Department for Work and Pensions admits work allowance will fall under universal credit but people can ‘recoup the loss’

The Department for Work and Pensions has admitted that people will see cash losses to their in-work benefits under the new universal credit system and suggested they could make up for it by working an extra 200 hours a year.

In a new document on universal credit, published after parliament has broken up for Christmas, the department said people could “recoup the loss” caused by lower in-work benefits from April 2016 by taking on an extra three or four hours of work a week at the new “national living wage” of £7.20 an hour.

Iain Duncan Smith, the work and pensions secretary, has repeatedly insisted that people on universal credit will not be worse off because of changes to in-work benefits announced at the summer budget.

He told parliament: “Those who are on universal credit at present will be fully supported through the flexible support fund, which will provide all the resources necessary to ensure that their situation remains exactly the same as it is today.”

But the government response to its independent advisers on the Social Security Advisory Committee (pdf) admits people are due to see losses from April.



It said: “We expect many claimants to respond to the changes to work allowances announced in the summer budget by actively seeking more work, and we will support them with this. For example, someone could recoup the loss from the work allowance changes by working three to four additional hours a week at the national living wage to which they are entitled.”

Owen Smith, the shadow work and pensions secretary, highlighted the difficulty of getting extra hours of work for many people.



“Working families set to lose thousands of pound next year because of cuts to universal credit will be livid at the Tories’ offhand suggestion that they just work more hours,” he said.

“It’s the measure of Iain Duncan Smith that he is trying to shift the blame for the cuts on to the victims. His Christmas message is work an extra 200 hours a year and you’ll be no worse off.

“A single mother working full-time with two children is set to be up to £3,000 worse off as a result of the cuts, while 2.6 million working families stand to lose an average of £1,600.”

An extra four hours a week at the new minimum wage of £7.20 an hour would make someone another £1,500 a year.

Universal credit has come under scrutiny since George Osborne, the chancellor, cancelled his billions of pounds of cuts to tax credits under political pressure from Labour and some of his own Conservative MPs.



The new universal credit system – which rolls six benefits into one monthly payment and replaces tax credits with work allowances – will come into force gradually over the next five to six years.



Labour has previously claimed the tax credit cuts are merely being delayed rather than cancelled because it says government figures show it is intending to cut £100m from the universal credit work allowance next year, £1.2bn the year after that, and then £2.2bn, £2.9bn and £3.2bn by 2020.

People who currently claim tax credits will be transferred to universal credit without any cash losses, but they will get the lower work allowance rate when their circumstances change.

New claimants will be also put on the new lower rate from April, and those who are already on universal credit will see their work allowance entitlements fall at that point. Around 500,000 will be on universal credit by April but it is not known how many of those claim the work allowance.

A DWP spokesman said: “Universal credit is at the heart of our welfare

revolution. It ensures work always pays, and supports people to

progress. And it is working – under the new system people are significantly

more likely to be in work, and earn more than under the old system.”