The roll-out of universal credit will result in the poorest households losing the most when income protections during the transition period expire, research by the Institute for Fiscal Studies has found.
The analysis published today, which examined the impact of universal credit over an eight-year period for the first time, shows while many of the biggest reductions in income are temporary, those claimants whose incomes are in the lowest tenth will lose, on average, £100 per year - more than any other income group.
The IFS found around 4.2 million of the 11 million adults eligible for some universal credit will be at least £100 a year better off under the new system, while 4.6 million will be at least £100 worse off once top-up payments to ensure no one loses out under the new system end.
In any one year, one in three adults entitled to benefits will experience a change in their entitlement of at least £1,000 a year, with 1.6 million gaining and 1.9 million losing. However, over an eight-year period 0.6 million will gain and 1.2 million will lose by the same amount.
IFS research economist Tom Waters 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.”
The research was funded by the Economic and Social Research Council and Understanding Society.