AIBU to question whether UC rules create incentives to limit earnings?

[Justwonderingum]

Unpopular topic, I know. But I'm trying to understand how UC works. It looks to me like there is a huge gap where you are much better off limiting the hours you work, paying yourself less from your company, or even over paying into your pension as you can claim the difference in UC. Also claiming UC means you pay less for many other things, and will include free school meals soon too. So AIBU to wonder if this really is the case or are these loopholes closed? A quick play seems to suggest that even on a household income of £70000 can claim over £1000 a month, assuming 2 plus kids,including one with lower rate DLA

Yes, many ladies in my work reduce their hours until their child is 18. Obviously it will affect their pension long term but most are going to work less hours if they are having their salary topped up with UC.

I think UC rules actually encourage employers to continue paying rubbish wages knowing it’ll be topped up. That’s the real problem alongside the housing element that encourages landlords to charge high rents and then the claimant is demonised for taking too much in reality majority of their UC payment goes to someone who would never qualify for UC and probably has huge amounts of savings and assets.

I don’t claim UC & never have , but a lady I work with does and deliberately works less hours as otherwise loses her free dentist / prescription / eye tests

Absolutely this. My entire UC payment goes to my private landlord, despite only just under half being allocated for housing. There is nothing cheaper where I live and depute being served 2 S21s in 2 years when successive landlords sold up, I’ve never been able to access social housing. If I could access social housing, I could probably manage without UC at all, or certainly with a much much smaller amount.

It’s an absolute scandal as far as I’m concerned . It falsely makes the claimant the ‘face’ of the high welfare bill and it’s not accurate. This is why I will vote Green from now on (previously voted Labour) as they are the only party prepared to tackle this issue at a level that doesn’t harm the poorest.

Can I just check, are Labour changing the rules so all children with parents in receipt of UC (even if it’s barely anything at all) will soon get FSM? Is that throughout their whole schooling too? That sounds expensive to fund! I know lots of people get UC whilst working FT and the UC might only be £20 a week or something. Seems bonkers to make that a blanket rule, if that’s what they’ve done?

Free prescriptions and eye tests etc are for those on a very low income only aren’t they, so basically people who don’t work at all or work very few hours. I don’t think there’s much incentive to make yourself quite that poor just to avoid the odd £10 prescription fee or whatever.

Sorry if I’m wrong about any of this. I don’t get UC, DH and I are considered high earners. We lose a portion of our salary to student finance, we both get taxed very heavily and we have a lot of outgoings anyway because we have 5 DC. We’re still waiting for the free breakfast clubs they promised which actually would help us. We haven’t been helped by any of their other policies thus far.

So earning £25k for 25hrs a week so around £19gross ph

obv more kids - rent and if any dla/sen kids make a diff

but yes I’m sure many work less hours or then they lose extra uc

the system is a screwed but more so I find madness that if parents work and earn over x amount they lose their carers allowance - which I think is very unfair

they are still up at night looking after /caring for awake child - then go to work next day

She’s daft then. She could get free eye tests through her employer. And if she keeps her wage below £935 for the purpose of getting free prescriptions, she’d be better off earning more and taking home more in wage and UC combined and getting a prescription prepayment certificate. Dentistry is obviously expensive too, but if she has an NHS dentist, unless she’s having work done incredibly frequently, she’d still be better off paying the set prices an earning more herself.

Yes they have and I agree it’s too broad really. Although in London FSMs have been universal for a good while, so some would argue it can work.

I also pay back a student loan and get UC though, so the two aren’t mutually exclusive.

The thing is there's also a cliff edge where people earning 100k + aren't any better off working full time if they have kids in childcare. So they will drop hours to stay below 100k and get their subsidised childcare. No one calls them scroungers. People are going to balance their lives in the way that works best with the situation they are presented with.

As PP have said UC is designed to incentivise working.

Theres often an amount that you are allowed to earn before it effects your UC. And then the UC gradually tapers away as you earn more.
In strict monetary terms you are always better off working.

Peoples lives are more complicated than the UC calculation of course.

Theres often other considerations like the costs of taking up work, caring responsibilities, increased stress of working longer hours etc...that might mitigate against that incentive for individual people.

Thats particularly true at the edge between being entitled to UC or not.

This is true of every benefit. Its impossible to design a syatem that doesnt have some kind of "cliff edge" or "benefits trap". A bite point where people will ask themselves whether losing their entitlement to benefit is "worth it" to them.

What people tend to forget is that under previous systems this kicked in at a much lower income level. And in a much more brutal fashion.

Under the old Income Support you had people (particularly single mothers) trapped on very low levels of benefit for very long periods of time because taking work of any kind would cause all the benefits to stop, losing whatever security they had.
Often, it was impossible to earn enough to cover childcare so working was not even a possibility.

Under Tax Credits and now Universal Credit people are making these sorts of decisions at a much later point. Often when considering moving from part time to full time work. Thats an improvement. More people are able to work, less children are growing up in poverty and more mobey is circulating around the economy.

You don't automatically get free eye tests for being on universal credit you have to also have an income below a certain amount. I can't remember what that amount is but its really low. The dentist you have to have an NHS dentist good luck finding one of them and prescriptions anyone can have a prepayment certificate.

I agree that private landlords getting paid is an issue. If you have a mortgage it's "morally" wrong to pay it through benefits ie other peoples tax but it's fine to pay a random person's mortgage. Or maybe even a family member's mortgage if you are lucky enough to rent off of family. I agree this has inflated rents. In my area the cap for hb is lower than the average cost by a few hundred pounds.

Spot on!

And when people bemoan the parents working pt to accommodate childcare and therefore staying on UC, they forget that they likely could still be entitled if they worked full time (as I was), or that if they went full time an then need childcare which is likely to be taxpayer subsidised anyway (either through UC, or through the tax free childcare scheme).

the ultimate point is, wages are too low for the vast majority of families to survive on without state intervention. And yes, that’s a problem, but give that any time there’s mention of rising the NMW, the same people break out in chorus that businesses can’t survive it.

Oh I didn’t suggest they were! I was just explaining our situation. We obviously chose to have more than the average number of children and we would undoubtedly be better off had we stopped at the average 1-2 children. All life choices ultimately but I do think it’s a bit crazy to give all children FSM, even if their parents can clearly afford the dinners and only get a nominal amount of UC.

Oh yes I’m totally with you I think. I think all benefits (including indirect ones like FSMs etc) should be means tested. I just think the means testing needed looking at as it was previously a household income of £7k ish which is insanely low.

But I’m also someone that thinks that means testing should extend to pensions, so I’m rarely popular with that view 😂

@MyLuckyHelper I can see that the system is incentivising work as opposed to not working. But it is also creating an issue where there are people with a much smaller household income who are not entitled because they have a mortgage. And that does not mean they have equity of any significant amount.

I agree with this. And im not sure how we get out of it. In a way the end consumers are also dependent on workers recieving UC.
I think a lot of people would get a shock if the cost of food and childcare suddenly reflected the actual labour costs of providing it.

Without a doubt yes.
Colleagues have said they can't have pay rises or bonus because it will affect their benefits.
Work has openly mentioned this.

i 100 percent agree with this.

@HowLongIsTooMuch @unlimiteddilutingjuice I'm in public sector already crippled by other recent gov changes like the huge NI rise.

Yes the rules are definitely difficult if you have a mortgage and while I don’t agree that so much should be going to private landlords to fund their mortgages, I also don’t think the state should be paying UC claimants own mortgages to help them build assets for the future. Although if people had their own homes it would be better long term than endlessly paying rent, so I don’t have much to offer in the way of suggestions really 😔

we need to return to a time where people by and large owned houses or they rented socially but how we get back there I don’t know!

So many posts on mumsnet at the moment where people really seem to be upset they haven't got a disabled child so they can join the party that is the benefits system

I did research on this in a previous job and yes, one of the issues with seeking to increase people’s hours or encourage them to go for promotion was that they feared it would affect their benefits. I don’t work in welfare, so I don’t know if their perception was accurate, but the fear was certainly real.

I worked (in benefits, ironically) and when the minimum number of hours worked was upped from 18-25 (or whatever, it’s been a while) one of my colleagues simply changed his hours at work to continue to get the UC. It helped that he was the manager’s “pet”. My opinion has always been that UC effects the employment market by keeping wages low, employers know that UC will fill the gap.
No shade to anyone claiming, what I witnessed first hand showed me that the most vulnerable people were the “in-work poor” who were living payday to payday