Recent changes to universal credit made by Boris Johnson’s government will leave 3.6 million families across the UK worse off, according to leading economists.
The combined impact of cutting the £20-a-week universal credit uplift and reducing the so-called “taper rate” will push 120,000 people into poverty, according to the Resolution Foundation.
The think tank said positive changes made by the chancellor Rishi Sunak at last week’s Budget were not enough to make up for the “damage” by the decision to axe the uplift payment in October.
Mr Sunak announced that the taper rate – the number of pence in every £1 lost when a claimant takes on work – will be reduced from 63p to 55p in a bid to help those in work keep more of their earnings.
The Resolution Foundation said the chancellor’s “welcome” move would benefit around 1.3 million working families and leave them better off than they were even before the £20-a-week uplift was cut last month.
But for 3.6 million families – including the unemployed, as well as some of those in work on very low incomes – these changes will not compensate for the £86-a- month loss.
Karl Handscomb, senior economist at the Resolution Foundation, said Mr Sunak had made “very welcome major changes” in the Budget which boost the incomes of families.
But he added: “The changes are not enough to offset the damage from the recent £20-a-week cut to Universal Credit. While 1.3 million families on universal credit will be better off, almost three-quarters of universal credit families will see their incomes fall this autumn as the cost of living crunch bites.”
There will now be 40,000 fewer people in poverty in working families, but 160,000 more people in poverty in out-of-work families, according to the think tank’s analysis of recent changes.
The Resolution Foundation did praise the chancellor’s decision to increase the eligibility for Universal Credit. His Budget changes will mean 330,000 more families will be able to claim the benefit while working.
A home-owning couple with two children can now claim universal credit if they earn up to £37,700, compared to £32,800 prior to the latest Budget changes.
But the think tank warned of the grim impact of rising energy and food costs ahead – saying cuts in welfare mean “our basic safety net remains far too weak to support families facing economic bad news”.
Citizens Advice has also warned that the tape rate changes do not “cushion the blow” of the £20-a-week cut for those still looking for work, or the 1.7 million unable to work because of disability, health issues or caring responsibilities.