Tax Credits and Universal Credit

The £12bn cuts in welfare, due to be detailed in the Budget next month and the Autumn Statement, seem to be focusing, say informed sources,  on Tax Credit cuts. Yesterdays speech by the PM seemed to be looking at earnings and Working Tax Credit by talking about pay levels.

If that’s the case then there will be equivalent changes in Universal Credit inevitably.  That isn’t actually that easy.  If the intention is to retain the current JSA rates and rules for people out of work, or in part time employment, but to change the WTC rules then that’s straightforward, even if there will have to be some tweaking to avoid better-off issues at the boundary. 

Universal Credit doesn’t really have that kind of boundary at all. Hours don’t matter in the main, only rates of pay.  If they want to lower the support in-work then they can really only change the earnings taper or the earnings disregards.  Those changes would affect the part-time earners as well, although lowering earnings disregards would affect fewer of them as many would not reach the level of earnings needed to take advantage of the disregards anyway.

Concentrating on Child Tax Credit would be easier, as the effect would reach JSA and other benefits as well.  Cutting the child elements in UC would then be as simple too.

Cutting CTC, for those out of work as well, would fit in with more incentivisation to work - just by lowering benefits levels - without giving any real in-work support from the state.

What guesses do others have?