part iii
chapter seventeen Assessing the Universal Credits Scheme These reforms lay the basis for the simpler, fairer system. The much lowered benefit withdrawal rate of 55% sends a clear signal that work will pay – at all hours and at all wages. The restructuring moreover reduces the unfairness that couples face by a significant amount. Key Conclusions •
Our reforms would benefit 4.9 million working households in the UK by an average of £1,000 per year:
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Those starting out in entry-level jobs would benefit the most;
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Higher-earning families currently receiving the family element of the
Child Tax Credit would lose out, as would those working just above
the hours thresholds of the Working Tax Credit.
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They would result in 600,000 workless households moving into work, and an increase in £1.16 billion in national earnings.
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210,000 children would escape poverty.
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The direct dynamic cost to the Treasury would be £2.7 billion p.a., with associated administrative cost savings and reductions in the indirect costs of worklessness meaning our proposals would break even after five years.
17.1 Winners and losers These proposals would directly benefit 4.9 million working households – almost one-sixth of all households in the UK - by an average of £1,000 per year. As a result in the earnings and employment effects, the overall increase in income as a result of these proposals would be £4.7 billion. The main winners would be those starting out working in entry-level jobs, especially those working below the current 16/30 hours thresholds. Some of the largest gains are received by low-earning couples without children – due to the incentive effect of reduced withdrawal rates, and also the reduction of the couple penalty. On the other hand lone parents working above 16 hours will see only a small gain. They have already comparatively low PTRs beyond that earnings level. The major change experienced by lone parents is for the group working under 16 hours. This will make shorter working hours much more financially rewarding for this group. There are two categories of losers. The largest group are those higher-earning families currently in receipt of the Family Element of the Child Tax Credit.
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