UK heading for the biggest overnight cut to the basic rate of social security since World War II

Government plans to cut Universal Credit by £20-a-week in October will impose the biggest overnight cut to the basic rate of social security since the foundation of the modern welfare state, according to analysis by the independent Joseph Rowntree Foundation (JRF).

This historic cut to the incomes of around 6 million families is scheduled in law for 6 October 2021 and will coincide with the final day of Conservative Party Conference.

As ministers and MPs go for their summer break, there are 5 facts about the impact of this cut which they should consider:

• The Government would be responsible for the biggest overnight cut to the basic rate of social security since the birth of the modern welfare state. This will be a huge shock for millions of people on low incomes who will have £20 less to spend each week.

• Half a million more people are set to be pulled into poverty, including 200,000 children.

• Working families make up the majority of families who will be affected by the cut to Universal Credit and Working Tax Credit.

• Families with children will be disproportionately impacted. Around 6 in 10 of all single-parent families will experience their income falling by the equivalent of £1,040 per year because of the cut in UC or WTC.

• Despite a commitment to ‘levelling up’ the impact of the cut will be the greatest across the North of England, Wales, the West Midlands and Northern Ireland.

New analysis from JRF on the adequacy of working-age social security used a range of illustrative families to demonstrate how adequacy has changed for different households over time. In their illustrative family with three children, where one adult is working full-time, and the other is working part-time (living in Kernow West, a medium cost area):

• In 2013/14, they would have been £271 a month above the poverty line.

• Cuts and freezes in the decade leading up to the pandemic eroded their income, so that even with the £20 increase in 2020, they are now below the poverty line.

• If it the cut goes ahead, they will be a huge £150 per month below the poverty line.

Particularly worryingly, the analysis found that the planned cut would leave an illustrative single adult who loses their job, destitute – the most extreme form of poverty.

The Poverty Alliance recently submitted a Freedom of Information request asking the Government to disclose any analysis that it has undertaken on the potential impact of the £20-a-week cut to Universal Credit. The Department for Work & Pensions deemed the disclosure of the information to not be in the public interest. This is in spite of the fact that:

• When we entered the pandemic, the main rate of out-of-work support was at its lowest level in real terms since around 1990 and its lowest ever as a proportion of average wages. At the same time, support for families in work had been eroded, causing a rise of in-work poverty.

• The cut is opposed by six former Conservative Work & Pensions Secretaries, the Northern Research Group of Conservative MPs, the One Nation Group of Conservative MPs, numerous cross-party committees in all nations of the UK and a huge coalition of charities and community groups.

It is important to note that around 2 million people claiming legacy benefits - Jobseeker’s Allowance, Employment and Support Allowance and Income support - have wrongly been excluded from this vital improvement in support. The £20 increase should be extended to people on these benefits which are mainly claimed by sick or disabled people and carers.

Katie Schmuecker, Deputy Director of Policy and Partnerships for the independent Joseph Rowntree Foundation said:

“Universal Credit has been a lifeline that has helped keep millions of heads above water, but the new analysis should act as a stark warning of the immense, immediate and avoidable consequences of what amounts to the biggest overnight cut to the basic rate of social security since the Second World War.

“We all accept governing is about priorities but cutting the incomes of millions of the poorest families and sucking money out of the places in which they live, flies in the face of the Government’s mission to level up our country. This is not about generosity, it’s a matter of investing in families so they have the dignity of being able to meet their needs and supporting everyone in and out of work to escape poverty.

“The public deserve to know what the Government expects the impact of this cut to be. Ministers cannot hide the fact that they are ploughing ahead with a cut despite knowing it will be devastating for millions of families. They should publish their analysis on the impact of the cut as soon as possible.”

Method:

How has JRF worked out ‘the biggest overnight cut to the basic rate of social security since the foundation of the modern welfare state’ statement? We have reviewed officially published data on rates of benefits stretching back to 1948 (when the Beveridge system was introduced), in particular, the main element of support for a single adult aged over 25 who has lost their job. It is possible that the cut this October could be the biggest cut ever, though we have not looked in detail at the period before 1948.