Six million households face losing £1,040 a year if chancellor Rishi Sunak allows the coronavirus temporary boosts to welfare to expire as planned in April, a new analysis warns.
The so-called “red wall” in the north, west Midlands and Wales, where the Tories took swathes of seats in its December election victory, will be worst hit by the £20 reduction in main UC and tax credit payments, with one-in-three working age households affected.
The losses from the planned £8bn cut will be even higher in some of the seats that switched from Labour to Tory at the last election, according to the Resolution Foundation report, released on the eve of the Conservative virtual conference.
Almost two-in-three households in Blackpool South would lose out, along with over forty per cent of households in seats such as Great Grimsby, Bolton North East, West Bromwich West and Dudley North.
The plan to reverse this year’s pandemic-related benefit increase presents a major headache for Sunak, Boris Johnson and his backbenchers.
It would also reduce the generosity of unemployment support down to its lowest real-terms level in three decades, and leave the poorest fifth of households facing a huge 7% income loss next year.
Resolution Foundation chief executive Torsten Bell urged Sunak to follow George Osborne’s lead from 2015, noting the former chancellor scrapped tax credit cuts that would have caused a major overnight income loss for millions of households six months later.
The difference is that Osborne’s cuts would have affected half as many people – 3.3m – and came against a backdrop of fast-rising employment.
Sunak, however, is on course to cut benefits when unemployment could be high and rising, and when the economy needs a boost from the spending power of families.
Bell said: “The £20-a-week boost to universal credit and tax credit this year has been a living standards lifeline for millions of families during the pandemic.
“But allowing the policy to expire next year would be disaster not just for household incomes but for economic policy too as the chancellor seeks to secure a recovery next year. It would also be a blow aimed squarely at the ‘red wall’, with one-in-three working-age households on course to lose over £1,000 next year.
“This policy is bad politics, bad economics and bad for living standards too. The chancellor should act swiftly to extend the boost to universal credit and tax credits beyond next spring.”
A government spokesperson said: “We’ve invested an extra £9bn in our welfare system to help those most in need through the pandemic, including by increasing Universal Credit and Working Tax Credit by up to £20 a week, as well as introducing income protection schemes, mortgage holidays and additional support for renters.
“The government will continue to do all it can to support the lowest paid families while focusing on helping people into work. This includes launching the Kickstart Scheme, a £2bn fund to create hundreds of thousands of new, fully subsidised jobs for young people.”