Universal Credit - how can this be right?

[beentheretoo]

I’ll admit I know very little about Universal Credit apart from what you hear on the news thankfully (touch wood) never had to claim).

A friend recently got a new job 2 days a week I congratulated her and said it’s the type of job they are always looking for people I bet they’ll be offering you more days in no time. She then said oh I don’t want more days it’ll affect my UC, I’m allowed to work up to 16 hours before they take money off me and besides I’m really looking forward to having 3 days to myself once the kids are back in school. She’s a single parent her DH left her when she was a SAHM she was on full UC for a bit then had another PT job now this new one (she has a degree but doesn’t want to go back into that field).

I was thinking about it how can they be right that if you work 16 hours you get full UC but if you work 20 you get money taken away? Where’s the incentive to work more hours? My friends DC are older so doesn’t need childcare and I’m sure loads of people would love 3 days to themselves I bloody would.

Am I getting it correct then?

Statistical likelihood says I'm one of the higher earners on this thread, and probably one of the most asset rich.

And yet I find it extraordinary that people can't understand why a person who doesn't have my privilege and luck would make very rational choices around how much work they are prepared to do for a certain amount of reward.

It's so basic. If your income isn't markedly higher by working more, why would you do so?

@TulisaIsBrill

This is interesting. In my case because I grew up in a single parent household, in benefits, and we were horribly impoverished.

Benefits have become synonymous with shame, guilt, hunger, insecurity- although in hindsight actually those were probably symptoms of my DM’s poor mental health and a chaotic home life, than it was the financial situation.

But no- for me I’ve made a very irrational choice to work and accrue debt (childcare) rather than accept benefits.

The horrible irony is, I can’t say I’m financially any better off working 50 hours a week, in a relatively well paid “career” role, than my DM was on benefits.

It may pay off down the line, but coronavirus has fucked my industry so roundly, I hesitate to say that this will be the case.

should clarify- I do receive a small amount of Universal Credit for childcare element only.
I mean accept benefits as my total income

It's so basic. If your income isn't markedly higher by working more, why would you do so?

For myself my income is so low that even £20 per week is substantial. It doesn't cost me more to do the extra hours so that money is fully expendable, albeit very hard earned. It's not the case for everyone and OP is very unlikely to know the finer details of the person in questions finances even though she thinks she does. It's absolutely up to individuals to make their own call. No one's circumstances are identical!

[quote dontdisturbmenow]@May17th,you response makes no sense as I was responding to someone who was staring that people in benefits should be able to save to become owners, those happy to rent are clearly not included in this statement.

Gold star for having worked FT all my life even when single with 3 kids? No, a choice and one that allowed me to become a home owner which I couldn't have done otherwise.

Many people who work full time can't become home owners anymore. That's what's absurd
I agree with that although there are often other issues at stake, but I do agree. I hope the 5% deposit will change this for many.[/quote]
Let’s be honest. If you work full time with 3 kids hats off to you as a single parent. The majority of people who do this have a family support network to assist them with school holidays etc.. not everyone is as lucky my response was to your comment about working “FT and owning a home”.

@TulisaIsBrill

Statistical likelihood says I'm one of the higher earners on this thread, and probably one of the most asset rich.

And yet I find it extraordinary that people can't understand why a person who doesn't have my privilege and luck would make very rational choices around how much work they are prepared to do for a certain amount of reward.

It's so basic. If your income isn't markedly higher by working more, why would you do so?

Exactly

@AnaisNun

**should clarify- I do receive a small amount of Universal Credit for childcare element only. I mean accept benefits as my total income**

Precisely.

If you qualify for any amount of universal credit, then absolutely - you are in part of the income spectrum where you will only be fractionally 'better off' than if you were earning less and topped up.

That's because of the taper and the product of the effective marginal rate of taxation. Which is what some of the martyrs on this thread refuse to acknowledge.

What would be really helpful on the housebuyers front would be if support for mortgage interest (which is a loan not a no strings payment) would kick in from the beginning of the claim, not 9 months down the line and only if you have no earnings at all. What kind of incentive is that to work? And are benefit claimants really expected to lose their homes when they can't keep up even the interest only part of the mortgage? Seems ludicrous because the state will end up paying their rent when their home gets repossessed.

@midnightstar66

It's so basic. If your income isn't markedly higher by working more, why would you do so?

For myself my income is so low that even £20 per week is substantial. It doesn't cost me more to do the extra hours so that money is fully expendable, albeit very hard earned. It's not the case for everyone and OP is very unlikely to know the finer details of the person in questions finances even though she thinks she does. It's absolutely up to individuals to make their own call. No one's circumstances are identical!

Fair enough and I agree - noones circs are identical. Others, maybe they can make do without that £20 per week. Other posters should let them do so without judgement.

@MiddlesexGirl

What would be really helpful on the housebuyers front would be if support for mortgage interest (which is a loan not a no strings payment) would kick in from the beginning of the claim, not 9 months down the line and only if you have no earnings at all. What kind of incentive is that to work? And are benefit claimants really expected to lose their homes when they can't keep up even the interest only part of the mortgage? Seems ludicrous because the state will end up paying their rent when their home gets repossessed.

They should remove all props for housing. That would solve the problem long term.

• No help to buy (sell)
• No 5% mortgages. Make deposit requirements 10-20%
• No relief at all for buy to let mortgages
• Force all Interest only mortgages to be converted to repayment terms
• Instead of MMRs sticking plaster, go back to 3x main earner + 1 X secondary as max mortgage.

The only bit I actually agree with in current mainstream thinking is stamp duty is a stupid tax.

And watch as house prices collapse to 33% of what they are now. A lot of pain now, and a better world later for our kids.

The real problem is we have no prospect of either main political party doing anything to stop the entrenchment of corporate and landlord welfare.

Both are equally inept, or dare I say it - bought and paid for.

If you qualify for any amount of universal credit, then absolutely - you are in part of the income spectrum where you will only be fractionally 'better off' than if you were earning less and topped up....That's because of the taper and the product of the effective marginal rate of taxation. Which is what some of the martyrs on this thread refuse to acknowledge

It's not about "refusing to acknowledge it", it's about understanding that a purely monetary calculation isn't (or shouldn't be) the point. Earning your own money instead of being on benefits, building your career, having pride in yourself, working for self esteem and self worth, all of those things matter too.
If you stick with the mindset that its not worth it, its only a little more money, you're better off not working more and staying on benefits, you're losing out on so much more. And, and its a big and, you are feeding that idea to your children who are then more likely to perpetuate the cycle and do the exact same thing.

Buy to let and support for homeowners on benefits are separate issues.
I don't disagree with most of your suggestions. But if people fall on hard times then they definitely should be able to convert to interest only and there should be a mechanism that supports them in an appropriately sized home rather than forcing them onto a lifetime of rental at increased cost to the state.

@boltfromtheblueblue Absolutely agree with this although I would add the proviso that high levels of stress caused by juggling work, childcare and trying to make ends meet, may tip the balance towards working fewer hours.

@boltfromtheblueblue

If you qualify for any amount of universal credit, then absolutely - you are in part of the income spectrum where you will only be fractionally 'better off' than if you were earning less and topped up....That's because of the taper and the product of the effective marginal rate of taxation. Which is what some of the martyrs on this thread refuse to acknowledge

It's not about "refusing to acknowledge it", it's about understanding that a purely monetary calculation isn't (or shouldn't be) the point. Earning your own money instead of being on benefits, building your career, having pride in yourself, working for self esteem and self worth, all of those things matter too.
If you stick with the mindset that its not worth it, its only a little more money, you're better off not working more and staying on benefits, you're losing out on so much more. And, and its a big and, you are feeding that idea to your children who are then more likely to perpetuate the cycle and do the exact same thing.

Fair enough, and I utterly agree with the idealism. But back to the real world, and a question.

Is the taper rate and EMTR for a person UC at a level that sufficiently encourages most low paid workers to claw themselves out of the trap?

P3

Even on UC, you do not keep nearly enough of the additional income to make it worthwhile. The effective marginal rate is over 75% after tax and taper rate

Exactly right, @TulisaIsBrill.

Someone on NMW gets to keep about £2 for every extra hour they work (less if they're in a stakeholder pension), before taking into account any work-related expenses such as childcare or fares.

Imo it's unreasonable to expect people to work more hours if they're only going to be £2ph better off. I was earning more than that in 1977, ffs.

Fair enough, and I utterly agree with the idealism. But back to the real world, and a question.Is the taper rate and EMTR for a person UC at a level that sufficiently encourages most low paid workers to claw themselves out of the trap?

It's not idealism. That's so patronising. These are actual people with real lives, and again you're purely focusing on money.
How about we start acting like poor people might have dreams and ambitions beyond an extra tenner a week?

Imo it's unreasonable to expect people to work more hours if they're only going to be £2ph better off. I was earning more than that in 1977, ffs

2 pounds MORE and hour better off. Not their rate isn't 2 pounds an hour!

No it's £2 an hour.

It's £2 more a week. For working the extra hour.

Thats not what the post says
Someone on NMW gets to keep about £2 for every extra hour they work
£2ph better off

Unless for some bizarre reason you're arguing about someone working one extra hour a week, which makes no sense

Is the taper rate and EMTR for a person UC at a level that sufficiently encourages most low paid workers to claw themselves out of the trap?

Absolutely not, which is why we need:

1. Higher personal allowances for income tax and a graduated rate of tax for people on below average earnings
2. Graduated taper rates for means-tested benefits
3. Free, flexible childcare, including pre- and after-school care, for any working parent on below average income
4. An end to ZHCs
5. Employment protection so that (major supermarket chain) can't just fire people who won't work extra hours at the drop of a hat, even when that means they'll have to get a taxi home which will cost them the equivalent of the net gain they'll make for working 4 extra hours (true case)
6. Paid parental leave, reimbursed by the govt like SMP is

And probably a shedload of other things I haven't thought of yet.

The poverty trap is a very real thing. It's worse for women, because women earn less, on average, and are more likely to be single parents.

And it's worse in areas where housing costs are high, because even people on above average earnings are still entitled to UC if they rent.
(Elsewhere on t'internet, someone flatly refused to believe me that a junior doctor on £32k would be entitled to UC if they were a lone parent with 2 children. In a wide swathe of Sussex, from the M25 to the coast, the LHA for a 2-bed property is £1,000 a month, so someone on £32k with 2 kids gets quite a bit of UC)

This isn't just an issue that affects "poor people", or people on min wage.

@AnaisNun - so you pay 50% of your childcare bill.
Do you think that's a bad idea? Is Taking financial responsibility for yourself and your children a bad thing?

Where does the states responsibility end and individual responsibility start?

How about we start acting like poor people might have dreams and ambitions beyond an extra tenner a week?

That would be great.

We'd have to completely overhaul universal credit to do that though. Because universal credit is set up on the false premise that earning an extra tenner a week is all one need aspire to, it being sufficient motivation to go from working two days a week to working five days a week.

If I ruled the world, Universal Credit would be just that - universal. Everyone of working age who isn't in full time education would get it by default, no means testing needed. It would be just enough for a subsistence level existence, ie it wouldn't cover luxuries such as alcohol, cigarettes, gifts, holidays etc.

Anyone who worked would have their earned income on top of the UC, so it would be worthwhile getting a job or taking on extra hours.

The personal tax allowance would be abolished. Everyone would pay income tax, including on the UC (the net amount of which would be sufficient for the said basic existence).

So when you started earning money, you would directly benefit from it and nothing would be taken away apart from the income tax.

Income tax would be tiered, as it is now, but probably with different thresholds.

I know I haven't really thought this through, but surely something like that would be fairer to everyone?

Where does the states responsibility end and individual responsibility start?

Somewhere above £8.74 an hour.

In fact, given the amount of landlords churning through state help to the tune of the £12 billion a year we give them to secure their £250k+ assets, individual responsibility kicks in at a much higher point than £8.74 an hour. Evidently.