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Benefits shake-up: What is Universal Credit?

The changes represent the biggest shake-up of the welfare system for years. Photo: PA

Government attempts to set up its flagship Universal Credit scheme have not achieved "value for money" and have already wasted £34 million, according to a damning report by the National Audit Office.

The idea is to replace six separate means-tested benefits with just one. Here we look at how the changes will affect you.

What is Universal Credit?

Universal Credit is a new single payment for people who are looking for work or on a low income.

Universal Credit is designed to help claimants and their families to become more independent and will simplify the benefits system by bringing together a range of working-age benefits into a single payment.

It will be rolled out throughout 2013 and will replace:

  • Income-based Jobseeker’s Allowance
  • Income-related Employment and Support Allowance
  • Income Support
  • Child Tax Credits
  • Working Tax Credits
  • Housing Benefit

How will it work?

Universal Credit will be paid once a month, rather than fortnightly or weekly, and will go directly into a bank account.

If both you and your partner each receive these benefits, then this will change to a single payment for the household.

In addition, if you receive help in paying your rent at present, this money goes directly to your landlord.

Under universal credit, you will receive the money as part of your benefit payment and you will then have to pay your landlord.

What you need to do now?

Universal Credit is being introduced in parts of Greater Manchester and Cheshire from 29 April 2013. Most people won't be affected at this stage.

There is a small chance you could be affected if you live in this area and start living with a partner who gets Universal Credit.

If this happens, your tax credits claim might end, and you'd be able to claim Universal Credit with your partner instead.

How will Universal Credit be rolled out?

The system will be rolled-out nationally from October, with completion due in 2017, but started with four pilot tests: Ashton-Under-Lyne, Oldham, Warrington and Wigan.

From October, people will be able to make new claims while claims for existing benefits and credits will be gradually phased out.

From April 2014, all new claims will be for Universal Credit.

Universal Credit will replace jobseeker's allowance and income support. Credit: PA

The differences between Universal Credit and the current system

The main differences between Universal Credit and the current welfare system are:

  • Universal Credit will be available to people who are in work and on a low income, as well as to those who are out of work
  • Most people will apply online and manage their claim through an online account
  • Universal Credit will be responsive – as people on low incomes move in and out of work, they will get ongoing support, giving people more incentive to work for any period of time that is available
  • Most claimants on low incomes will still be paid Universal Credit when they first start a new job or increase their part-time hours
  • Claimants will receive just one monthly payment, paid into a bank account in the same way as a monthly salary
  • Support with housing costs will go direct to the claimant as part of their monthly payment

Why is the Government introducing Universal Credit?

Work and Pensions Secretary Iain Duncan Smith has said Universal Credit is a "fundamental cultural shift of the welfare system".

He added that the new system will "revolutionise" the way people deal with the welfare state, making it easier for people to move off benefits and into work.

Work and Pensions Secretary Iain Duncan Smith. Credit: PA

Criticism of Universal Credit

Mr Duncan Smith came under criticism earlier this year when he suggested that he could live on £53 a week.

In the wake of the comment, more than 100,000 people signed a petition on the change.org website, calling for the minister to try surviving on that money for a year.

Source: www.gov.uk

Source: www.hmrc.gov.uk

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