Nearly two million people £1,000 worse off a year under Universal Credit

Universal Credit will leave almost two million people living off £1,000 less than they do under the current system, with some disabled claimants hit the hardest.

Analysts from the Institute for Fiscal Studies (IFS) examine the short and long-term effects of Universal Credit on people and tried to balance how many people stand to benefit from the shift with the number which will feel their budgets shrink.

People who are disabled or have a disabled person in their household are particularly likely to be hit by losses after the move. The country’s lowest-income 10 per cent will lose the most (around £150 a year per adult on average, which is 1.1 per cent of the average income – more than any other income group).

The researchers found that many families who face losses after switching to the new system will see their income improve over eight years, with some losses falling from £1,000 to nearer £100.

However Labour’s shadow work and pensions secretary Margaret Greenwood pointed out that the report shows “that it’s hitting the poorest hardest”.

Also among those set to experience “harsher treatment” are self-employed people and couples where one person is older than state pension age and the other below.

The roll out of the new system, which replaces six current benefits like child tax credit and income-based Jobseeker’s Allowance, is expected to be completed in 2024.

Tom Waters, research economist at the IFS, 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”

He added that while many of those large losses turn out to be temporary, universal credit “still hits the persistently poor the hardest” long-term.

The IFS said while 4.2 million people could find themselves better off on Universal Credit, up to 4.6 million will find they have less money coming in.

Claimants are now in the fourth year of a benefits freeze.