The major universal credit changes coming into force this week

Major changes to benefits for millions of individuals came into force this week as part of changes announced by the government last year.

The adjustments, designed to tackle what ministers call “perverse incentives” in the welfare system, will see universal credit entitlement rise for most people but fall dramatically for some claimants.

Disability minister Sir Stephen Timms said on Monday: “For too long the benefits system we inherited has left disabled people and people with long-term health conditions unemployed.

“Laws coming into force today will change this and reduce projected spending on Universal Credit by almost £1bn.

“Simultaneously increasing the standard allowance and investing £3.5bn in employment support means we are creating a welfare system that supports people into work and helps them build a better future.”

The government has also pledged that investment in personalized employment support will provide opportunities for people, supporting them to get into and stay in work “rather than leaving people dependent on benefits”.

The main changes to universal credit that will come into force are:

The standard rate for everyone is increasing

All those claiming universal credit on 6 April received an increase in income of around 6.2 per cent above inflation compared to the standard allowance. For a single person over the age of 25, this means an increase of £6 per week, rising from £92 to £98.

For couples where one or both partners are over 25, the amount will increase by £9 per week, from £145 to £154.

Most other benefits were only increased by the September inflation rate of 3.8 percent. This includes PIP, DLA, attendance allowance, carer’s allowance, ESA and more.

Matthew Oulton, research economist at the IFS, said the changes “represent a shift towards universal credit”.

He said: “The government is re-weighting the system away from people with health problems and towards everyone else, especially those with three or more children. Half a million families will see a big increase in their income overnight, while three million families will see a smaller increase.”

Health-related rate declines

At the same time, the weekly payment rate for the health-related element of universal credit for new applicants has also been reduced from £105 to £50. Rates for existing claimants will also be frozen until 2029.

This represents a reduction of more than £200 per month and reduces the surcharge by around half.

The government said the change would save taxpayers around £1bn.

Statistics published last month showed there were 2.7 million people receiving universal credit in England, Scotland and Wales who were assessed as having limited capacity for work and work-related activity (LCWRA).

People in this category are not required to engage in any interviews or work-related activities.

Mr Oulton said this cut was “harder to spot” than other changes: “As existing beneficiaries are protected, new beneficiaries alone will lose thousands of pounds. It will take decades for this cut to have its full impact, but it will ultimately affect millions of people.”

Two child benefit limit removed

The Chancellor has announced an end to the two-child benefit limit in last year’s budget, following intense pressure from backbenchers, campaign groups and political opponents.

The controversial policy prevented parents from claiming universal credit for their children beyond their second birthday. It was introduced by the Conservatives and came into force in April 2017.

The move will increase benefits for 560,000 families by an average of £5,310, the Office for Budget Responsibility (OBR) calculates in its financial outlook.

The government estimates that this change will reduce the number of children living in poverty by 450,000 by 2029/30.

Alison Garnham, chief executive of the Child Poverty Action Group, said the move was “a game-changer for children across the country who are being deprived of what they need to learn and grow due to the two-child limit”.

“This was one of the worst policies for children in modern times. Its removal is a ray of hope for affected families and an important first step towards giving every child a fair start.”