Universal Credit: What does the government’s social security cut mean for families?

One third of claimants could end up in debt as unemployed and low-paid workers lose £20 a week

The UK government’s £20 per week boost to the Universal Credit scheme, which was brought in to support struggling families at the outset of the coronavirus pandemic, comes to an end on Wednesday 6 October, the same day prime minister Boris Johnson attempts to underline his leadership credentials in his address to the Conservative Party conference in Manchester.

His decision to slash the benefit will affect an estimated 6m claimants in England, Scotland and Wales, 60 per cent of whom are unemployed and 40 per cent working in low-paid jobs, leaving them £1,040-a-year worse off and potentially driving 500,000 people, including 200,000 children, below the poverty line.

The total of those set to lose out also includes an estimated 100,000 care workers, according to the GMB Union, a sector whose employees worked so hard and so selflessly throughout the pandemic, providing frontline services to the sick on an average wage of £8.72 per hour.

Universal Credit is a social security payment that was first introduced in 2013 under the Conservative-Liberal Democrat coalition government’s Welfare Reform Act 2012 and was intended to make claiming benefits simpler by rolling together six working-age benefits into one payment: income support, income-based job-seeker’s allowance, income-related employment and support allowance, housing benefit, child tax credit and working tax credit.

The weekly increase was introduced to see families through lockdown in March of last year when redundancies, furlough and income losses threatened to lead people into financial hardship.

The decision to drop it back down to pre-pandemic levels will see the benefit for a single person aged under 25 fall from £79 to £59 (a 25 per cent drop, according to the Resolution Foundation think-tank), a single person over 25 see their support dip from £95 to £75 (down 21 per cent), a couple aged under 25 see theirs fall £113 to £93 (down 18 per cent) and a couple one or both of whom is aged over 25 lose 15 per cent of their benefits as £137 slides to £117.

Many will now face “a very difficult winter”, by business secretary Kwasi Kwarteng’s own admission.

What makes the current moment so particularly tough is the rise in the cost of living, with the Bank of England forecasting a four per cent climb in the rate of inflation over the coming months (unlikely to be matched by a commensurate increase in salaries), which coincides with the colder, darker weather driving up domestic electricity and gas bills and the HGV driver crisis expected to lead to rising grocery and petrol prices should supply problems continue to mean shortages.

The charity Citizens Advice has warned that up to one third of people on Universal Credit will end up in debt as a result of the £80 a month loss, predicting an average shortfall of between £51 and £55 per month.

Other likely and disturbing knock-on consequences of the cut might include a run on food banks, widespread declines in mental health and even cancer sufferers turning to payday lenders to support themselves, as Macmillan Cancer Support has warned, given that an estimated 60,000 people living with the disease currently rely on Universal Credit.

“We’re anticipating a huge surge in need for independent food banks as the impact of the cut to Universal Credit and cost of living increases take hold,” Sabine Goodwin from the Independent Food Aid Network told The Independent this week. “On top of this, many of our food banks are struggling to access food supply.”

On the question of diminishing psychological well being, Mental Health UK has warned that the added financial strain could cause existing problems to spiral and prove “catastrophic”.

The charity says its online mental health and money advice services have seen almost double the number of visitors over the course of the last year, rising from 30,760 visits in August 2020 to 60,214 in August 2021.

But the prime minister has nevertheless defended his decision, saying he believes employers paying higher wages, rather than claimants receiving taxpayer-funded benefit rises, is the way to get the country back on its feet as the national recovery from Covid-19 continues.

Mr Johnson told BBC One’s Andrew Marr Show on Sunday that he would not “raise taxes to subsidise low pay” at a time when he is already presiding over the highest-taxing administration since the Second World War.

“There was a whole package of measures, from furlough to bounce-back loans to the Covid uplift, that are no longer appropriate,” he said.

“What we would rather do is help people into better-paid, better-skilled jobs - which is what is happening. I’d rather see that than raising taxes to subsidise low pay.”

The PM was standing firm despite widespread calls for him to overturn the Universal Credit cut, with a Savanta ComRes poll for The Independent concluding that fewer than one-fifth of voters (19 per cent) supported the plan and 59 per cent saying the level of the benefit should be maintained or increased.

Even among Conservative voters, just 34 per cent thought it was right to slash the increase altogether, against 43 per cent who said it should be maintained or increased and 13 per cent who said it should be kept at a reduced rate.

“The public, charities and the government’s own assessment all agree this cut will be catastrophic,” Labour’s shadow work and pensions secretary Jonathan Reynolds told The Independent in response to the survey.

“Working families are facing a Tory cost-of-living crisis this winter because of this government’s tax hikes, energy crisis and cuts to Universal Credit. It’s not too late for the government to change course and cancel their cut to Universal Credit.”

Scottish first minister Nicola Sturgeon, Welsh first minister Mark Drakeford and the first and deputy first minister of Northern Ireland, Paul Givan and Michelle O’Neill, likewise said there was still time for a change of heart and urged Mr Johnson to think again.

“Ending it amid a cost of living crisis doesn’t seem right for a civilised society,” tweeted popular money-saving expert Martin Lewis on Wednesday morning, voicing his own opposition to the move.

A Downing Street spokesperson remained unmoved, however, when they said this week: “As announced by the chancellor at the budget, the uplift to Universal Credit was always temporary. It was designed to help claimants through the economic shock and financial disruption of the toughest stages of the pandemic, and it has done so.

Prime minister Boris Johnson and chancellor Rishi Sunak (Jonathan Brady/PA)

“Universal Credit will continue to provide vital support for those both in and out of work and it’s right that the government should focus on our plan for jobs, supporting people back into work and supporting those already employed to progress and earn more.”

Speaking to Sky News on Wednesday morning from Manchester, deputy prime minister Dominic Raab said: “As we come through the pandemic, with youth unemployment going down, employment going up, we need to transition. We don’t want to see people reliant on the welfare trap.”

Chancellor Rishi Sunak has, however, announced a £500m hardship fund to help the poorest pay for food, clothes and bills, in a tacit admission that the welfare cut will cause difficulties for many families in accessing the basic necessities of life.

But both he and the prime minister insist it is not possible to find the £6bn needed to maintain the Universal Credit uplift in the wake of the “fiscal meteorite” that was the coronavirus.

The decision, already extremely unpopular, could yet have political consequences for the ruling Conservatives, as the Joseph Rowntree Foundation points out that of the 140 constituencies across Britain that will see one in four families affected by the cut, 36 are current Tory seats.