Public confidence in universal credit will collapse without an urgent £3bn cash injection to reverse cuts that are set to leave millions of families worse off, an influential thinktank has warned.

The Resolution Foundation says a spree of Treasury-driven welfare cuts since 2015 has left universal credit unable to meet its original aims of strengthening work incentives and supporting the incomes of low-income families.

It warns that the current fragile political consensus in support of universal credit risks breaking down unless ministers refinance the reform and fix multiple design and implementation problems.

The original universal credit vision of merging six benefits into one to create a simpler social security system is still “worth holding on to”, Resolution argues, but it warns the programme will fail unless ministers face up to its inherent flaws.

“The government is rightly committed to the roll-out of universal credit, but will need to relaunch the benefit to both address the design challenges that are already visible and get ahead of those that will emerge in the years ahead,” said David Finch, senior policy analyst at the foundation.



The government is under increasing pressure to make changes to universal credit amid fears that the reform will reach poll tax levels of public unpopularity. Reports at the weekend suggested ministers were considering a reduction in the current 42-day wait for a first universal credit payment.



Although David Gauke, the work and pensions secretary, proclaimed at Conservative party conference that universal credit was “working”, he subsequently came under heavy pressure from his backbenchers to make changes and announced earlier this month that 55p-a-minute charges for the universal credit helpline would be scrapped.

However, Resolution argues that big changes to the financing of universal credit are needed to restore its credibility. It warns that cuts to work allowances will be a “major drag on the living standards of families on low and middle incomes”, leaving 1m working households an average of £2,800 a year worse off by the time universal credit is fully rolled out.

“Restoring parity with the tax credit system by reinvesting £3bn a year into universal credit is essential, not only to protect living standards but also to prevent universal credit’s brand becoming synonymous with such major cuts, resulting in significant opposition to roll-out,” it says.



The current political focus is on the hardship endured by claimants forced to wait a minimum of 42 days for a first universal credit payment. Resolution calls for this to be reduced to around 30 days, with the housing rent element paid within two weeks, to minimise the likelihood of poorer claimants running up debts and arrears.

Resolution adds that a series of other design flaws are likely emerge as “real world problems” as hundreds of thousands more families move on to the system over the next few months.



These include wider awareness of changes that will leave self-employed workers up to £2,000 a year worse off, and frustration over the complicated processes for payment of childcare support that have forced some parents to give up work.

It adds: “Until recently one of the biggest strengths of the new benefit was the near-universal support for the principle underpinning it of a simpler scheme that would improve work incentives and outcomes for low-income families. That consensus is now looking seriously strained.”

A DWP spokesman said: “This report fails to acknowledge the package of support introduced to help people move into work, including unprecedented support with childcare costs and wider reforms to taxation and the introduction of the national living wage. It also assumes benefit claimants’ lives remain unchanged, but the truth is [that], under universal credit, people are moving into work faster and staying in work longer than under the old system.

“The majority of people are comfortable managing their money, but advances are available for anyone who needs extra help and arrangements can be made to pay rent direct to landlords.”