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Universal Credit: an exploration and key questions

8 February 2011
Benefits and tax credits briefing cover

Introduction

Universal Credit [PDF 95 kb]

In this document , Citizens Advice provides a brief guide to Universal Credit and highlights some issues that we consider need to be resolved before judgement can be made about the fairness or otherwise of the Credit. We have modelled the potential pitfalls and problems as we see them. (The lack of detail from Government necessarily makes this a working document which will be updated as further details are announced.) The main issues we raise are:

  • Will statutory sick pay (SSP) count as earnings? This will make a big difference to some claimants. In the scenario we have modelled, where the main earner gets cancer, a family already facing a big drop in income will face a further drop of over £60/week compared with the present system if SSP is treated as income other than earnings.
  • Will statutory maternity pay and maternity allowance statutory adoption pay and statutory paternity pay also need to be considered be treated as earnings or as income other than earnings? The scenario we model - a lone parent who was previously working, who has a new baby - shows a drop in income of nearly £90/week compared with the present system – if these benefits are not treated as earnings.
  • How will childcare costs be incorporated into the Universal Credit? Our modelling demonstrates that households who depend on childcare in order to be able to work will be considerably worse off under Universal Credit. Those who only command the minimum wage and who have high childcare costs will be particularly badly affected, since the higher the ratio of childcare costs to earning power, the worse off someone will be.
  • Will any extra support be offered to parents of disabled children? Because of the extra costs of childcare they face, they will be particularly badly affected by the amount of childcare covered. Unless extra safeguards are put into the system, our modelling demonstrates a very significant drop in income
  • What criteria will be used to determine entitlement to the disability disregard? If the criteria are the same as those for entitlement to the disability element of WTC, many fewer people will be eligible, as the benefits which passport this help are being radically changed.
  • Will Universal Credit include any extra support for people with a disability, apart from that mentioned in the White Paper? (ie the disability disregards and - we assume - the work-related or support component for those who satisfy the WCA). If not, then our modelling suggests that several groups of disabled people will be worse-off than under the present system
  • What support will be available for carers? Will those eligible for carers allowance be able to earn more than the present limit and still claim and receive a carers premium?
  • How will support for pensioners with children be incorporated into UC? At present, for example, grandparents with combined pensions of £16,000/year, who take responsibility for, say, two grandchildren, are eligible for nearly £100 child tax credit.  Unless some concessions are introduced, they will get no help from Universal credit or pension credit.

Universal Credit [PDF 95 kb]