Welfare reform aims 'in ruins'

Labour MP Frank Field described the aims of the Government’s flagship welfare reform, to ensure work always pays, as being “in ruins”.

In a report for the Civitas thinktank, Mr Field, the chairman of the Work and Pensions Select Committee of MPs, claimed the Government was undermining the aims of universal credit by setting thresholds which meant some claimants who found work were losing money faster than under the old system.

Mr Field argued that ran contrary to the original aim of universal credit which was to withdraw state support at at a slower rate to encourage more people into work and cut the Government’s benefit budget.

The Government is in the process of rolling out universal credit which is supposed to replace a series of other benefits with a single payment to welfare claimants.

In his report, Mr Field, a welfare reform minister in the Tony Blair government and an advisor on poverty to the Coalition Government, said: “It is in the fate of universal credit, and the changes that have been made to the original ideas, that we see the collapse of the Government’s strategy to make work the best route out of poverty.

“This judgment is not based simply upon the minute number of people claiming universal credit - there were barely 75,000 claimants by the 2015 general election when 1.7 million was the goal - and its minimal impact on welfare expenditure.

“Because of universal credit’s higher taper rate for many claimants, the strategy of fixing ‘broken Britain’ by offering lower withdrawal rates than the current system lies in ruins.

“Universal credit fails to incentivise the work on which the ‘broken Britain’ analysis was built.

“If creating an incentive to work is the goal, the present system, for the vast majority of claimants, meets that goal more effectively.”

The report proposed using the new National Living Wage as the basis for a new system aimed at helping and incentivising people in low-paid work to either seek more hours or change jobs.

That would mean centring tax credits on low-paid workers with children, ending entitlement for those without children by 2020.

The report said: “The aim of these reforms is not to pull the floor from underneath low earners without children. It is instead to ensure the labour market can provide them with a decent minimum income as well as the prospect of pay progression.”

Jobcentre Plus staff would be given the role of helping claimants work more hours within an existing job or find new, better paid, employment.

Claimants would be allowed to increase their earnings by up to £5,000 in any 18-month period without the clawback of their tax credit entitlement.

A Department for Work and Pensions spokesman said: “This report produces an inaccurate and misleading picture of our welfare reforms to date.

“It completely fails to recognise those who gain significantly under Universal Credit, and the fact that claimants are moving into work faster and earning more than under the old system.

“The reality is that our welfare reforms are incentivising work and ensuring we have a system that is fair for those who need it and those who pay for it.”

The rollout of universal credit to all Jobcentres would be completed this spring, he said.