A Universal Credit claimant has criticised the current rules (Image: Getty)
Concerns have been raised about Universal Credit rules which mean claimants could see their payments drop. Critics fear many people are being “trapped” because of how the system currently works.
A joint meeting of the Work and Pensions Committee and Education Committee took place in Parliament recently. They joined forces to discuss how to implement the Government’s Child Poverty Strategy, looking at ways to reduce the number of children in poverty.
To understand the issue, the MPs heard from people who have experienced poverty themselves. One of the people who spoke was Sam Richards from Cardiff, a single mum who has a 12-month-old son named Oscar. His dad died three years ago.
She said she works full-time and is reliant on private childcare to look after her son, and said the system can be “problematic” if you have a low income. The mum pointed to some flaws with the Universal Credit system.
‘Poverty trap’
She said: The Universal Credit system as it stands now creates a poverty trap. The upper capital and lower capital limits have not changed for 20 years.”
These limits are about how the savings and investments you have can affect how much you get through Universal Credit. Under general rules, you can have up to £6,000 in what is classed as ‘capital’, and this does not affect your claim in any way. You can view what counts as capital on the Government website.
But if you have more than this amount, your monthly Universal Credit payment is reduced by £4.35 for each £250 you earn between £6,000 and £16,000. Once you hit the £16,000 limit, you can no longer claim the benefit.
Ms Richards said: “In 2006, £6,000 bought you a lot more than it does now, and the same with £16,000 as the upper. This is what I feel like; you are trapped.
“If you work more hours, your Universal Credit income goes down. You are always on this wheel trying to catch ahead of you, and you cannot get out of it.”
Had the capital limits gone up with inflation, the lower limit would now be worth over £10,600, while the upper limit would be worth over £28,000.
Work allowances
There is also a Universal Credit Work Allowance to consider here, which sets out the amount customers can earn from working before their benefit payments start to reduce. The monthly work allowance rates are
- £427 if your Universal Credit claim includes help with housing costs
- £710 if your Universal Credit does not include help with housing costs.
For each £1 you earn above these allowances, your Universal Credit payment is reduced by 55p. So customers keep £45 out of every £100 of any net earnings they have above the work allowance.
DWP statement
The DWP was asked for a comment about how these capital limits are set. The department said that any decision to increase the capital limits has to be considered within the wider fiscal context and the overall budget for welfare.
A DWP spokesperson said: “We’re committed to moving from a welfare state to a working state, so that work always pays and people can move into good, secure jobs, and out of poverty. That’s why we’ve deployed 1,000 Pathways to Work advisers who are supporting people left behind by the previous Government, are helping sick or disabled people into jobs backed by £3.5billion by the end of the Parliament and removing the sickness incentive in Universal Credit.
“We’re also tackling the cost-of-living pressures by increasing the National Minimum Wage, taking money off energy bills and launching the Crisis and Resilience