Ejemplo: el caso argentino y “Proposición”

Universal Credit

Universal Credit was introduced with an emphasis on the broad aims of simplifying the benefit system and making sure work pays. The principle of claimant responsibility underlies

the Universal Credit system, introducing in-work conditionality for the first time (ie having to continue job-seeking whilst doing some work) and ensuring that the Claimant Commitment (outlining work-related requirements) has been integrated within the claim process.

Universal Credit replaces six legacy benefits: Income Support, income-based Jobseeker’s Allowance, income-related Employment and Support Allowance, Housing Benefit, Working Tax Credit and Child Tax Credit.

Universal Credit is being phased in gradually over a number of years. It was first introduced in a limited number of job centres in the north west of England in April 2013. The national roll-out was expected to start in October 2013. However, the initial roll-out was very limited, extending in the North West and then to a further six job centres between October 2013 and March 2014. Universal Credit was rolled out to one third of job centres in Spring 2015 and will be extended nationally between September 2015 and April 2016.

During the rollout Universal Credit has been limited to ‘simple claims’ only. Jobseekers must satisfy ‘gatekeeper conditions’ (e.g. no savings over £6,000, not disabled). In most areas they must be single although it has been extended to couples and families in limited areas.

The government has recently announced details about the digital rollout of Universal Credit will begin in May 2016, accelerating in 2017. Further delays to full implementation have been made known. From 2018 the government plans to migrate people from the six legacy benefits over to Universal Credit with a projected finish date of 2020 or 2021.

Changes announced in the Summer Budget 2015 (July)

Proposed cuts to tax credits from April 2016 raised significant concern particularly centred on the impact on lower income families and the reduction of work incentives. The government argued that the cuts would be offset by increases to the National Minimum Wage and personal tax allowances. In September 2015 the Institute of Fiscal Studies issued a report (ISF Briefing Note BN175) that concluded that the increase from the National Living Wage would only compensate for 26% of losses due to proposed tax credit and benefit changes.

Further, the impact will be greatest on the poorest income groups.

In October 2015 the House of Lords voted to delay changes to the regulations until the government provides transitional protection and responds to analysis about the severity of the impact these cuts.

In representation to the Work and Pensions Committee the Director of the Resolution Foundation, Torsten Bell, highlighted how similar changes had been announced in relation to Universal Credit work allowances. As with the changes to tax credits, the removal or reduction of the work allowances will have a significant impact on work incentives and fundamentally reduces the support for people on Universal Credit.

On 6 November 2015 the Telegraph reported that the government was examining plans to increase the Universal Credit taper applied to earnings from 65% to 75% (ie removing a higher proportion of earned income and thereby reducing Universal Credit entitlement). The Work and Pensions Committee reported on this matter stating that a ‘raid’ on Universal Credit as a means of covering adjustments to the tax credit plans would either just shift the burden of cuts to different low income families or further undermine the objectives of making work pay. The Committee points out that these changes impact greatly on the ‘strivers’ that the government purports to support.

Work incentives in the benefit system

A common criticism of the benefits system is that they provide a disincentive to work. To make work financially beneficial earnings disregards and tapers are used in benefit calculations.

Income Support, income-based Jobseeker’s Allowance and income-related Employment and Support Allowance are benefits to cover basic living costs, most claimants are out of work or unable to work. Income generally reduces any award pence by pence until an individual has no entitlement. There is an earnings disregard however this is very low and could be seen to discourage paid work. The earnings disregard is £5 for a single person, £10 for a couple and

£20 for specified groups (such as a disabled person or a carer). It is clear that any costs associated with work (eg travel, uniform) will negate any financial reward. Housing Benefit (to cover rent) has a £25 disregard for long parents but the same earnings disregards otherwise; however income above a ‘needs’ figure reduces the award by 65% (ie at this point earning an extra £10 per week reduces the Housing Benefit award by £6.50).

Child Tax Credit is paid to families who are on a low income and Working Tax Credit is paid to workers on a low income. The annual calculation uses an income threshold. For Working Tax Credit the threshold is £6420 per annum (£123 per week) - income (including earnings) below this amount do not affect the award. Income above the threshold reduces the tax credit award by 41%. This more generous threshold and taper ensures that claimants are better off in work. A disincentive remains as often there is little gain in moving into full-time low paid work compared to work of 16 hours (if a single parent) or 24 hours (couples with children).

Universal Credit uses work allowances which provide a disregard for earnings and then a taper on earnings of 65%. The work allowances for a claimant without housing costs are more generous. The work allowances for someone with housing costs included in their claim are £111 per month (£25 per week) for a single person, £263 (£60) for a lone parent, £222 (£51) for a couple with children. These work allowances are clearly greater than the allowances under the legacy benefits and through tax credits, for most groups. Under Universal Credit there are no rules relating to hours worked, making it more flexible and significant than Working Tax Credit.

There are more generous disregards for people with limited capability for work in all the benefits to encourage people to return to work. (Tax credits incentivise through more generous amounts for disabled workers).