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Millions set to be worse off unless the Government makes the increase to Universal Credit permanent

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Keep the lifeline: Around 16 million people are at risk of seeing their social security support cut by £1,040 per year in April 2021 

700,000 people are likely to be pulled into poverty if the temporary increase of £20 per week for those on Universal Credit and Working Tax Credit is withdrawn.

The Government must do the right thing and use the Autumn Budget to make the temporary increase to Universal Credit and Working Tax Credit permanent and extend this support to those who are currently excluded because they are claiming legacy benefits.

Ministers are being urged to keep a vital lifeline for low-income families by committing to make the temporary £20 per week uplift to Universal Credit and Working Tax Credit permanent, as well as extending this support to those excluded on legacy benefits.

New analysis by the independent Joseph Rowntree Foundation, “Storm ready – how to keep us afloat as unemployment hits” warns that if this lifeline is removed as planned in April 2021, it will cause a significant shock to the incomes of those who are newly unemployed and families who were already struggling to get by.

Around 16 million people are at risk of experiencing a cut of £1,040 per year in their support, and 700,000 are likely to be pulled into poverty in the Spring unless action is taken.

Those newly accessing social security due to unemployment are likely to have higher fixed outgoing costs and therefore find a severe income shock particularly difficult to weather and will be at risk of losing their home and getting into debt.

At a time when households are grappling with additional challenges accessing childcare and transport, managing health risks, and when services like breakfast clubs and informal childcare arrangements are not available, many will be unable to cope if the uplift is reversed.

Such is the impact of the ongoing economic storm that without this support, half a million people are likely to be plunged into deep poverty. Many families have already had to cut back on food and other essentials or fallen behind on rent and other bills.

Back in March, the Government rightly increased the standard allowance of Universal Credit and Working Tax Credits by £20 per week to support people on low incomes. As furlough unwinds and unemployment rises, it is critical that the Government uses the upcoming Autumn Budget to commit to keeping this lifeline. Social security has a key role in steadying the nation in the recovery, enabling families to seize new opportunities.

Today’s analysis shows that families with children – particularly single parents – would be hardest hit. The evidence also shows that almost half of those losing out will be living in families where someone is disabled and almost a quarter will be from Black, Asian, and Minority Ethnic (BAME) families.

Helen Barnard 100x100Helen Barnard, Acting Director of the Joseph Rowntree Foundation, said:

“The additional £20 per week is a vital lifeline for many people on low incomes who are struggling to get by. As we all adjust to living and working alongside Covid-19, we know many families have been hit by extra costs and barriers to earning as a result. Too many households are at risk of being pulled into poverty as unemployment rises.

“We cannot afford to whip this lifeline away at precisely the time when it’s needed most. Now is the moment to help families stay afloat, not cut them adrift.

“The Autumn Budget offers an opportunity to strengthen social security by making the increase to Universal Credit permanent and extending it to those on legacy benefits who are largely sick or disabled people and carers, who have wrongly been left out.”

The Government has taken welcome steps to strengthen social security during the pandemic and should keep up the momentum. The Institute for Fiscal Studies has found that even with the £20 uplift, families unable to find work will on average receive £1,600 less per year in social security support than they would have done in 2011. Those with children will receive £2,900 less. This should be the foundation upon which to build.

Currently, the additional £20 per week of social security support does not cover those claiming legacy benefits such as Employment and Support Allowance (ESA), Jobseekers Allowance (JSA) and Income Support. Most of these claimants are sick or disabled people and carers who have unjustly long faced a much greater risk of poverty.

These groups are also likely to have had their lives made even harder by the heightened health risks, additional challenges associated with social distancing and the withdrawal of essential services. There is also emerging evidence that disabled people are facing a higher risk of losing their jobs because of the pandemic.

Therefore, JRF agrees with the Social Security Advisory Committee that the continuing disparity between the rates of Universal Credit and equivalent legacy benefits is untenable.  By extending this lifeline to those on legacy benefits who are excluded, the Government can boost the incomes of 1.5 million people, including 300,000 children.

Storm ready – how to keep us afloat as unemployment hits

This final briefing in JRF’s economic discussion series – Shaping a recovery that reduces poverty – explains why the Government should introduce a new COVID-19 Job Support Scheme, and create new job opportunities to deliver a ‘good jobs’ recovery.

With the Coronavirus Job Retention Scheme (CJRS) set to be withdrawn fully on 31 October, we are now on the eve of a coming wave of unemployment. We’ve created a COVID-19 Pre-Vaccine Job Risk Index to predict which jobs are most at risk, and who and where are most likely to be affected. Our analysis suggests that winding down the CJRS without a replacement will lead to big job losses in sectors such as hospitality and leisure that are likely to grow again post-pandemic.

JRF recommendations

  1. Introducing a COVID-19 Job Support Scheme, a new temporary and targeted furlough policy measure for businesses that continue to face constrained capacity and reduced demand due to required social distancing measures.
  2. A further package to create new job opportunities to deliver a ‘good jobs’ recovery, including:
  • A package of targeted employment support for workers most at risk of job losses.
  • A ‘New Deal for Adult Education’.
  • Go further on job creation programmes.
  • Use the promised UK Shared Prosperity Fund (UKSPF) to deliver on the Government’s levelling up pledge.

Cost of recommended policies:

  • Total annual expenditure of around £8.8 billion in 2021/22, with this being around the same level in 2024/5.
  • Keeping the £20 per week uplift (in addition to normal annual uprating by CPI) would cost around £7.7 billion in 2021/22, rising to around £8.4 billion in 2024/25.
  • Extending the same uplift to ESA, Income Support and JSA would cost around £1.1 billion in 2021/22, falling to around £300 million in 2024/25.
  • In comparison, the OBR estimate that the Coronavirus Job Retention Scheme and Self-Employment Income Support Scheme will cost over £60 billion in 2020/21.  

*Deep poverty is when someone is more than 50% below the relative poverty line after housing costs.

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