Working families and disabled people will “overwhelmingly” bear the brunt of chancellor Rishi Sunak’s planned reversal of the £20 increase in Universal Credit, new analysis suggests.
Sunak has been under pressure to keep the Covid pandemic-linked uplift in place but reports suggest that he is only willing to do so temporarily.
It means that over the coming years the £20 cut in UC will reduce six million family incomes by around £1,000 a year and drag 760,000 people into poverty, the Fabian Society research shows.
Of these, 95% (720,000) are in a household where someone is working or disabled, while 65% of all those who will be pulled into poverty are in working families (490,000 people).
The government is planning to proceed with the cut just as pandemic-related measures such as the furlough scheme finish at the end of April.
The report looks at the impact of the reduction several months down the line, once UC is fully rolled out and everyone on legacy benefits has transferred over.
So reports suggesting that Sunak use next month’s Budget to extend the £20 UC uplift to later this year will have little impact on its conclusions.
The Fabian Society said that a temporary extension “just isn’t good enough” because the cuts will “punish” families and disabled people who have “shown huge resilience during the pandemic and have done nothing to deserve this”.
“The reality is that millions of working households need benefits and tax credits to make ends meet, as do disabled people who are out of work through no fault of their own”
Half of the value of the cuts (£3.2bn) will fall on households where at least one adult is in work, while a further 37% (£2.4bn) will hit non-working households where at least one adult is disabled.
Just 13% (£800m) of the cuts will hit non-working households where there is no one disabled.
Families with children will be hit by half of the cuts (£3.2bn) while households where someone is a carer will be hit by 12% (£700m).
Single adult households will face £4.1bn of the cuts, and £2.3bn will fall on couples' households.
Andrew Harrop, general secretary of the Fabian Society, said: “If ministers cut Universal Credit this April, they will overwhelmingly punish working families and disabled people.
“People in these groups have shown huge resilience during the pandemic and have done nothing to deserve this.
“The chancellor’s planned cut will strip £1,000 per year from six million families and plunge three quarters of a million people into poverty.
“Some politicians like to pretend that social security is just for the workshy.
“But the reality is that millions of working households need benefits and tax credits to make ends meet, as do disabled people who are out of work through no fault of their own.
“If ministers are considering a few months’ temporary extension to the Universal Credit uplift, that just isn’t good enough.
“The 2020 benefit increase must be placed on a permanent footing.”
Mubin Haq, chief executive of the Standard Life Foundation, which supported the report, added: “Last year’s uplift to Universal Credit has been an essential lifeline for millions of families with no or low earnings through 2020.
“Even with the £20 increase, many are struggling. Without it, more will face hardship.
“Our safety net needs strengthening not further erosion.
“If the chancellor reverses the uplift in this March’s budget, the cut will come into force just as the government’s main pandemic support schemes come to an end.
“It will be a blow to many who rely on it to make ends meet.”
Responding, the government highlighted the “billions” it has spent on pandemic policies such as the furlough scheme, which ends in April, and the one-off Covid winter grant.
A government spokesperson said: “We are committed to supporting the lowest-paid families and those most in need through the pandemic, which is why we’re spending hundreds of billions to safeguard jobs, boosting welfare support by billions, and have introduced the £170m Covid winter grant scheme to help children and families stay warm and well-fed during the coldest months.”
:: The report uses the Landman Economics Tax-Transfer Model, a microsimulation of the tax-benefit system, to project the impact of the cuts once UC is rolled out and assumes employment has returned to pre-pandemic levels.
:: The paper also uses the standard international measure of poverty – 60% of median income after housing costs and adjusting for the size of household.