Those on disability benefits and low incomes will be among worst affected, IFS concludes

This article is more than 1 year old

This article is more than 1 year old

Almost 2 million people will lose more than £1,000 a year following the switch to universal credit, with those claiming disability benefits the worst affected, according to research by a leading thinktank.

Self-employed workers on below average incomes and low-income families with little savings will also be among the biggest losers, the Institute for Fiscal Studies study concluded, as the government aims to complete one of the biggest overhauls of the benefits system since the introduction of tax credits in 2003.

The benefit clawbacks under the new system, which will affect around half of claimants, are expected to lead to a huge outcry from anti-poverty charities who have accused ministers of sanctioning more than a decade of austerity for some of the UK’s most hard-pressed households.

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Earlier this month, welfare claimants began the fourth year of a benefits freeze imposed by the former chancellor George Osborne in 2016, which has already delivered cumulative savings of £4.4bn.

In March, the annual Households Below Average Income (HBAI) report covering 2017-18 found that 3.7 million children were living in absolute poverty, up from 3.5 million in 2016-17.

Universal credit is a merger of several benefits previously paid to claimants separately, including housing benefit, child tax credit and jobs seekers allowance.

The IFS said 11 million adults would lose or gain under new rules governing UC payouts, with 1.6 million gaining by more than £1,000 a year and 1.9 million losing at least that much.

About 4.2 million will be at least £100 per year better off than under the current system and 4.6 million will be at least £100 per year worse off after transitional protection expires, the IFS said.

The research tracked previous claimants and concluded that the circumstances of many low-income families will improve and they are likely to reduce their losses from UC over eight years. For some, losses will fall from more than £1,000 to nearer £100, the report said.

But those who are disabled or live with a disabled person are especially likely to be persistently, rather than temporarily, poor.

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Tom Waters, a research economist at the IFS and an author of the briefing note, said: “The biggest losses experienced as a result of the switch are mostly down to a small number of specific choices the government has made about universal credit’s design, such as its treatment of the low-income self-employed and people with financial assets.

“Many of those very large losses do turn out to be temporary for those concerned. However, even when measuring people’s incomes over relatively long periods, universal credit still hits the persistently poor the hardest on average.”