Submitted October 2011.
Universal Credit: A Preliminary Analysis of Its Impact on Incomes and Work Incentives*
Article first published online: 7 MAR 2012
© 2012 The Authors Fiscal Studies © 2012 Institute for Fiscal Studies
Volume 33, Issue 1, pages 39–71, March 2012
How to Cite
Brewer, M., Browne, J. and Jin, W. (2012), Universal Credit: A Preliminary Analysis of Its Impact on Incomes and Work Incentives. Fiscal Studies, 33: 39–71. doi: 10.1111/j.1475-5890.2012.00152.x
This research was funded by the ESRC Centre for the Microeconomic Analysis of Public Policy at the Institute for Fiscal Studies (RES-544–28–5001). The Family Resources Survey was collected by the Department for Work and Pensions and made available through the Economic and Social Data Service (ESDS), which bears no responsibility for the interpretation of the data in this paper. Crown copyright material is reproduced with the permission of the Controller of HMSO and the Queen's Printer for Scotland. This paper is an updated version of Brewer, Browne and Jin (2011).
- Issue published online: 7 MAR 2012
- Article first published online: 7 MAR 2012
- welfare reform;
- income distribution;
- work incentives
Alongside a series of cuts that will reduce welfare spending by £18 billion per year by 2014–15, the UK government announced in November 2010 plans to integrate and simplify means-tested welfare benefits and in-work tax credits for working-age adults into a single programme, to be known as Universal Credit and to be phased in from October 2013. The aims were to make it easier for claimants to claim benefits, to make the gains to work more transparent and to reduce the amount spent on administration and lost in fraud and error. More households will see entitlements rise from the move to Universal Credit considered in isolation than will see entitlements fall; in aggregate, entitlements will rise by nearly £1.1 billion a year. Low-income families will see their entitlements rise by more than high-income families, on average, and couples will gain more from the reform, on average, than single-adult families, especially if there are also children in the family. In general, those facing the weakest incentive to work at all, or the weakest incentive to increase earnings, see their incentives strengthened, including those with very low earnings and hours worked per week and those who at present experience simultaneous withdrawal of multiple means-tested benefits and tax credits. But a Council Tax Benefit that operates separately from Universal Credit, and that has rules that vary across English local authorities, could easily undermine many of the supposed advantages of Universal Credit.