Around 2m people will lose £1,000 each year under Universal Credit reforms

Almost 2m people will lose over £1,000 a year following the switch to universal credit revealed the latest report from the Institute for Fiscal Studies.

According to the IFS, 11m adults will either gain or lose money under the universal credit system with those on disability benefits and low incomes among the worst affected.

Self-employed workers on below average incomes and low-income families with little savings will also be among the biggest losers from the government’s overhaul of the benefits system since the introduction of tax credits in 2003.

Universal Credit is a merger of several benefits previously paid to claimants separately and the benefit clawbacks under the new system will negatively impact around half of them.

Around 1.6m would gain by more than £1,000 a year and 1.9m would lose at least that much. About 4.2m will be at least £100 per year better off and 4.6m will be at least £100 per year worse off.

Tom Waters, a research economist at the IFS and an author of the briefing note, 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.”

Among those expected to be £1,000 or more worse off, three-quarters are affected by universal credit’s harsher treatment of certain groups.

These included those with financial assets greater than £6,000, the self-employed reporting low levels of earnings, couples where one person is above state pension age and the other below, and some claimants of disability benefits.