Families on low incomes are facing a worrying winter ahead as today’s figures show inflation has hit 5.1%. The rising cost of utilities are especially challenging given they take up such a large share of low-income families’ budgets.
The Government recently announced that benefits will be uprated by 3.1% in April which will close some of the growing gap between people’s incomes and their costs. However, this does not address the immediate hardship families are experiencing this winter.
In October, the Office for Budget Responsibility projected inflation to peak at 4.4% by April but today’s 5.1% exceeds that level.
New JRF analysis based on OBR forecasts shows that should inflation be 4.4% by next April:
Around 100,000 individuals are at risk of falling into deep poverty (below 50% of median income after housing costs) due to benefit uprating being less than inflation in April
Around 7 in 10 of whom live in households that contain children
Around half live in working households
Given today’s high inflation figures, this could be an underestimate and even more individuals may be at risk of deep poverty.
The outlook is especially stark for people who are out of work and reliant on social security to make ends meet. These families have already experienced a £20-a-week cut to Universal Credit. This also comes after a decade of cuts and freezes to social security which has left the system wholly unable to provide the support millions of people need.
Katie Schmuecker, Deputy Director of Policy & Partnerships at the Joseph Rowntree Foundation, said:“It is deeply concerning that families on low incomes, who are already struggling to make their budgets stretch, are at risk of being pulled deeper into poverty. Prices are rising sharply and support available to people is inadequate.
“Everyone in our country should be able to afford the basics yet there is no sign of any respite on the horizon for families struggling to keep their heads above water. Too many people who are being hit by rising energy bills and increasing food prices are forced to ask themselves what essentials they will go without this winter.
“In a country like ours, social security should, at a bare minimum, enable people to meet their needs with dignity. Unless the Government urgently strengthens support, we will see more and more people being pulled deeper into poverty and debt in the months ahead. This is not only harmful but also completely avoidable.”
Spending Review and Autumn Budget 2021: Universal Credit Taper Factsheet
FACTSHEET ISSUED BY HM TREASURY
The UK Government says the best way to support people’s living standards is through good work, better skills, and higher wages.
We will always give families the support they need and the tools to build a better life for themselves.
The UK’s modern Universal Credit (UC) benefit system ensures that people on the lowest wages are given the support they need to thrive and fulfil their potential.
As an incentive to find good work as the UK economy moves to a high-wage, high-productivity economy, the Government is changing the rate at which people’s UC award gradually reduces once they earn a salary – making work pay.
How does the Universal Credit Taper work?
The taper rate means that if people work more hours, their support is gradually withdrawn. It was withdrawn far more quickly in the old system.
Currently that taper rate starts at 63 pence – so for every £1, after tax, a person earns, their UC payment is reduced by 63pence.
The Government is taking decisive action to make sure work pays, and permanently cutting this taper rate by 8p from 63p to 55p, ensuring more money in people’s pockets.
Some households can earn a set amount before the taper kicks in. This is called the work allowance.
What is the Work Allowance?
Households on UC who are in work and either looking after a child or have a household member with limited capability for work are being supported with an increase in their work allowances.
This is the amount that a person can earn before support begins to be withdrawn as the taper rate kicks in.
Work allowances are currently set at £293 a month if the household receives housing support, or £515 if they do not receive housing support. These are both being increased by £500 per year.
Who is affected?
1.9 million households will benefit from these changes. For example, within five weeks, as a result of these changes:
A single mother of two, renting in Darlington, working a full-time job on the National Living Wage, will see her take-home income increase by £1,200 on an annual basis.
A couple with two children, renting their home with their two children, where one partner works full time at the National Living Wage, and the other works 16 hours a week at National Living Wage will be £1,800 per year better off.
Taken together, this is an effective £2.2bn tax cut for around 2 million of the lowest earning working families.
This applies to England, Scotland and Wales. The Northern Ireland Executive will be provided with funding to implement an equivalent measure.
Who has called for it?
the TUC:“If the aim of UC is to make work pay, the taper rate needs to be revisited’
Centre for Social Justice: “increasing work allowances would help those claimants who are highly motivated to re-enter a weakened labour market to have their incomes supported.”
Joseph Rowntree Foundation: ‘Increasing work allowances and reducing the taper rate would strengthen work incentives and help protect families on low earnings from poverty.”
Centre for Policy Studies: “The Government should implement improvements to work incentives within UC through a cut to the taper rate and increased work allowances. This is desirable in itself and would complement a broader economic programme for increased employment post-pandemic.”
When will it be introduced?
Changes like this are usually introduced at the start of the financial year in April, but in order to support families through the Winter, the reduction to the taper rate and increase to the work allowances will be implemented by the beginning of December 2021.
This builds on continued support to tackle cost of living:
We are supporting millions of workers by increasing the National Living Wage to £9.50 an hour in April 2022 from £8.91.
Young people and apprentices will also see their wages boosted as the National Minimum Wage for people aged 21-22 goes up to £9.18 an hour and the Apprentice Rate increases to £4.81 an hour.
Investing £170million in 2024-25 to increase the hourly rate to be paid to early years providers to deliver the government’s free childcare hours.
Saving consumers £3billion over the coming years on alcohol duty. The freeze will save consumers 3p off a pint of beer, 2p off a pint of cider, 14p off a 75cl bottle of wine and 52p off a 70cl bottle of Scotch.
The average driver will pay around £15 less fuel duty per tank as we freeze fuel duty for twelfth consecutive year, compared with pre-2010 plans.
Taking into account the increase in the National Living Wage, changes in Universal Credit, the freezing of the income tax Personal Allowance and the introduction of the Adult Social Care Levy:
A single parent with two children, working 16 hours a week at the National Living Wage in 2022/23 will still be around £590 better off in cash terms than if none these changes had been made.
A single earner couple with two children, working 35 hours a week at the National Living Wage in 2022/23 will still be around £1,200 better off in cash terms than if none these changes had been made.
New analysis by the independent Joseph Rowntree Foundation reveals that the rising cost of living wipes out much of the financial gain some families will receive from the Universal Credit changes announced yesterday.
Weekly incomes and Costs for 2022/23
Family 1: single adult, no children, not working
Family 2: single parent, with one young child (assume age 5), part-time 16 hours per week
Family 3: couple with two young children (assume 7 and 5). One FT worker
Family 4: single parent, with one young child (assume age 5), full-time 35 hours per week
Family 5: Couple with two young children (assume 7 and 5). 1 FT worker (35 hours), 1 PT worker (16 hours)
Weekly income before new announcements
£77
£278
£433
£333
£489
Weekly gain from taper rate and work allowance
£0
£8
£19
£19
£31
Total loss from higher cost of living due to…
-£13
-£16
-£23
-£18
-£24
1) increase in energy prices
-£7
-£7
-£7
-£7
-£7
2) overall cost of living increase
-£6
-£8
-£13
-£8
-£13
3) increase in National Insurance and impact of inflation on earnings
£0
-£1
-£3
-£3
-£4
Overall weekly gain or loss after measures and cost of living
-£13
-£8
-£4
£1
£7
Note all five families lost £20-a-week in October 2021, due to the cut in the Universal Credit Standard Allowance, so all are worse-off than they would have been in September 2021. All workers are assumed to be paid at the National Living Wage rate, so benefit from its increase.
JRF Study reveals scale of debt crisis among low-income households
Number of low-income households in arrears has tripled since pandemic hit
4 in 10 working-age low-income households fell behind on bills during pandemic
Millions are behind on rent and bills and have had to take on new borrowing
JRF calls for urgent action to support low-income families through cost-of-living crisis and prevent worsening wealth inequality
A large-scale study of households on low incomes has revealed the extent of the debt crisis hanging over the UK’s poorest families as the country braces to weather a cost-of-living crisis.
The analysis by the Joseph Rowntree Foundation (JRF) looks at households in the bottom 40% of incomes in the UK – those with a household income of £24,752 or less. This represents around 11.6 million households.
It estimates that 3.8 million such households are in arrears with household bills, totaling £5.2bn. 950,000 are in rent arrears; 1.4 million are behind on council tax bills; and 1.4 million are behind on electricity and gas bills. 33% of low-income households are now in arrears, which is triple the 11% estimated by a similar study prior to the pandemic.
Working-age households on low incomes (those aged 18-64) have been particularly hard hit: 44% are in arrears. For households aged 18-24 this rises to almost three-quarters (71%) of people being in arrears.
The survey shows clear signs that the profound financial impact of the pandemic has dragged families who were previously just about managing into arrears on essential bills. A large majority of households who are now behind on their household bills (87%) said that they were always or often able to pay all their bills in full and on time before the pandemic hit.
This is not surprising given people on low incomes were more likely to lose income during the pandemic due to job loss, reduced hours or being furloughed. Even before recent energy price rises began to bite, six in ten households on low incomes (62%) reported that their costs increased during the pandemic.
The other clear trend in the survey is the increased borrowing taken on by households on low incomes. Around 4.4million such households have taken on new or increased borrowing, and their total amount of borrowing comes to an estimated £9.5bn. 69% of households with new or increased borrowing are also in arrears.
The study highlights groups that have been hit particularly hard. Over half of the households in the following groups have been pulled into arrears:
Families with children (55%),
Households in London (55%),
Households with a person under 45 answering the survey (56%),
Black, Asian and minority ethnic households (58%)
Many families on low incomes are still reeling from the huge £20 per week cut to Universal Credit and Working Tax Credit earlier in the month. It is worrying that the survey was conducted in September when many of the households surveyed received the uplift which has now been removed.
Energy bills and other costs are continuing to rise, with the price of energy projected to soar further in the coming months. An increase in National Insurance contributions next April is another extra cost many working people will face.
Of the households surveyed who receive Universal Credit, 40% are not confident they will be able to pay their bills in full and on time, while 35% don’t think they will be able to avoid taking on more debt. Half (50%) of these households say they do not feel confident they can find a job or work more hours, calling into question the Government’s insistence on jobs as the only solution.
The comparison between how poorer and wealthier households have fared during the pandemic is striking. The Bank of England found that wealthier households have tended to accumulate savings during the pandemic.
These households were more likely to stay in work and to be able to work from home, reducing daily costs, and to save money during lockdown due to enforced saving. Homeowners also benefited from rising house prices.
JRF is urging the Government to put in place a package of support at the Budget to ease pressure on low-income households and prevent further debt.
As well as urging the Government to reinstate the £20 in Universal Credit, the report also recommends that the Government provide at least £500m additional grant funding via the Household Support Fund for targeted debt relief.
It is also essential to address the systemic drivers of debt including through writing off Tax Credit debts when people move onto Universal Credit and addressing Universal Credit advance repayments that many households have no option but to take on during the five-week wait for the first payment.
This flaw in the design of the benefit has long been criticised by food banks and anti-poverty groups for causing ‘destitution by design.’
Katie Schmuecker, Deputy Director for Policy & Partnerships at JRF said: “There is a debt crisis hanging over millions of families on low incomes. Behind these figures are parents gripped by anxiety, wondering how they will put food on their children’s plates and pay the gas bill; young people forced to rely on friends to help cover their rent and avoid eviction.
“While many households on higher incomes have enjoyed increased savings and rising house prices during the pandemic, people on low incomes are under serious financial pressure that shows no sign of abating. As a society, we believe in protecting one another from harm. As costs pile up and incomes have been cut, we urgently need to rethink the support in place for people at the sharp end of the cost of living crisis.
“The Budget is about priorities. We know the Chancellor is capable of taking bold action to protect people from harm when it is required. Reinstating the £20 per week increase to Universal Credit and boosting funding for councils to tackle debt must be priorities in next week’s Budget. We must give families the firm foundations they need to flourish and take part in our economic recovery.”
Chancellor of the Exchequer Rishi Sunak made the keynote speech at the Conservative Party conference in Manchester yesterday. On the week the Tories will cut the £20 Universal Credit lifeline, the Chancellor told the conference:
Whatever it takes.
That phrase, and those press conferences, were my introduction to so many of you as Chancellor.
It was daunting to face such a challenge in my first days in office. And what it also meant is that more than a year has gone by before I had the chance to meet you all properly. And that is why these last few days have been such a joy. Meeting you all face to face and hearing so many of you say to me “Wow, you’re even shorter in real life!”
Nothing can ever prepare you to become Chancellor, especially in recent times. There have been occasions where it really did feel that the world was collapsing. In those moments, there are certain things I fell back on. Yes, my family. Yes, my colleagues. Yes, my tremendous Treasury team.
And yes, the person who made all this possible, the person who delivered a thumping Conservative majority, my friend, our leader, the country’s Prime Minister, Boris Johnson.
But the other thing I fell back on is something we all have in this room. Our values. Our Conservative values.
I believe in some straightforward things.
I believe that mindless ideology is dangerous. I’m a pragmatist. I care about what works, not about the purity of any dogma. I believe in fiscal responsibility. Just borrowing more money and stacking up bills for future generations to pay, is not just economically irresponsible. It’s immoral.
Because it’s not the state’s money. It’s your money.
I believe that the only sustainable route out of poverty comes from having a good job. It’s not just the pounds it puts in your pockets. It’s the sense of worth and self-confidence it gives you. So I will do whatever I can to protect people’s livelihoods, and create new opportunities too.
And when it comes to those new opportunities, I am very much a child of my time. I spent the formative years of my career working around technology companies in California. And I believe the world is at the beginning of a new age of technological progress which can transform jobs, wealth, and transformed lives.
So: pragmatism. Fiscal responsibility. A belief in work. And an unshakeable optimism about the future. This is who I am. This is what I stand for. This is what it will take. And we will do whatever it takes.
Our Plan is Working
And there can be no prosperous future unless it is built on the foundation of strong public finances.
And I have to be blunt with you. Our recovery comes with a cost.
Our national debt is almost 100% of GDP – so we need to fix our public finances. Because strong public finances don’t happen by accident. They are a deliberate choice. They are a legacy for future generations. And a safeguard against future threats.
I’m grateful, and we should all be grateful to my predecessors and their 10 years of sound Conservative management of our economy. They believed in fiscal responsibility. I believe in fiscal responsibility. And everyone in this hall does too.
And whilst I know tax rises are unpopular. Some will even say un-Conservative. I’ll tell you what IS un-Conservative.
Unfunded pledges.
Reckless borrowing.
And soaring debt.
Anyone who tells you that you can borrow more today, and tomorrow will simply sort itself out just doesn’t care about the future.
Yes, I want tax cuts. But in order to do that, our public finances must be put back on a sustainable footing.
Labour’s track record on the public finances speaks for itself.
Since 2010, we’ve had 5 Labour Leaders, 7 Shadow Chancellors and innumerable spending pledges. And in all that time they still haven’t got the message. The British people won’t trust a Party that isn’t serious with their money. That’s why they vote Conservative.
We must never forget that the fundamental economic differences between us and Labour run very deep.
Differences not just about debt and borrowing but about how to deal with the real pressures people face in their lives.
And right now, we are facing challenges to supply chains not just here but right around the world and we are determined to tackle them head on.
But tackling the cost of living isn’t just a political sound bite. It’s one of the central missions of this Conservative government.
Picture this: you’re a young family. You work hard, saving a bit each month. But it’s tough.
You have ambitions for your careers for your children.
You want to give them the best more than you had.
Now you tell me: Is the answer to their hopes and dreams, just to increase their benefits?
Is the answer to tell that young family the economic system is rigged against you, and the only way you stand a chance is to lean ever more on the state?
Be in no doubt, that is the essence of the Labour answer.
Not only does Labour’s approach not work in practice. It is a desperately sad vision for our future.
But there is an alternative. An approach focused on good work, better skills, and higher wages.
An approach that says: ‘Yes, we believe in you. We will help you. And you will succeed.”
And better still, it’s more than words. It’s a plan in action. A Conservative plan and Conference it is working.
We’re giving people the means and opportunities to help themselves
Governments rarely get to set the tests by which they will ultimately be judged.
And our test is jobs.
Remember, as economies around the world pulled the shutters down, forecasters were predicting unemployment to reach 12%. Millions of people were on the precipice of losing their jobs, their livelihoods, and their homes.
Well, the forecasts were wrong.
The unemployment rate is at less than 5% and falling. That’s lower than France, America, Canada, Italy, and Spain.
And we now have one of the fastest recoveries of any major economy in the world.
Now it wasn’t that the forecasters had bad models No. It’s just their models did not take account of one thing – and that was this Conservative Government. Our will to act and our plan to deliver.
An increased national living wage. The restart programme. Sector based work academies. Doubling work coaches. Job finding support. Traineeships. Apprenticeship incentives. Skills Bootcamps. And the Prime Minister’s Lifetime Skills Guarantee.
All things we are doing that won’t just help people but will give them the means and opportunities to help themselves.
Our plan for the future
I believe in good work, better skills, and higher wages.
I believe that every person in this country has the potential to become something greater.
And I know that we, and only we, the Conservative party, are the ones who can make that happen.
And our economy cannot be what we need it to be without the courage, creativity and sheer force of will that each new generation brings.
Yet, at its peak just under 1 in 3 workers under 25 were on furlough. One in three.
That’s one million people who didn’t have the fall back of a career history or a network of contacts, and in many cases hadn’t even moved into their first job.
And so what did we do? We created the Kickstart scheme, up running and working in a matter of months. A landmark programme that is helping young people start exciting new careers.
And thanks to our plan, young people, just like John Chihoro who introduced me today, are starting those new jobs in their thousands.
So to give more young people the same chance as John, I can confirm we are expanding our successful Plan for Jobs into next year.
The Kickstart scheme extra support through the Youth Offer, the Job Entry Targeted Support scheme, and our Apprenticeship Incentives. All extended because we believe in the awesome power of opportunity.
And we are going to make sure that no young person in our country is left without it.
But what we do today means little if we don’t also have a plan for tomorrow.
A plan for the future.
A future economy shaped by the forces of science, technology, and imagination.
The years I spent in California left a lasting mark on me, working with some of the most innovative and exciting people in finance and technology. Watching ideas becoming a reality. Seeing entrepreneurs build new teams.
It’s not just about money.
I saw a culture, a mindset which was unafraid to challenge itself, reward hard work, and was open to all those with the talent to achieve.
The future is here
I look across the United Kingdom and that culture is here too in the young people I’ve already spoken about today, unencumbered by timidity and orthodoxy.
And it’s there in our willingness to take risks not just on companies, but on people.
People with the raw potential to create a wave of the most dynamic high growth companies. A wave that will reach the farthest corners of the world.
That optimism, that unshakeable belief that the future, can be different and better was also at the heart of Brexit.
I remember over five years ago being told that if I backed Brexit my political career would be over before it had even begun.
Well, I put my principles first. And I always will.
I was proud to back Brexit. Proud to back Leave.
And that’s because despite the challenges in the long term, I believed the agility flexibility and freedom provided by Brexit would be more valuable in a 21st century global economy than just proximity to a market.
That in the long term a renewed culture of enterprise willingness to take risks and be imaginative would inspire changes in the way we do things at home.
Brexit was never just about the things we couldn’t do. It was also about the things we didn’t do.
That’s why we introduced the super deduction, a UK first in tax policy which is triggering an explosion in capital investment.
That’s why we created the Help to Grow scheme another UK first to help small and medium sized companies digitize skill up and scale up.
That’s why we launched the Future Fund another UK first in government investment backing high potential start-ups.
My point is this: even if you can’t see it yet, I assure you, the future is here.
Now is the time to turn to the future
Last year alone the UK attracted more venture capital investment to our startups than France and Germany combined.
And along with enhanced infrastructure and improved skills, we are going to make this country not just a Science Superpower, not just the best place in the world to do business… I believe we’re going to make the United Kingdom the most exciting place on the planet.
Take Artificial Intelligence. Once the stuff of science fiction. Now it’s reality – and we’re a global leader.
The steam engine kicked off the industrial revolution. Computers delivered automation. The internet brought information exchange.
And as the latest general-purpose technology, AI has the potential to transform whole economies and societies.
If Artificial Intelligence were to contribute just the average productivity increase of those three technologies, that would be worth around £200 billion a year to our economy.
And so today, I am announcing that we will create 2,000 elite AI scholarships for disadvantaged young people and double the number of Turing AI World-Leading Research Fellows, helping to ensure that the most exciting industries and opportunities are open to all parts of our society.
New policy, focused on innovative technology, supporting jobs for the next generation, a sign of our ambition for the future.
Because that’s why we are here. All of us. That’s why we became members of the Conservative party.
That’s why you all give up so much of your time sacrificing things that are important to you in order to help build a better future.
You know, the longer I spend in this job, the more I realise that the worst parts of politics are driven by fear. Fear of change. Fear of losing. The fear of being wrong. Even fear of the future.
And when people get scared they create divisions. They say: “you’re either with us or you’re with them.” But you cannot make progress if you’re pitting people against each other.
That’s what you get from a tired, fearful sort of politics. We saw it last week in Brighton.
It’s not just that Labour don’t like us. They don’t even like each other.
Whereas we, the Conservatives, are now and always will be the party of business and the party of the worker.
The party of the private sector and the public sector.
A party for the old and the young.
The British people want a party that can get things done.
So, at just the moment when it feels like we’ve done enough, that we’ve gotten through, that we can take a rest, we must not stop.
Now is the time to show them that our plan will deliver.
And now is the time, at last, at long last, to finally turn to the future.
Thank you.
Responding to the Chancellor’s speech at Conservative Party Conference, Helen Barnard, Deputy Director of the Joseph Rowntree Foundation, said:“The Chancellor may say he has a plan for jobs but he has no plan for paying the bills.
“He spoke of doing whatever it takes to protect people’s livelihoods, yet he is cutting the incomes of around 5.5 million families by £1,040 a year on Wednesday when we are facing a cost of living crisis.
“It is completely wrong to suggest there is a trade-off between good jobs and adequate social security when they are both essential to improving people’s living standards.”
“This cut will impact many working families and inadequate social security makes it harder for people to seize opportunities whilst they struggle to stay afloat. We must ensure people who are sick, disabled or caring for others and therefore unable to work can meet their needs with dignity.
“To impose the biggest ever overnight cut to social security would be economically irresponsible which is why it is so fiercely opposed from across the political spectrum. The Government can’t credibly claim to be levelling up while levelling down people’s incomes. He must abandon this cut.”
First Minister Nicola Sturgeon has joined with the First Minister of Wales and the First Minister and deputy First Minister of Northern Ireland to demand Prime Minister Boris Johnson “do the right thing” by reversing the decision to withdraw the £20-a-week uplift to Universal Credit.
In a rare joint intervention, the leaders of the devolved nations have warned in a letter that the UK Government “is withdrawing this lifeline just as the country is facing a significant cost-of-living crisis.”
They have urged the Prime Minister to “consider the moral, social and economic harms” of the of this cut, and “do the right thing” and reverse his government’s decision to withdraw this funding which will harm around 6 million people across the UK.
The First Minister, along with Welsh First Minister Mark Drakeford and Northern Ireland First Minister and deputy First Minister Paul Givan and Michelle O’Neill say the move, which comes into effect this Wednesday, 6 October, is short sighted at a time of increases in the cost of food and fuel, rising inflation, the end of the furlough scheme, and imminent rise in National Insurance contributions.
First Minister Nicola Sturgeon said: “I do not think there has been anything quite so morally indefensible in UK policy in recent times as the proposed cut to Universal Credit.
“At a time when we are facing the impact of the pandemic, Brexit and soaring costs, removing £20 per week from the lowest-income households simply cannot be defended in any way, shape or form.
“The planned cut represents the biggest overnight reduction to the basic rate of social security in more than 70 years and would sever a crucial lifeline for countless households across the UK at a time when budgets are already facing an unprecedented squeeze.
“It is an immoral, ill-thought out and ultimately counterproductive policy which simply must be stopped.
“Those on low incomes are going to find it difficult to feed their children, heat their homes, and pay their rent if the cut goes ahead. We have therefore united as the leaders of Scotland, Wales and Northern Ireland to say to the Prime Minister: ‘Do not do this.’”
The full text of the letter is included below:
Dear Prime Minister
We are writing to call on you, with the utmost urgency, to reverse your Government’s short-sighted decision to withdraw the £20-per-week uplift to Universal Credit.
Your Government is withdrawing this lifeline just as the country is facing a significant cost-of-living crisis. This winter millions of people are facing an untenable combination of increases to the cost of food and energy, rising inflation, the end of the furlough scheme, and an imminent hike to National Insurance contributions.
There is no rationale for cutting such crucial support at a point when people across the UK are facing an unprecedented squeeze on their household budgets.
Within the last month, an overwhelming majority of elected members in Holyrood, the Senedd, Stormont and Westminster have voiced their opposition to this cut to Universal Credit, as have the four social security committees of each parliament. The four Children’s Commissioners of each nation, numerous charities and faith groups have also expressed their grave concerns as have millions of people who face additional and unnecessary hardship because of this cut to Universal Credit against the backdrop of a winter of hardship.
We note your Government’s announcement of a Household Support Fund – an acknowledgment that too many people will be unable to make ends meet this winter. Unfortunately, a £500 million fund handed out on a discretionary basis is wholly inadequate to making up the £6 billion shortfall in social security expenditure that will result from the cut to Universal Credit.
Your Government has repeatedly refused to conduct any impact analysis on the biggest overnight reduction to the basic rate of social security for more than 70 years.
As such, it is important that we draw your attention to the growing body of evidence and analysis about the harm this cut will inflict. Research by the Resolution Foundation and the Trussell Trust has highlighted the significant and devastating impact the cliff-edge withdrawal of the £20-a-week uplift to Universal Credit will have on family incomes, with an associated rise in food insecurity.
The Legatum Institute has produced sobering analysis highlighting that the £20-per-week uplift has kept 840,000 people, including 290,000 children, out of poverty in Q2 of 2021. It makes no sense at all to knowingly pursue a policy that will result in this immense and needless rise in child poverty and we ask you to consider the lasting harm and costs of this cut accordingly.
It is important to note that this will increase poverty and hardship without delivering any tangible social or economic benefits. The UN Special Rapporteur on Extreme Poverty and Human Rights said – when calling upon you to reverse this cut – that for a healthy and well-qualified workforce to emerge, your Government must provide adequate levels of social protection. Years of a freeze on benefits means Universal Credit has not kept pace with rising living costs. Further to this, rising inflation means that a basic rate of Universal Credit after this cut will hold less purchasing power than it did in March 2020.
To support a meaningful recovery from this pandemic we must first ensure the needs of our most vulnerable are met. This cut threatens to undermine the recovery by diminishing the capacity of six million people to make ends meet.
It is not too late for you to reverse the decision to take money out of the pockets of the poorest in society at a time when they are facing a serious cost of living crisis.
We, with the full support of the Northern Ireland Executive and the Scottish and Welsh Governments, urge you to consider the moral, social and economic harms of this cut, and do the right thing and reverse your decision to withdraw this lifeline.
A copy of this letter is being sent to the Secretary of State for Work and Pensions, the Chancellor of the Exchequer and relevant Secretary of States for the devolved nations.
A lower-income couple with two young children where one adult is working full-time is going to need to find an additional £31-a-week to cover the cost of living and falling benefit rates from October, according to new analysis by the Joseph Rowntree Foundation.
In an interviewyesterday, the Business Secretary warned “it could be a very difficult winter”. This comes amid growing concern across the political spectrum that the rising cost of living is about to put immense strain on low-income families.
If the Government proceeds with cut to Universal Credit as planned, changes to the energy price caps, and inflation means that at the same time this couple family are trying to compensate for the £20-a-week they had before the cut, they will soon need to find an additional:
£3 for energy (assuming pre-payment meter)
£8 for other living costs
= an additional £11 per week from October.
On top of this, the same family would need to find an extra £2.50 to cover the increase in National Insurance Contributions from April 2022 because of the Health and Social Care levy.
This would mean in total this family may need to find an additional £13.50 per week or £710 per year (around the entire clothing and footwear annual budget for this kind of family) as well as losing £20 a week from Universal Credit. For this family, the extra costs alone equate to around 3.5% of their weekly disposable income.
Peter Matejic, Deputy Director of Evidence & Impact at the Joseph Rowntree Foundation, said:“Millions of low-income families are incredibly anxious about how on earth they are supposed to make ends meet from next month.
“Ministers rightly recognise this is shaping up to be a very difficult winter, yet there is little sign of them taking the decisive steps that are necessary to avoid real hardship for low-income families.
“The growing concern about the cost of living reinforces why cutting Universal Credit makes absolutely no sense. Social security is a key defence in protecting families from precisely these sorts of economic shocks, but the Government is on course to impose the biggest ever overnight cut to the system and leave families with an inadequate lifeline.
“The Prime Minister urgently needs to keep the £20-a-week increase to Universal Credit in place. Rising child poverty, soaring demand for food banks, people worrying about keeping their homes and covering the cost of bills, flies in the face of uniting and levelling up our country.”
NEW POLLING reveals the extent to which low-paid workers have borne the brunt of the pandemic
NEW POLLING reveals the extent to which low-paid workers have borne the brunt of the pandemic
TUC analysis shows three industries furthest away from recovery are all low-paid and have highest rates of furlough use
TUC warns the end of furlough and Universal Credit cut will be a hammer blow for low-paid workers
Union body says without an economic reset post-pandemic the government’s levelling up agenda will be “doomed to failure”
The coronavirus crisis has been “a tale of two pandemics”, the TUC said today as it calls for an urgent “economic reset” to tackle the huge class divide in Britain that has been exposed by the pandemic.
The call comes as the union body publishes new polling which shows how low-income workers have borne the brunt of the pandemic with little or no option to work from home, no or low sick pay and reduced living standards, while better-off workers have enjoyed greater flexibility with work, financial stability and increased spending power.
Pandemic class divide
New TUC polling, conducted by Britain Thinks, has revealed the extent of the pandemic class divide with the high-paid more financially comfortable than before, while the low-paid have been thrust into financial difficulty:
Low-paid workers (those earning less than £15,000) are almost twice as likely as high-paid workers (those earning more than £50,000) to say they have cut back on spending since the pandemic began (28 per cent compared to 16 per cent)
High earners are more than three times likely than low-paid workers to expect to receive a pay rise in the next 12 months (37 per cent compared to 12 per cent).
This Covid class divide isn’t just apparent on personal finances. The polling also shows how low-paid workers are markedly more likely to get low or no sick pay compared to higher earners:
Low-paid workers are four times more likely than high-paid workers to say they cannot afford to take time off work when sick (24 per cent compared to six per cent).
Only a third (35 per cent) of low-paid workers say they get full pay when off sick compared to an overwhelming majority of high-paid workers (80 per cent)
The TUC has long been calling for an increase to statutory sick pay, which stands at a derisory £96.35 a week, and from which more than two million low-paid workers – mostly women – are currently excluded because they do not earn enough to qualify.
The union body recently criticised the government decision to “abandon” these two million workers by failing to expand eligibility of sick pay, as they had previously promised.
This lack of decent sick pay is compounded by the fact that low-paid workers are more than three times more likely than high-paid workers to say they their job means they can only work outside the home (74 per cent compared to 20 per cent).
This means that low-paid workers face greater risk of contracting the virus at work, and when ill, often face the impossible choice of doing the right thing but losing income or keeping full pay but potentially spreading the virus.
Low-paid industries lag
New TUC analysis shows that the three industries furthest away from a jobs recovery – arts and entertainment, accommodation and food and ‘other services’ – are all ‘low paid’ industries.
These are also the three industries with the highest furlough rates according to HMRC stats, and three of the highest according to most recent ONS estimate.
The end of furlough poses a serious threat to low-paid jobs in these industries – and combined with the “senseless” Universal Credit cut – will be a hammer blow for low-paid workers and push many further into hardship, the union body says.
Time for an economic reset
The TUC says its analysis and poll findings paint a picture of stark inequality in the UK, which has been further entrenched through the coronavirus crisis, and show that the country needs an urgent “economic reset” post-pandemic.
The union body warns that without such a reset, the government’s levelling up agenda will be “doomed to failure” as ministers risk repeating the same mistakes which followed the financial crisis, allowing insecure work to spiral even further.
To prevent unnecessary hardship in the coming months, the TUC is calling on the government to:
Extend the furlough scheme for as long as is needed to protect jobs and livelihoods and put in place a permanent short-time working scheme to protect workers at times of economic change
Cancel the planned £20 cut to Universal Credit
And as part of a post-pandemic reset, the TUC says ministers must:
Ban zero hours contracts
Raise the minimum wage immediately to at least £10
Increase statutory sick pay to a real Living Wage and make it available to all
Introduce new rights for workers to bargain for better pay and conditions through their unions
TUC General Secretary Frances O’Grady said: “Everyone deserves dignity at work and a job they can build a life on. But too many working people – often key workers – are struggling to pay the bills and put food on the table.
“It has been a tale of two pandemics. This Covid class divide has seen low-paid workers bear the brunt of the pandemic, while the better off have enjoyed greater financial security, often getting richer.
“This should be a wake up call – we need an economic reset. It’s time for a new age of dignity and security at work.
“Without fundamental change, the government’s own levelling up agenda will be doomed to failure. And we risk repeating the same old mistakes of the past decade – allowing insecure work to spiral even further.
“Ministers must start by banning zero-hours contracts, raising the minimum wage with immediate effect and increasing statutory sick pay to a real Living Wage, making it available to all.
“And we know that the best way for workers to win better pay and conditions at work is through their union.”
On the risk to low-paid workers this autumn, Frances said: “The imminent end to the furlough scheme and cut to Universal Credit this autumn will be a hammer blow for low-paid workers and could plunge millions into hardship, many of whom are already teetering on the edge.
“The government must reverse its senseless decision to cut Universal Credit and extend the furlough scheme for as long as is needed to protect jobs and livelihoods.”
The largest coalition of organisations to date on this issue has signed a joint open letter to the Prime Minster calling on him not to go ahead with the planned £20-a-week cut to Universal Credit and Working Tax Credit, due to come into effect on 6 October.
The joint letter, coordinated by the Joseph Rowntree Foundation, is signed by a wide range of 100 organisations that operate at a national level as well as in communities across the UK. Among the signatories are leading voices on health, education, children, housing, poverty, the economy and other aspects of public policy.
OPEN LETTER
Dear Prime Minister,
We are writing to collectively urge you not to go ahead with the planned £20-a-week cut to Universal Credit and Working Tax Credit at the beginning of October.
Many of us provide frontline support in communities up and down our country and see first-hand the importance of our social security system. Life is full of crises that we cannot plan for, such as job loss or illness, and periods of lower earnings or caring responsibilities. We all need the security and stability of a strong lifeline, not just during a national crisis, but every day.
Imposing what is effectively the biggest overnight cut to the basic rate of social security since World War II will pile unnecessary financial pressure on around 5.5 million families, both in and out of work.
At the start of the pandemic, the Chancellor rightly said that he was introducing the £20 increase to “strengthen the safety net” – a tacit admission that a decade of cuts and freezes had left it unfit to provide the support families need. We all strongly supported this crucial improvement in support.
We are at risk of repeating the same mistakes that were made after the last economic crisis, where our country’s recovery was too often not felt by people on the lowest incomes. The erosion of social security support was one of the main drivers of the rise in in-work and child poverty, and contributed to a soaring need for food banks, rising debt and worsening health inequalities.
We deeply regret that the Department for Work & Pensions has not published its assessment on the impact of cutting Universal Credit and Working Tax Credit. However, the latest independent analysis from the Joseph Rowntree Foundation (JRF) shows it risks plunging 500,000 people into poverty, including 200,000 children. It will take the main rate of out of work support down to its lowest levels in real terms since around 1990.
This is not a question of having to choose between a recovery based on getting people into jobs or investing in social security, in fact most families impacted by this cut to Universal Credit and Working Tax Credit are already in work. The reality of the UK labour market means that to improve living standards, we need to both improve job quality and strengthen the social security system. We also must never lose sight of the need to provide adequate support to families who are not able to work so they can meet their needs with dignity.
Six former Conservative Work & Pensions Secretaries believe previous cuts to social security spending went too far and oppose this cut, and your own Conservative MPs are warning that it will have deep and far-reaching effects in their constituencies.
Recent analysis from JRF shows that 413 parliamentary constituencies across Great Britain will see over a third of working-age families with children hit by the planned cut to Universal Credit and Working Tax Credit on 6 October 2021. Of these 413 constituencies, 191 are Conservative – 53 of which were newly won at the last general election or in a subsequent by-election.
This looming cut would fundamentally undermine the Government’s mission to level up. Citizens Advice has identified that people are one and a half times more likely to claim Universal Credit in places the Government has prioritised for levelling up investment. They also found for every £1 that could be invested from the Levelling Up Fund in England, £1.80 would be taken from these local economies if the Government presses ahead.
Furthermore, it is unacceptable that legacy benefits, such as Employment and Support Allowance, Jobseeker’s Allowance and Income Support, continue to be excluded from this crucial improvement in support, mostly impacting people who are sick, disabled or carers.
We are rapidly approaching a national crossroads which will reveal the true depth of the Government’s commitment to improving the lives of families on the lowest incomes.
We all want a social security system that supports families to escape poverty rather than pulling them deeper into it. However, this cut risks causing immense, immediate, and avoidable hardship. A strong social security system is a crucial first step to building back better. We strongly urge you to make the right decision.
Yours sincerely,
Action For Children
Advice NI
APLE Collective
The Association of Charitable Organisations
Become
Bevan Foundation
The Big Issue
Bright Blue
The British Association of Social Workers
British Psychological Society
Business in the Community
Carers UK
Caritas Social Action Network
Centre for Cities
Centrepoint
Child Poverty Action Group
Children England
Christians Against Poverty
Church Action on Poverty
Citizens Advice
Citizens Advice Scotland
Citizens UK
Communities that Work
Crisis
Disability Benefits Consortium (a network of over 100 disability organisations)
Employment Related Services Association (ERSA)
End Child Poverty Coalition
End Furniture Poverty
The Equality Trust
The Faculty of Public Health
Family Fund
Feeding Britain
The Food Foundation
Generation Rent
Gingerbread, the charity for single parent families
Scottish Government’s £5.2 billion for social security support
Social security expenditure in Scotland will total £5.2 billion in 2026-27, according to the Scottish Fiscal Commission’s latest forecast report published today/yesterday.
The amount spent is projected to increase by £1.5 billion over the five years due to a variety of reasons including an increase in benefits provided, inflationary rises to payments, Scotland’s ageing population increasing caseloads for payments to support the pension age group and more children and working-age people receiving disability benefits.
It is expected that more people will access financial support in the coming years as the Scottish Government continues the roll out of devolved benefits. This includes Adult Disability Payment which will replace Personal Independence Payment for disabled people of working age in Scotland in 2022.
The Scottish Child Payment will also be extended to children up to the age of 16 from the end of 2022 if data relating to this benefit is received from the Department for Work and Pensions.
Social Security Minister Ben Macpherson said: “Social security is an investment in the people of Scotland and is a fundamental human right. With the devolved social security powers and limited resources that we have, we are committed to making sure everyone can access the financial support they are entitled to.
“By understanding people’s experiences of accessing UK Government social security support, we have sought to ensure that our new Scottish Government service is easily accessible and that people have a good experience when interacting with the Scottish social security system. If someone is eligible for support then it is our responsibility to make sure that they know about available payments, and help them get the money they need and that they are due.
“As well as the introduction of our new disability benefits in 2021 and 2022, in the coming years, we will also introduce Scottish Carer’s Assistance, which will replace the UK Government’s Carer’s Allowance in Scotland.
“In 2023-24 it is forecast that nearly 300,000 children will benefit from the Scottish Child Payment. This will be the first full year of the planned rollout of Scottish Child Payment to 6 to 15 year olds. We also plan to significantly increase the value of Scottish Child Payment, doubling it to £20 per week within the lifetime of the Parliament and lifting more children out of poverty.
“It is vital that the UK Government matches our efforts. We need UK Ministers to take decisive action in the areas where they have power and responsibility and to reverse their welfare cuts which are hitting households harder than ever.
“I call again on the UK Government to end their benefit cap, bedroom tax and two-child limit, and to maintain the £20 Universal Credit uplift.”
More than 120 organisations from across Scotland are urging First Minister Nicola Sturgeon to double the Scottish Child Payment in this year’s Programme for Government.
The campaigners say the 1 in 4 children living in poverty in Scotland cannot wait.
In an open letter the End Child Poverty coalition is calling on The First Minister to “do the right thing” to help thousands of poverty-stricken children and families.
The letter in full:
Dear First Minister,
As a broad coalition of national organisations, community groups, academics, trade unions and faith groups, we are writing to you to urge you to use the upcoming Programme for Government to commit to doubling the Scottish Child Payment in this year’s budget.
We welcome the Scottish Government’s commitment to tackling child poverty, evidenced in the setting of statutory child poverty targets, introducing the Scottish Child Payment and the upcoming incorporation of the United Nations Convention on the Rights of the Child. These steps have laid the foundation for tackling child poverty in Scotland and we have been delighted that they have been supported across Scotland’s political spectrum.
This cross-party agreement was also evident in May’s Holyrood elections, when all Scotland’s five main political parties committed to doubling the Scottish Child Payment. Such political consensus is welcome, and provides the opportunity for your government to act quickly and decisively in doubling the payment now.
To do so would provide a lifeline to families who are struggling to stay afloat. Even before Covid-19, people across Scotland were being swept up in a rising tide of poverty, with child poverty rising in every Scottish local authority. And the pandemic has exacerbated existing inequalities in Scotland and pulled many more people – particularly women, disabled people, and Black and minority ethnic people – into hardship.
With women’s poverty being inextricably linked to child poverty, the pandemic’s impact has pulled children across Scotland ever deeper into poverty. It has hit lone parents – the overwhelming majority of whom are women – particularly hard, a group already disproportionately affected by years of social security cuts.
Unlocking people from this poverty requires long-term work to tackle the structural inequalities around the labour market – particularly for women, disabled people and Black and minority ethnic people – and it will also require action like further expanding childcare provision. But we also need action now to boost incomes in the short term.
Every level of government has a duty to boost incomes where it can, and we are clear that the UK Government must scrap its planned and unjust £20 Universal Credit cut. But just as the UK Government has a moral responsibility to do the right thing, so too does the Scottish Government have a moral responsibility to use all of the powers at its disposal to loosen the grip of poverty on people’s lives.
We have the powers, we have the urgent need, and we have the cross-party consensus to double the Scottish Child Payment. If your government is to truly make ending child poverty a ‘national mission’, and if we are to ensure that a more just Scotland emerges from the pandemic, then we must not delay. Children growing up in the grip of poverty right now – as well as their parents and care-givers – simply cannot endure until the end of this Parliament to be unlocked from poverty. Their lives and life chances are too important for this action to wait.
The evidence is clear that if it is doubled now, it will represent the single most impactful action that could be taken to help meet the interim child poverty targets in 2023, and would signal that ending child poverty will be a defining priority for this Scottish Government and Scottish Parliament. If it is not, more and more children will be pulled into poverty and the opportunity to meet the interim child poverty targets will be missed. Under the current roll out plan and value, the Scottish Child Payment will reduce poverty in Scotland by between 2 and 3 percentage points. This could leave child poverty rates as high as 26% in 2023/24, when the interim target in legislation for that year is 18%. We cannot allow that to happen.
We therefore urge your government to do the right thing, to capitalise on the cross-party consensus that already exists, and to commit to doubling the Scottish Child Payment in this year’s budget. We look forward to your response.
Kind regards,
Peter Kelly, Director, Poverty Alliance
Claire Telfer, Head of Scotland, Save the Children
Paul Carberry, Director for Scotland, Action for Children
SallyAnn Kelly, Chief Executive Officer, Aberlour
John Dickie, Director, CPAG Scotland
Martin Crewe, Director, Barnardo’s Scotland
Jamie Livingstone, Head of Oxfam Scotland
Satwat Rehman, Director, One Parent Families Scotland (OPFS)
Amy Woodhouse, Joint Interim CEO, Children in Scotland
Christine Carlin, Scotland Director, Home-Start UK
Clare Simpson, Manager, Parenting Across Scotland
Anna Ritchie Allan, Executive Director, Close the Gap
Polly Jones, Head of Scotland, The Trussell Trust
Mary Glasgow, Chief Executive, Children 1st
Eilidh Dickson, Policy and Parliamentary Manager, Engender
Hugh Foy, Director, Xaverians UK Region
Russell Gunson, Director, IPPR Scotland
Dr Patrycja Kupiec, CEO, YWCA Scotland – The Young Women’s Movement
The Rt Hon Lord Wallace of Tankerness QC (Jim Wallace), Moderator of the General Assembly, The Church of Scotland
Emma Cormack, Chief Executive Officer, The Health Agency
Gillian Kirkwood, Chief Executive, Y sort it Youth Centre
Agnes Tolmie, Chair, Scottish Women’s Convention
Linda Tuthill, CEO, The Action Group
Steven McCluskey, CEO, Bikes for Refugees
Trishna Singh OBE, Director, Sikh Sanjog
Professor Adrian Sinfield, Emeritus Professor of Social Policy, University of Edinburgh
Jimmy Wilson, CEO, FARE Scotland
Ian Bruce, Chief Executive, Glasgow CVS
Revd Gary Noonan, Minister, Houston and Killellan Kirk
Jacqui Reid, Project Lead, EBI Unites
Innes McMinn, Manager, Independent Living Support
Suzanne Slavin, CEO, Ayr Housing Aid Centre
Fiona Rae, Interim Chief Executive, Community Food Initiatives North East
Mhairi Snowden, Director, Human Rights Consortium Scotland
Juliet Harris, Director, Together (Scottish Alliance for Children’s Rights
Tressa Burke, CEO, Glasgow Disability Alliance
Martin Wilkie-McFarlane, Director, Wellhouse Housing Association
Morna Simpkins, Scotland Director, MS Society
Kara Batchelor, Operations Manager, Alexander’s Community Development
Murray Dawson, Chief Executive, Station House Media Unit
Ashli Mullen, Creative Director, Friends of Romano Lav
Professor John McKendrick, Co-Director of the Scottish Poverty and Inequality Research Unit, Glasgow Caledonian University
Justina Murray, Chief Executive Officer, Scottish Families Affected by Drugs and Alcohol
