Forum Home → Discussion → Universal credit administration → Thread
Abolition/reduction in UC work allowances - Potentially misleading DWP response.
In today’s response to the SSAC DWP have effectively confirmed that there will be no transitional protection from the work allowance cuts (as we might have guessed.)
.. they’ve also come up with the following rather surprising statement (page 5)...
“We also expect many claimants to respond to the changes to work allowances announced in the Summer Budget by actively seeking more work, and we will support them with this. For example, someone could recoup the loss from the Work Allowance changes by working 3-4 additional hours a week at the national living wage to which they are entitled.”
Working 3-4 hours extra hours at £7.20 NLW will return around £93.60-£124.80 per month (assuming earnings are too low for tax/NI). After the 65% UC taper that returns an uplift of £32.76 - £43.08 per month.
The vast majority of current working UC claimants will be losing at least £111 per month of work allowance (so their monthly loss due to abolition of the work allowance is typically £111 x .65 = £72.15 ) so three to four hours extra work at NLW won’t come close to recouping the loss due to the removal of work allowance - it’s more like seven hours.
If they’re on the CTR taper and/or liable for income tax/NI then it’s even worse and of course many UC claimants won’t even qualfiy for NLW.
( I wonder if DWP have simply forgotten to factor in the taper when coming up with the ‘3-4 additional hours’ line ... it reminds me of this nonsense re bedroom tax from the last government: http://www.insidehousing.co.uk/people-should-work-more-to-pay-bedroom-tax/6525693.article )
For info, tables of UC losses for various households due to work allowance (after tax and NLW changes where relevant) are still available here - http://www.lgbp3.co.uk/tcuc2016/tcuc2016.html
[ Edited: 21 Dec 2015 at 05:25 pm by Jon Blackwell ]Might be worth a Freedom of Information request asking them where the calculation is that supports this statement?
On the basis of 3.5 hours at NLW, I made it a net loss of £33.93. I’ve just finished the first big run of the 2016 - 2021 period with our Future Benefit Model and, like all these changes, when you carry the results forward into the consequences for following years, with all the additional changes like child limits and frozen values, it gets worse and worse.
I did my own calcs but posted them in the wrong thread on WA cuts: http://www.rightsnet.org.uk/forums/viewthread/9110/#41316
Might be worth a Freedom of Information request asking them where the calculation is that supports this statement?
It looks like the ‘thinking’ behind the figures is the same as that reported in the Guardian article at http://www.theguardian.com/society/2015/dec/21/universal-credit-benefit-cuts-work-allowance :
‘“A single mother working full-time with two children is set to be up to £3,000 worse off as a result of the cuts, while 2.6 million working families stand to lose an average of £1,600.”
An extra four hours a week at the new minimum wage of £7.20 an hour would make someone another £1,500 a year.’
So they’ve simply omitted (in the Guardian commentary) to apply the 65% reduction to the £1,500 to calculate the actual gain to offset against the slightly-lower-than-average loss.
I find it difficult to believe that those in charge of designing the system would also make such a fundamental error, especially when formulating a careful response to the SSAC. Perhaps someone was in a rush to get to the office Christmas party when drafting it, and by the time Parliament broke up it was too late to proof read it before hitting send.
Perhaps someone should point out this perfectly understandable error to the Committee concerned.