Universal Credit: “biggest ever overnight cut to social security”

The increase to Universal Credit, amounting to £1,040 a year, was brought in to support those on low incomes during the pandemic.

The government announced its withdrawal of the support on October 6th and is projected to risk pushing half a million people and children into poverty. Katie Schmuecker, deputy director of policy & partnerships at the Joseph Rowntree Foundation, has branded it “the biggest ever overnight cut to social security”.

Resolution chief executive Torsten Bell tweeted about the impact, suggesting:  “4.4 million households, with 5.1m adults and 3.5m children, will see their incomes fall by £1,000 overnight”.

The withdrawal of the Universal Credit uplift coincides with increases in the cost of living as the Bank of England has predicted inflation will rise 4% in the coming months and is unlikely to be matched by wage growth by most economical sectors.

Rising prices are being found in areas driven by necessities, such as gas and electricity and will add to the struggles of those on lower incomes. Business Secretary Kwasi Kwarteng has admitted people in the UK will be facing “a very difficult winter”.

As a result, families have detailed the reduction in their income, paired with the rising cost of living, which will force them to choose between “heating or eating”.

The government has defended the decision to reduce Universal Credit payments, saying the £20 uplift was always intended to be temporary and encouraging people back into work is the best way to tackle poverty.

On the other side of this statement, families find themselves having to adjust to the decreased income alongside the governments’ proposition to increase National Insurance bills.

From April 2022, National Insurance tax will be rising by 1.25 percentage points to help get the NHS back on track following the backlog from the Covid-19 pandemic and potentially contribute to long-awaited reforms to social care.

As National Insurance is paid for by both employees and businesses, the Institute of Directors has expressed concerns where one in three firms may be encouraged to put a stop to expanding and therefore stop recruiting. Especially, while firms recover from the impacts of lockdowns and take over from furlough payments, they may find themselves more hesitant to recruit. This goes against the government’s aim by cutting universal credit to get more people back into work to tackle poverty.

The increase was confirmed and voted on by MPs last month and additionally infringes on a manifesto commitment signed up to by the Conservatives in 2019.

Julian Jessop suggested that the National Insurance tax increase will not benefit the social care reforms for a number of years due to the backlog. He suggests that “it’s a missed opportunity to have a fundamental rethink about social care and tax” and branded it a short-term fix “that may end up fixing nothing at all”.

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Una Jones

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January 2022
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