What would cutting Universal Credit in April mean for claimants?

Elliot Chappell
© Michaelasbest/Shutterstock.com

Labour has forced a vote in the House of Commons today on government plans to cut Universal Credit and Working Tax Credits. Back in April, the government grudgingly granted a £20-per-week increase to Universal Credit and Working Tax Credits when faced with unprecedented numbers of people struggling in the first wave of the pandemic. It brought up the standard rate for a single claimant over the age of 25 from £317.82 to £409.89 per month.

This was a limited change – not available to those still on legacy benefits: child tax credit; housing benefit; income-related employment and support allowance; income-based jobseeker’s allowance; and income support. But it was a change described by a group of over 50 charities as a “lifeline” for many during the Covid crisis. The Tories are now apparently getting ready to withdraw that lifeline.

Dominic Raab has said the uplift was “always a temporary measure”, and the additional support is currently set to be withdrawn in April. 6.2 million families across the country will see their household income drop by around £1,040 a year and around half a million more people, including 200,000 children, will be pushed into poverty. And what timing. The Office for Budget Responsibility has estimated that unemployment will peak in the second quarter of 2021, just as the government slashes the out-of-work support, at 7.5% with 2.6 million people out of work. This is around 4% more than prior to the pandemic. And this forecast was made before the government introduced the latest national lockdown currently in place in England.

Taking a longer-term look to the end of this parliament, analysis by the Resolution Foundation shows that the withdrawal of the uplift would drive up relative poverty from its current estimated level of 21% to 23% by 2024-25, and a further 820,000 children would be driven into poverty. But the organisation has told the government that this bleak outlook on living standards could be “transformed” by both a quicker recovery from the pandemic and by keeping the boost.

Senior economist at the foundation Karl Hanscomb said: “Deciding if the £20 a week uplift to Universal Credit should be extended will determine whether millions of households are able to enjoy any sort of living standards recovery next year. And looking further ahead, the decision on whether to keep the Universal Credit boost will help define whether this is to be a parliament of ‘levelling up’ living standards, or pushing up poverty.”

Households on low incomes will bear a disproportionate burden when the benefit is reduced, with around 60% of those who will lose out being in the bottom 30% of the income distribution. Around 60% of all single-parent families in the country will experience the overnight reduction to the money coming into their household, and over half of the households that face the significant drop in their incomes when the support is withdrawn at the end of March include someone who is disabled.

One claimant, who has been on Universal Credit since October 2019, told the BBC: “It is terrible – the first one or two weeks when you get Universal Credit, you are sort of okay, but the third and fourth week, you’re struggling.” He explained how he cannot cover his bills with the payment and cannot afford broadband in his home. Something in particular that should worry all of us, as we consider that the vast majority of children in England are currently attempting to learn remotely in the latest lockdown. “Money is tight,” he said. “You have to think about it every day.”

The extra £20 a week is not groundbreaking; it does not suddenly afford applicants a lavish lifestyle. Instead, as another person on the benefit said, it has provided a bit of “breathing space” in the pandemic. “I know that to some people £20 a week might not sound like anything much but £20 a week is literally our food spend, so that’s massive,” Rebecca, who lives with her eight-year-old daughter, said. “It’s not the greatest thing in the whole wide world and we’re not suddenly living like kings but it’s a little bit less rubbish.”

Instead of keeping this vital support, the Chancellor is reportedly considering a one-off £500 payment to benefit claimants – an idea that Shadow Work and Pensions Secretary Jonathan Reynolds has criticised as a “terrible policy”. He pointed out that, while the payment would be given to six million claimants currently in need of support, those affected by the pandemic will change over time. Some will go back to work. Others will undoubtedly find themselves newly unemployed as furlough ends. A one-off payment distributed based on a current snapshot of those needing help now will do nothing for those facing hardship in future months.

Downing Street faces plenty of opposition ahead of the debate this afternoon. 60 organisations brought together by the Joseph Rowntree Foundation issued a public statement last November expressing “deep concern” at government failure to guarantee the uplift and provide security for millions across the country. 65 northern Conservative backbenchers – many of them representing the ex-Labour ‘Red Wall’ seats – have called on the Prime Minister not to cut the benefit.

Right-wing think tank Bright Blue has also called for an extension of the uplift, highlighting that the cut will hit the poorest towns in England worst and undermine Boris Johnson’s pledge to ‘level up’ the country. The public also takes a different view from the government: polling by Ipsos MORI recently found that 59% support making the uplift permanent, including 42% who strongly support it, while a poll conducted by Survation for Unite the Union found that 54% of UK adults believe that the increased allowance should be extended beyond April, against just 28% who disagreed.

The vote this afternoon is not a binding one, and Downing Street is free to ignore it. Johnson has ordered his MPs to abstain, rather than try to force his Conservative backbenchers to vote down the motion. As a result, the motion is set to pass – but it is likely to do so with the support of several Tory MPs. The Prime Minister’s spokesperson is already hinting at a U-turn. Despite Raab’s comments on Sunday, the press secretary told journalists today that on Universal Credit: “We haven’t made a decision. We will be coming forward in due course with our decision.” Given what we know about the impact on claimants of a cut, the government must rethink its previous position.

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