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Rudd urged to build on ‘compassionate’ reforms to Universal Credit system

UK News | Published:

Three million people will not move on to the new system until 2020 and a retrospective two-child cap will be scrapped, the minister said.

Amber Rudd has been urged to take further steps to help people on Universal Credit after unveiling reforms of a system she said was not as “effective” or “compassionate” as she wanted.

Charities, church and union leaders spoke out after the Work and Pensions Secretary said a plan to move three million people on to the single benefit payment would be delayed until 2020.

She said it was not “reasonable” to impose the two-child cap – intended to force claimants to make decisions on whether they can afford a third child in the same way as those in work – on families which already have more than two offspring.

Ms Rudd also signalled that an end is in sight for the longstanding benefit freeze introduced by former chancellor George Osborne in 2016, saying “it should come to an end” in 2020.

However, she admitted she had yet to discuss extra funding with Chancellor Philip Hammond.

Other changes will make the system more “individual”, tailoring it to claimants’ needs by making payments more regular or paying rent money direct to landlords.

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Shelter chief executive Polly Neate said the benefit freeze had been causing “real hardship”, including affecting people’s ability to pay their rent.

She said: “We hope the Government is now waking up to the challenges faced by tens of thousands of households around the country who cannot wait until 2020 for the freeze to be lifted.

“They need action now to avoid homelessness.”

Save The Children’s Steven McIntosh said the announcements were “a step in the right direction”, but added: “Families are forced to pay sky-high childcare fees before waiting weeks to be paid back.

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“This risks plunging families into debt or keeping parents out of work, undermining the whole system.

“The Secretary of State acknowledged this is a huge issue but the proposed solution – short-term support and flexibility over deadlines when parents start work – tinkers around the edges of a problem that needs addressing head on.”

The two-child cap limits support for families through tax credits, housing benefit and UC to the first two offspring.

Subsequent children, except in special cases, are not entitled to the “child element”, which is currently £2,780 a year.

Ms Rudd used her first major welfare speech to try to allay fears about the roll-out of UC.

Work and Pensions Secretary Amber Rudd giving a speech at Kennington Jobcentre, London
Amber Rudd giving a speech at Kennington Jobcentre (Yui Mok/PA)

She added: “All children born before that date will continue to be supported by Universal Credit. And that will help approximately 15,000 families a year.”

Ms Rudd later said she was prepared to push the Chancellor over a reduction in the “earnings taper rate”, which sets the amount of benefits a claimant loses for every pound they earn.

Asked whether she favoured a reduction in the rate from 63% to 60%, she told BBC Two’s Newsnight: “Yes, and of course I would like to see it go down further. I would like every incentive we can find to make sure that people going back into work realise that it is the best thing for them and that they don’t get a huge 90% tax rate.

“I have to manage that with the needs of the taxpayer, the demands of the Chancellor, the reality of how far we can go in terms of spending with Universal Credit. But that is always going to be at the top of my mind.

“Let’s bed in what we have already got: £4.5 billion from the last Budget. But I will always be ready to have additional discussions with the Chancellor to see what else we can get.”

Ms Rudd’s move came as the Commons Work and Pensions Committee branded the plans to retrospectively extend the cap to children born before it was brought in “cruel”.

The committee expressed fears about the impact of such a move on the levels of child poverty.

The Institute for Fiscal Studies said that Ms Rudd’s announcement on the two-child policy “makes no difference to the long-run generosity of the benefit system” but delayed its long-term impact from being felt until the mid 2030s.

IFS economist Tom Waters said that the two-child policy would still leave 700,000 families entitled to less support, of which a third would be single parent families, if the population remained similar to today.

He cited previous research that suggests it would increase child poverty by around 300,000 for a saving of £2 billion to the exchequer.

He added: “Amber Rudd’s reform announced today certainly addresses the issue of ‘retrospection’ that had attracted criticism.

“But it does nothing to change the fact that, in the long-run, the two-child limit substantially reduces the extent to which the benefits system supports poorer families with three or more children.”

The Work and Pensions Secretary had earlier told BBC Radio 4’s Today programme that she remained committed to the completion of the “migration” of claimants of six old benefits on to UC by 2023.

“I’m absolutely convinced that Universal Credit is a far better system than the legacy system it replaces,” she said.

“This is a really ambitious project. It’s going to impact on eight million people’s lives when it is finally completed.

“It is inevitable that, as we roll it out, as we make the changes, we are learning about how to do it better.

“Maybe things that were proposed previously weren’t effective or weren’t compassionate in the way that I want them to be.

“So I’m going to be perfectly bold about making those changes where I need to.”

Taking questions after her speech, Ms Rudd repeated her desire to see an end to the benefit freeze next year.

She told reporters: “I haven’t had any further conversations with the Chancellor so I had better not say anything too definitive at this stage.

“But it would certainly be my view that it should come to an end at that stage.”

But Unison general secretary Dave Prentis branded the remaining cap “morally wrong”, adding: “Now at least families who had a third child before April 2017 won’t be hit, but there are still many others with younger children who will be.

“This is a highly flawed system that needs to be thoroughly rethought.”

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