There was no shortage of warnings to the government about ending the Universal Credit uplift. The extra £20 Covid cash didn’t exactly undo years of damage to welfare – but  removing it sets the value of benefits back decades

The calls were loud and they came from all quarters. The message couldn’t be clearer – the government’s plans to remove the £20 uplift to Universal Credit and Working Tax Credit is going to be devastating for people on low incomes this winter.

The uplift – an extra £20 a week for all UC claimants – was introduced in April last year by Chancellor Rishi Sunak, who said at the time that the government would be judged by its “capacity for compassion”.

But, it appears, the compassion has now run its course. The uplift boosted four million Britons when it was introduced, but the fallout from the pandemic means that figure now sits at 6.2 million. Forty per cent of those are in work.

The loss of £20 a week, or £1,040 a year, is the biggest overnight cut to social security since the Second World War and is projected to drag half a million people (200,000 of them children) below the poverty line.

At the time of writing, the government was determined to press on with the plan – despite numerous warnings including several from within the Conservative Party (six of them former Work and Pensions Secretaries).

One of the most bitter responses came from former prime minister Gordon Brown, who pointed out that the combination of falling UC payments and rising energy bills would remove all slack from the system, forcing charities, foodbanks and “people of conscience and decency” to fill the gap that government policy has created.

Household Support Fund

UC claimants will recently have found their journals updated with a message from the DWP informing them of the date their uplift will end and signposting them to advice on managing their money.

It’s clear the Chancellor knows the damage the cut to Universal Credit will cause

Helen Barnard, JRF deputy director

In the meantime, less than a week before the October 6 uplift end date, the DWP announced a £500m Household Support Fund to help “those most in need” to pay for “food, clothing and utilities”.

It was seen by commentators as acknowledgement of the looming financial crisis for many households, but the £500m total falls well short of the £6bn being taken from UC claimants.

“By admitting today that families will need to apply for emergency grants to meet the cost of basics like food and heating through winter, it’s clear the Chancellor knows the damage the cut to Universal Credit will cause,” Joseph Rowntree Foundation deputy director Helen Barnard said of the announcement.

Similar to hardship funds and crisis grants already available through some local authorities, the cash will be paid out by councils over the winter as discretionary “small grants”, the DWP said. 

The £500m will be divided up between the nations using the Barnett formula but it will be up to the devolved governments to decide how to spend their share.

As the cut-off approached, some also sensed panic in reports of DWP proposals to allow working people on UC to keep more of their earnings by reducing the ‘taper rate’ from 63p to 55p. 

The move would cost the Treasury, which is said to be considering the plan, an estimated £1bn a year.

It might go some way to appeasing Conservatives who have spoken out about the removal of the uplift, and it chimes with the ethos of UC that working people upping their hours should be left with more in their pockets.

I am just thinking, how am I going to survive? I mean, I cannot even pay the bills

Jason, UC claimant

But this assumes claimants can find extra hours to work and that their circumstances allow them to do so. And of course it only benefits the claimants who are in work, leaving the remaining 60 per cent facing the real-life consequences of the cut with no potential sweetener on the horizon.

Take Jason, for example. He lives with his wife and four children in Dagenham and has in the past worked as a chef and a carer. Recently though he moved on to benefits for the first time due to a range of complex health conditions.

He has £1,643 in Universal Credit coming in each month but shells out £1,400 on rent. Unsurprisingly, he already struggles to make ends meet – and he’s about to lose £20 a week. 

As it is, Jason can’t even cover utilities, let alone food, and depends on cash from family. He’s desperately hoping to be well enough to work again soon so that he can repay the debt to his relatives, but it’s far from certain.

“The pandemic isn’t over, so why is the government doing this now?” he says. “People are still dying, there are no jobs. I am just thinking, how am I going to survive? I mean, I cannot even pay the bills.”

Jason has applied for PIP and is receiving support from Clean Slate.

We know that five to six weeks of our support can result in financial gains of £950 by boosting the amount of money coming in and trimming back the sums going out. 

But Jason’s story shows that even with good budgeting and help to access money or grants, sometimes there just isn’t a way to square the circle. His situation, and that of many like him, is unsustainable.

Legacy of austerity

This perfect storm of the UC cut, the end of furlough and crippling hikes in energy bills has shone a light on what’s really been happening with working-age welfare since the benefits freeze was implemented in April 2015.

Throughout the five years of the freeze, inflation continued to push prices up. No one would be surprised to learn that this left working-age benefits worth less in real terms than they were pre-2015.

But what might come as a shock are Resolution Foundation figures from 2019 showing the real-term value of the support was £73 a week, or £3,800 a year, beneath that of 1991-92.

And child benefit for a second child and beyond was worth less than it was even way back in 1979.

So it’s clear that the £20 uplift was only ever going to go part-way to mitigating the damage that has been done to the safety net. Removing it leaves the most vulnerable even further behind. 

Institute for Fiscal Studies calculations showed the £20 a week represented a bigger jump in income than all real-terms benefits rises over the last 45 years.

It found that making it permanent would undo only two thirds (at most) of benefit cuts made since 2015, never mind those made under the coalition after 2010.

And it echoed the charge that working-age benefits were already “ripe for reform” even before the Covid crisis, adding that keeping the £20 uplift would still leave UK benefits “very thin” when compared with those in other countries.

But not only that, as life becomes a daily battle for survival, it makes it even harder for those on UC to find and seize the opportunities they need to begin building a stronger financial base. This is something the Joseph Rowntree Foundation has consistently pointed out.

So as the uplift ends, organisations like Clean Slate are ready to support as many people as possible to make the most of their remaining finances. 

Good money skills will always leave people better off and better prepared. But for many, there will come a point where the budget simply cannot be balanced. Then, as  Gordon Brown predicted, the “people of conscience” become the last line of defence.

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