The DWP has confirmed a review of Universal Credit to look at work incentives, reduce poverty and explore "untapped opportunities"

DWP issues new Universal Credit update as benefit payments review underway

by · Birmingham Live

The Labour Government has issued a new update on Universal Credit, confirming that a review is underway to determine whether the benefit is meeting its objective of "making work pay." The Chancellor has already announced that the DWP will be lowering debt deductions next April which is expected to give an extra £420 to one million households.

More than 7 million people are now claiming Universal Credit across Great Britain, with 37 per cent in employment and the rest either looking for a job or unable to work. This includes 212,024 claimants in Birmingham, where only 62,441 (a much lower proportion of 29 per cent) are in employment.

Labour has already announced a Get Britain Working white paper to reduce economic inactivity and boost employment support so that more people can rejoin the workforce. It will be followed by a "fundamental reform" of health and disability benefits in the spring which is expected to shift the focus to helping more people to find jobs rather than being written off and placed on sickness payments indefinitely.

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In response to a parliamentary question from Shadow Minister (Work and Pensions) Danny Kruger, the DWP confirmed that a review of Universal Credit is being carried out and is expected to increase work incentives and tackle poverty as well as identifying "untapped opportunities." As part of this, the work capability assessment used to decide if someone is fit for work or instead receives incapacity payments of £416 a month on top of their benefits is to be reformed or replaced, in line with Labour's election manifesto as well as a previous DWP plan set out under the Conservatives.

Sir Stephen Timms, DWP Minister for Social Security and Disability, said in his written response: "The Department is committed to reviewing Universal Credit to make sure it is doing the job we want it to and meeting our objectives of making work pay and tackling poverty. We have already begun this work with the introduction of the new fair repayment rate announced in the Budget.

"We will continue to work closely with stakeholders as the review progresses to seek views on proposed areas of focus and untapped opportunities in UC. Parliament will be updated on progress and future changes accordingly."

The new Fair Repayment Rate, put forward by Work and Pensions Secretary Liz Kendall and announced in the October Budget by Chancellor Rachel Reeves, will take effect in April 2025 and cap Universal Credit deductions at 15 per cent rather than the current 25 per cent. The move is expected to help 1.2 million families, including 700,000 with children.

Some of the poorest households will now be £420 better off as a result of the measure, the government has calculated. Save the Children estimates single parents could receive up to £39 more of their Universal Credit entitlement each month. For two-parent families, this could be up to £62. Two-thirds of children in Universal Credit households are pushed deeper into poverty by benefit deductions.

Deductions are made from monthly Universal Credit payments for a number of reasons, including recovering arrears on rent, council tax, water and energy bills; repaying benefit loans offered to new claimants and to existing claimants asking for help with emergency expenses; and clawing back overpayments from those who were previously on tax credits.

Adam Butler, Public Policy Manager at StepChange Debt Charity, said: "Unaffordable deductions from benefits are a huge driver of hardship in the benefits system, pushing over nine in ten of those affected to go without essentials. StepChange has been campaigning with sector partners for years to see deductions drastically reduced and the Government's announcement will make a massive difference to those affected.

"StepChange research shows more than one in four people (27 per cent) receiving Universal Credit are struggling with serious problem debt. Overhauling the deductions system will help people meet their essential costs like housing payments and reduce debt problems.

"We warmly welcome the Government signalling its intention to make real progress in tackling child poverty and taking concrete steps to increase household incomes among those most at risk of poverty and hardship."

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