Britain’s jobless crisis is fuelled by benefits anomaly that allows people to receive thousands of pounds in extra benefits if they earn as little as £658 a month. MPs have raised concerns with Jeremy Hunt, the Chancellor, and Treasury officials are looking at closing the loophole.
The Treasury is deeply concerned that the existing system enables applicants to access thousands of punds in additional benefits if they take home less than £658 per month. A flaw in the welfare system allows someone on Universal Credit to earn nearly £45,000 year for doing the equivalent of two days’ worth of low-paying work.
Someone not receiving benefits would need to make close to £62,000 year in order to take home the same amount after taxes. Jeremy Hunt, the chancellor, has received complaints from MP’s, and it is thought that Treasury officials are looking towards resolving the matter.
One Cabinet minister said: “We are aware of this issue and it is a matter of concern. We are determined to address the workless problem and closing this loophole is a top priority.”
Mr Hunt has promised to force more people on Universal Credit to meet work coaches, in order to help them get better jobs and help Britain recover from the financial cost of the pandemic. Under existing rules claimants have their benefits capped at £13,400 for a single person outside of London and £15,410 in the capital. Couples and single parents are affected by the cap, which affects payments including Universal Credit, child and housing benefit.
A single-mother-of-two, paying £2,000 a month in rent in London, would receive £36,663 a year in tax-free Universal Credit if she worked 16 hours a week at £9.50 an hour, but her gross income would only edge up by £2,172 a year. Couples with children face the disincentive to work because their income would only increase by £34 a week if they worked three days a week.
The Ashfield MP Lee Anderson claimed that the Chancellor “listened very intently to what I had to say and I am certain that he will act on this unfairness” after he brought up the matter. Mr. Hunt has already committed to requiring more Universal Credit recipients to meet with work coaches in order to assist them in finding better jobs, spur economic growth, and aid Britain in recovering from the financial toll of the pandemic. Mr Anderson said that claimants were better off working for a few hours on entry level jobs than having a full-time job. Mr Anderson said that claimants were better off working for a few hours on entry level jobs than having a full-time job.
According to a poll by the Confederation of British Industry, over the past 12 months to October, 75% of British businesses reported being affected by labour shortages. Iain Duncan Smith launched the Universal Credit system and said the key to making it work was that it would impose rigorous sanctions against claimants that refused to look for work or take job offers of work.