How many children will Universal Credit lift out of poverty?

Published on: 
22 March 2016
Written by: 

Imran Hussain
Former director of policy, rights and advocacy

Just days after Iain Duncan Smith resigned as Work & Pensions Secretary, citing his unease with the Summer Budget’s cuts to Universal Credit, today the Government has published a written answer in which it refuses to update its own assessment of how many children, if any, will be lifted out of poverty by the flagship policy following these cuts.

The Summer Budget last year slashed or eliminated altogether work allowances for low-paid workers – the work allowance sets out how much people can earn before their UC entitlements start being reduced at a rate of 65p per £1 earned.

This was surprising to many observers. This work allowance is one the key planks of Universal Credit. Undermining the work allowance, undermines a key aspect of Universal Credit, which incentivises moves into work by allowing people to keep more of their benefits as they increase their hours.

In 2011, the government said Universal Credit would lift over 350,000 children out of poverty - even more, it claimed, when you factor in the dynamic impacts on employment and earnings of the new benefit:

Universal Credit will have a substantial impact on poverty in the steady-state. As outlined in paragraph 22, the Department estimates the combined impact of take-up and higher entitlement might lift around 950,000 individuals out of poverty, including over 350,000 children and more than 600,000 working-age adults. 

In 2013, the Government downgraded this figure to 150,000 children (in a memorably opaque written answer):

However, before taking account of any expected behavioural change among the self-employed affected, modelling estimates that universal credit reduces the number of individuals in relative income poverty by some 400,000; including more than 150,000 children and around 250,000 adults.

Then today, the Government point-blank refused to answer the question:

We know that work is the best route out of poverty, and Universal Credit is designed to strengthen incentives for parents to move into and progress in work. Ignoring the impact that Universal Credit has on incentivising work and raising the incomes of families is inappropriate.

In refusing to respond to the question asked by Stephen Timms MP, the minister is ignoring one set of effects of Universal Credit - which previously it had been willing to produce assessments on - by saying any assessment of Universal Credit must not ignore other effects. The inference is that they know the answer and it isn’t pretty.

There is no doubt that Universal Credit’s poverty-fighting capability has been degraded in recent years. What’s just as worrying is that ministers aren’t willing to look at the likely impacts of a programme costing billions of pounds and affecting millions of families.