Universal Credit £20 cut explained as Citizens Advice and Turn2us say it'll hit low-income households with children hardest where people already work
The planned £20 cut to Universal Credit will hit low-income households with children, where adults are already in work, insist charities and unions deeply concerned about the impending slash to support.
One in seven of us will struggle to pay bills and one in eight won't be able to afford food - warns poverty support group Turn2us - when Covid support schemes begin ending this month, which alongside the planned drop in Universal Credit also includes the end of the eviction ban, the closure of the furlough and self employment income support schemes alongside planned rises to gas and electricity prices this winter.
Thomas Lawson, Turn2us chief executive, said: “At the end of the month, when the remaining Covid support schemes end, millions of families could be thrown into crisis and be at risk of going hungry or losing the roof over their heads.
"After a decade of caps, cuts and freezes, working age benefits will be at a historically low level. There are no assurances that payments will be enough to pay for rent, put food on our tables and cover essential costs."
Among the most controversial cuts is the more than £1,000 planned reduction to Universal Credit payments despite many appeals to make the increase more permanent, as many of those benefitting from the extra money are already employed but often in lower paid jobs.
At the start of the pandemic, claimants were given an extra £20 a week to acknowledge the pressure on outgoings as a result of lockdown, but that increase is about to come to an end, which many warn could be catastrophic for the UK's lowest earners.
What is Universal Credit?
Universal credit is paid to working-age people and was brought in to make the process of claiming benefits more simple.
It replaced six benefits including income support, child tax credit, working tax credit and jobseeker's allowance and is claimed by both those in and out of work with monthly payments varying depending on assessed need and individual circumstances.
The majority of people claiming some form of state support have now moved over to the new Universal Credit single-payment system.
How many will be affected by the cut?
Almost six million people are currently claiming Universal Credit with around 40% of those already in work - but who are entitled to support because they're often in lower paid jobs that mean they struggle to make ends meet.
Latest figures also suggest that roughly 1.9 million of those awaiting cuts to their payments are families with children.
When will the cut happen?
The government plans to slash the benefit by around £20 a week - the equivalent to £1,040 a year from October 6.
But the exact date that people will see the reduction will depend on the day they get their monthly Universal Credit payment. For most it means that their September payment will be the last month of paying their money at existing levels and from October the monthly amount will be less.
How much could people lose?
While every Universal Credit claim, says Citizens Advice, will drop by around £85 a month, the proportion of income claimants will lose will vary depending on their circumstances.
It is thought that single people under 25 could be hit with the biggest monthly drop.
Can people make the money up?
Critics of the policy say it will be almost impossible for those in work to add on enough hours to make up for the missing money, even if their employers had the extra work available,
Universal Credit is tapered so once you earn more than your work allowance, payments are reduced at a certain rate.
The Universal Credit earnings taper is currently 63% which means that for every £1 someone earns over their work allowance, should they have one, their UC payment is reduced by 63p and deducted automatically.
Work and pensions secretary, Thérèse Coffey came under fire on Monday from opposition ministers and charities for suggesting that people who are set to lose the £20 a week would only need to make it up with an extra two hours work.
But Labour and other charities strongly dispute this. Because of the tapering system some claim workers would need to work almost an extra shift more a week to claw back what is being taken away, and that isn't possible for most people.
Why is the cut controversial?
Labour has described the planned cut as the largest benefit cut in 'the history of the welfare state' while charities supporting low-income households say the £20 a week uplift should remain in place to help families recover from the effects of the pandemic.
Previous analysis by Citizens Advice shows £20 a week is equivalent to six days of energy costs or three days of food costs for a low-income family.
Morgan Wild, Head of Policy at Citizens Advice, said: “More than half a million people have come to Citizens Advice for support with Universal Credit since the pandemic. We know the extra £20 a week has often meant the difference between empty cupboards and food on the table.
“The government should do the right thing and keep this vital lifeline. It’s the best way of making good on its ‘levelling up’ promise and supporting households to recover from this crisis.”
The Trade Union Congress said the cut will hit low-earners hard.
It has hit out at government claims the reduction will help encourage people move back into jobs, saying that the government is 'missing the point' with almost half of those claiming already in work.
Many of the millions affected, says the TUC which represents 48 member unions, are keyworker households who will soon be worse off as a result of government plans. While separate analysis by the Joseph Rowntree Foundation shows the majority of families that lose out will be working families where claimants are already employed.
The reduction, which the government insists it made clear was always temporary for the duration of the pandemic, also comes at a time when many argue the pressure on working families and those on lower incomes is increasing.
A ban on enforced evictions, first introduced in March last year and extended on a number of occasions as lockdowns continued, is also ending.
That policy said the Joseph Rowntree Foundation provided much needed security and assurances to people renting their home during the pandemic.
At the end of September the furlough scheme also comes to an end, with employers where workers are still on furlough now having to decide whether to bring them back into the business or make them redundant.
There are also much publicised planned rises to National Insurance payments from next year to fund both the social care system and provide additional funds for the NHS, which it is also feared will hit those on lower wages the most including thousands of keyworkers.
Even government analysis by the HMRC has warned that the impact will be significant and may increase family breakdowns among those already living on the breadline. The report warned: "There may be an impact on family formation, stability or breakdown as individuals, who are currently just about managing financially, will see their disposable income reduce.”
Households are also being warned to begin preparing for considerable hikes to energy prices after Ofgem raised the energy price cap, that will result in thousands of homes paying more for their gas and electricity this winter.