From the TUC

Universal Credit changes in Autumn Statement 2016 won’t make up for cuts that hit families and low-paid workers

23 Nov 2016, by in Society & Welfare

The Chancellor’s announcement of a small cut in the Universal Credit taper rate goes nowhere near making up for the cuts his predecessor announced in July 2015, which will leave many low-paid working families hundreds – even thousands – of pounds worse off a year. As the End Child Poverty (*) coalition put it, today’s announcement is a ‘drop in the ocean’ compared to the cuts to benefits for low-paid families since the 2015 election.

In July 2015, George Osborne celebrated his party’s election victory with a Budget that announced two huge changes to Universal Credit (UC):

  • major reductions in the work allowance that allows claimants to keep a certain amount of their wages before their benefit starts to be reduced and
  • cuts designed to hit families with children by abolishing the ‘first child premium’ in UC and limiting support to just two children.

The cuts in the work allowance range from £360 for a couple with children getting help with housing costs to £4,044 for a lone parent whose UC doesn’t cover housing costs. For a childless couple or single person the work allowance has been abolished altogether. These reductions mean that the ‘taper’ (the rate at which your UC goes down as your earnings go up) applies at a much lower level. The amount claimants will be worse off will depend on their circumstances – a lone parent earning just over the old work allowance level could be more than £212 a month worse off from this reform alone.

For families with children, the abolition of the ‘first child premium’ (a higher rate paid for the first child) loses them £545 a year and limiting support to 2 children a further £2,780 for each child over that limit. Add that to the freeze in benefit rates and you get a further real cut in support.

These are cuts targeted at families with children and low-paid workers – groups that politicians of all parties claim to support. That’s why every organisation that knows anything about the subject – from the Child Poverty Action Group to Ian Duncan Smith’s Centre for Social Justice – called for them to be reversed today.

So what did we get? A two-point cut in the ‘taper’ to 63 per cent. If you’ve read the papers over the last few days you’ll have been expecting something wonderful.

To get an idea of the scale of the let down, according to today’s Statement, in 2020/21 (when the next Parliament is due to start) this reduction will cost the government £570 million.

According to the policy costing for the July 2015 Budget, that year the reduced work allowance alone will cost low-paid families £3.44 billion. According to the Institute for Fiscal Studies, that year they will lose £1.4 billion due to limiting support to two children and £675 billion due to the abolition of the first child premium. And the benefit freeze will be costing claimants (of all benefits, not just UC) £4 billion a year.

Wonderful this ain’t.


(*) Full disclosure: the TUC is a proud member of End Child Poverty.

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  2. Inequality is falling, but that doesn’t mean we can stop worrying
    Jan 12th 2017, 12:17 pm

    […] doesn’t mean we can stop worrying about poverty. As I’ve mentioned before, we’ve got massive cuts to Universal Credit coming that will hit low-paid workers, and the IFS expects the proportion of children living in […]