Could Universal Credit could help reduce child poverty?

New TUC research suggests ways that the controversial scheme could be made more effective



Research published today by the TUC and Child Poverty Action Group (CPAG) suggests that child poverty could be reduced by channelling support through Universal Credit (UC), rather than by raising the income tax threshold.

The report, Reforms to Universal Credit, looks at alternative options for helping low income families that would cost almost the same as immediately raising the income tax threshold to £12,500.

Ranking 13 options, the report finds that the tax threshold proposal cost by far the most, yet came bottom of the list for its child poverty reducing potential.

The other 12 options investigated would improve UC to varying degrees in one of three ways:

1. Reducing the taper rate – the rate at which UC is reduced when a person’s earnings increase. It is currently set at 65 per cent – so if a claimant’s pay goes up by £100 they have a net gain of £35, because their Universal Credit payment is reduced by £65. So the lower the taper rate, the stronger work incentives are.

2. Increasing work allowances – these ensure that some earnings each month are unaffected by the taper. The amount of the work allowance varies according to family composition and circumstances, and the higher the work allowance, the stronger work incentives are.

3 .Increasing the child element – currently this is set at £277.08 per month for the first child and £231.67 for second and subsequent children. The TUC’s research found that increasing the child element would have the strongest impact for reducing child poverty.

The TUC and CPAG conclude from their research that the most effective approach would be a package of measures combining all three options.

For example, they say a £13.6bn package of improvements that (1) cut the taper from 65 per cent to 55 percent, (2) increased work allowances by £80 a month, and (3) increased both the child element and the disabled child element by £40 a month each, would achieve a direct reduction in child poverty of 460,000 children.

TUC general secretary Frances O’Grady said:

“The government is right to think about giving more help to people in work on low earnings, but the chancellor should look carefully at the most effective way of doing it before making a final decision on raising the tax threshold.

“The taper in Universal Credit acts like a tax rate of 65 per cent on low-paid workers, so it makes good sense to prioritise reducing it. We’d also like to see other improvements, like a higher work allowance and higher child element.

“All along we’ve been told that the great thing about Universal Credit is how easy it is to make policy changes that boost work incentives and reduce poverty. With more and more people moving across to universal credit, it would be strange for the government to ignore its full potential for making work pay and reducing poverty.”

Chief executive of the CPAG Alison Garnham said:

“Rather than committing billions on the costly and poorly targeted policy of raising the personal tax allowance, the Treasury should stop starving Universal Credit of the investment it needs to fulfil its poverty-reducing potential and justify the massive upheaval surrounding it.”

Ruby Stockham is a staff writer at Left Foot Forward. Follow her on Twitter

9 Responses to “Could Universal Credit could help reduce child poverty?”

  1. stevep

    The Tory government has no interest in helping working people or alleviating child poverty – just shafting the poor.
    No doubt it`ll help pay for the forthcoming reduction in inheritance tax to benefit wealthy home owners.

  2. Jacko

    There’s a common theme in many of the posts on this site: everything is seen through the prism of ‘the rich’ vs ‘the poor’.

    The overwhelming majority of people in the UK are neither rich nor poor. ‘Working people’ own houses. We also own cars, iphones, designer clothes, take foreign holidays, and eat in restaurants. You may not realise it, but that’s actually most people. It’s the small minority at the other ends of the bell curve that live in penthouses or use foodbanks. And yet you characterize those minority groups as being the majority. But they’re not. And to people in the middle, like myself, it’s an incorrect, outmoded view of the society; you sound like a union leader who was frozen in 1974 and just thawed out.

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  4. JarrowPete

    The “minority” you talk about still means over 4 million kids are being raised in poverty, over 1 million people regularly using food banks and the highest number of working people in poverty since Victoria was on the throne. Let’s just forget about them eh?

  5. stevep

    Compared to what the wealthy own, our share is small fry – and it`s got way worse since 1974.

  6. Torybushhug

    It’s Dickensian I tell ya! I mean go to any poor Welsh town and the kebab shops and takeaway’s are busy with queues of very large people tapping away on thier phones and then home they go to enjoy a nights Play station online gaming, a spot of TV shopping channel purchasing, a few fags and feed the pitbull. This is the reality across the land, poverty my arse. I suppose this is a cliché, something I read in the DM, right?

    We’re in the midst of a sustained retail sales boom, people have money alright. Cue a lefty claiming it’s all borrowed. You guys need to get out there into the real world, put down your bar charts. Just as pollsters keep getting it wrong (Greece yes / no was supposed to be 50/50, lol), so do lofty academics. They are clueless as to reality.

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  8. JarrowPete

    I do live in the real world (unlike you who has a rather skewed view on reality. You probably watch, and believe, Channel’s 4 & 5 and their obsession with poverty porn believeing all benefit claimants live like this. Where, I wonder, are the exposes on thieving Bankers?). My job involves working with charities who have had to pick up the pieces of the credit crunch (caused by spiv bankers who have got off scot free) and see on a daily basis the extreme poverty out there. This at the same time their statutory funding is being ripped away.
    Yes, there are those that milk the system. There always has been and always will (like Banks, Rail Companies, MP’s etc) but don’t be deluded to think everyone is like that. And yeah, you probably do read the DM.

  9. Torybushhug

    Standard cookie cutter reply from the left, sooo predictable.
    I hate the DM.
    I do not watch those benefits shows.
    I did live on a council estate when my Father left the army (4 kids) and saw how perfectly able mates got drawn into life long dependency, and utter waste.
    I also saw my Mum managing to cook (and often freeze) healthy CHEAP stews, and compare this with the lefts excuse making culture that informs us millions of obese poor people are that way through no fault of their own, that they live in food deserts’ lol. And yet poor migrants in the same deserts manage to find onions, peppers, a bit of stewing steak and make healthy meals, how can this be, oh that’s right, they have yet to be spoiled by endemic welfarism and so have not yet lost site of their dignity.

    Typical left wing excuse making that helps cause people to act irresponsibly and behave like victims of circumstance. A fear we might hurt feelings if we speak bluntly and yes, apportion some blame and guilt. On no, anything but lay responsibility at their feet, it must be down to Bankers / the state / Thatcher. These people must be framed as perpetual victims.
    These days I run a small business and a letting agent lets some office space from within my premises so I see first hand the mass feckless entitlement culture.
    The other day 3 teen girls in here with their bayabys, organising their rental affairs (housing benefit of course), none of who work, the babies chomping on fries to keep them quiet, loudly planning last weeks 48 hour Playstation party. But they truly want to work and be responsible role model adults………. yeah right
    Day in day out we get them through here, the idle example to their kids, the bloke with a sore knee that has never worked (let alone fly a Spitfire into battle with no legs), the naval gazing ‘dark glamour’ self pitying types that feel their health issue is a woeful badge of honour, that would not for a moment consider the work they could actually do, I mean they’re entitled to free money aren’t they?
    And yes in most cases the rough benefits class I see nearly always chose and aggressive dig as their pet. Typical of naïve types to dismiss such realities as clichés.

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