EVEN AFTER THE CHANGE to universal credit announced in the autumn budget, the poorest fifth of people would have been £380 a year better off on average if the £20-a-week uplift had stayed in place instead, according to analysis from the New Economics Foundation (NEF).

The analysis finds that reversing this month’s £20-a-week cut to universal credit, rather than lowering the taper rate and raising work allowances  (which determine the amount of universal credit withdrawn for every £1 someone earns) would have prevented 300,000 more people from being pushed into poverty this winter.

In the first week of October, the £20-a-week uplift to universal credit payments introduced during the pandemic was removed. In the budget, the chancellor announced that the universal credit taper rate will be reduced from 63 per cent to 55 per cent, and that work allowances will be increased by £42 a month. These measures are expected to take effect in the coming weeks.

Today’s analysis from NEF modelling compared the effects of the government’s changes to universal credit by December this year, compared to the impact if the £20 uplift had stayed in place instead. They found that the chancellor’s changes to universal credit will push 300,000 more people into poverty than if cuts to the benefit had been reversed.

The New Economics Foundation is calling for the UK’s social security to be revamped in order to introduce a Living Income. This would set an​‘income floor’ – a level below which no one can fall that is sufficient to meet everyday needs.

Lukasz Krebel, economist at the New Economics Foundation, said: The chancellor was right to cut the universal credit taper rate and increase work allowances yesterday, reducing the excessive marginal tax rates on additional earnings faced by those on the lowest incomes.

“However, this won’t touch the sides when it comes to reversing the impacts of cutting universal credit by £20 a week. Neither will it lift the UK’s meagre social-security system to a similar level to other advanced economies. And while it offers some improvements for claimants who are in employment, it offers nothing at all for those unable to work or struggling to find work.

“To create the prosperous, high-wage economy the chancellor claims to want, the government cannot push hundreds of thousands of people into poverty. A more generous social-security system would aid our economic recovery from the pandemic, because recipients of universal credit would spend more, helping to create more jobs and higher tax receipts for the government.”

* More information on the Living Income here.

* Source: New Economics Foundation