There are around 2.6 million people still claiming old-style benefits in the UK. Photo: PA

Almost 3 million people still claiming old-style benefits like housing benefit are being phased out as the government moves legacy benefit claimants to universal credit from this Monday.

The so called migration process is estimated to affect 2.6 million families who are still receiving at least one of the six legacy benefits that universal credit replaces.

This includes tax credits, income-based jobseeker’s allowance (JSA), income support, income-related employment and support allowance (ESA) and housing benefit.

The Institute for Fiscal Studies (IFS) said this was the right thing for the government to do but warned there is a risk that some will slip through the net.

The IFS noted some claimants might find it particularly difficult — or be reluctant — to engage with the process of making a fresh claim for universal credit.

Read more: Is the UK heading into a recession?

Carl Emmerson, deputy director of the IFS, said: "From Monday universal credit will face another big test. There are still 2.6 million households receiving a legacy benefit and after a two-year pandemic-induced delay, the government will start transferring them across to universal credit.

"It is sensible to transfer people across — not least because many will be better off on universal credit and for those that are not protections are in place to prevent benefit income from falling at the point of transition to universal credit.

"It means claimants will need to go through the claims process afresh. There are real risks here, perhaps especially for those least able to cope with the added stress — mentally unwell recipients of employment and support allowance, for example — and for those who may not understand that they need to make a new claim in order to keep receiving benefit payments.

There are also 1 million households receiving tax credits who, to receive universal credit, will have to interact with Jobcentres — something not required under the current system.

"Those who are not successfully brought across might have to cope with a gap in their income and might lose any transitional protection that they could have qualified for.”

Only around 500 people will be invited to move over at first, but the Department for Work and Pensions (DWP) will increase the numbers of people it processes over the next few months.

The DWP said 1.4 million legacy claimants (55%) are set to be better off under the new system, and 900,000 (35%) would be worse off. The other 300,000 benefit claimants will see no change.

Read more: Cost of living squeeze hits 900,000 more households

"Of the 2.6 million households currently receiving a legacy benefit, an estimated 1.4 million would actually be better off on universal credit, including 700,000 recipients of tax credits. But 900,000 would, in the long term, be made worse off. That includes 500,000 recipients of employment and support allowance who currently receive the severe disability premium,” Emmerson said.

"Those who will be worse off in the long run will — if they successfully move across to universal credit — have the cash level of their benefits protected. But with high inflation, that will still mean a rapid fall in the real value of those benefits. One obvious inequity created by this system is that those moved across after next April – after what is likely to be a benefit uprating of over 9% — will be much better off during 2023 than those moved over before they could receive this sizeable annual uprating."

Everyone will eventually be moved from the older welfare system to universal credit by December 2024.

Watch: How to save money on a low income

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