How Universal Credit works

Claims are made by households rather than individuals and the amount awarded depends on the income and circumstances of all the household members. The previous coalition government claimed that it intended to make sure that no one whose situation has otherwise not changed ends up worse off when transferred to UC. Additional payments would be given if necessary, so these claimants would not end up with less than they were getting in benefits before.



However, the current Tory government has given no such commitment. In February 2016, the Institute for Fiscal Studies (IFS) said: “Since it was first proposed, the design of UC has been significantly changed. The amounts recipients can earn before their benefits start to be withdrawn have been cut, shaving almost £5 billion per year off its long-run cost. As a result, 2.1 million working households will get less in benefits due to the introduction of UC (average loss of £1,600 a year) and 1.8 million will get more (average gain of £1,500 a year).”


Retail union Usdaw has warned its members that most working people who are currently eligible for tax credits will be much worse off under UC.