House of Commons Library

Universal Credit: an introduction

Published Friday, November 9, 2012

Starting from next year, Universal Credit (UC) will begin to replace a range of means-tested benefits and tax credits for working age families. The intention is to simplify and streamline the benefits system for claimants, making it easier for people to understand; to reduce the financial and administrative barriers to work; to tackle in-work poverty; and to bear down on fraud and error.

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Starting from next year, Universal Credit (UC) will begin to replace a range of means-tested benefits and tax credits for working age families. The intention is to simplify and streamline the benefits system for claimants, making it easier for people to understand; to reduce the financial and administrative barriers to work; to tackle in-work poverty; and to bear down on fraud and error.

Universal Credit is means-tested and will be payable both in and out of work. A key feature is the “single taper” for the withdrawal of UC for those in work. As earnings rise, UC is withdrawn at a constant rate of 65 pence for each pound of net earnings (although an initial amount will be “disregarded” before the taper is applied). For employees paid through PAYE, Universal Credit payments are to be calculated and adjusted automatically using a new system giving “real time” information on earnings from employers.

The financial support provided by Universal Credit is underpinned by a new “conditionality” framework setting out the responsibilities claimants may be required to meet. The level of requirements will depend on the claimants’ circumstances. The conditionality framework is backed up by a new “strong and clear” sanctions regime for non-compliance.

Universal Credit is to be introduced nationally between October 2013 and 2017, although it will start in selected “pathfinder” areas from April 2013 in order to test that processes are robust and reliable before the national roll-out commences.

The Welfare Reform Act 2012 provides the broad framework for Universal Credit, but the detailed rules will be set out in regulations. Draft regulations were published by DWP in June for scrutiny by the independent Social Security Advisory Committee (SSAC), which launched a public “call for evidence” on them. The deadline for responses was 27 July and SSAC has submitted its report to the Secretary of State.

It is expected that final versions of most of the UC regulations will be laid before Parliament, along with the SSAC’s report and the Government’s response, following the Chancellor’s Autumn Statement on 5 December.

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