This Wednesday the British government is wrapping up its £20-a-week increase to Universal Credit. The move coincides with Prime Minister Boris Johnson’s speech addressing the Conservative Party conference, where he is to tout his government as “dealing with the biggest underlying issues of our economy and society… Problems that no government has had the guts to tackle before”, reported Sky News.
The decision to wrap up the uplift to Universal Credit has triggered concerns that with the latest food, fuel and tax hikes factored in, the end of the scheme may leave large numbers of working households losing a vital lifeline.
In response to the COVID-19 pandemic, in March 2020 Prime Minister Boris Johnson’s government announced an uplift to Universal Credit and working tax credits worth £20 per week.
People, some wearing masks queue outside a John Lewis store, in London, Thursday, July 16, 2020. Unemployment across the U.K. has held steady during the coronavirus lockdown as a result of a government salary support scheme, but there are clear signals emerging that job losses will skyrocket over coming months
© AP Photo / Alastair Grant
Universal credit is a benefit for working-age people, paid directly into claimants' bank accounts monthly in England and Wales, with the option of payment every two weeks in Scotland and Northern Ireland.
It can be claimed whether you are in or out of work, and was introduced as a replacement of six “legacy benefits”: income support, income-based jobseeker's allowance, income-related employment and support allowance, housing benefit, child tax credit and working tax credit.
On 20 March 2020, the Chancellor the Exchequer, Rishi Sunak, had announced the uplift was designed to “strengthen the safety net” and was part of a broader support package for household finances.
The scheme was originally planned to last a year, yet was extended by six months in the March 2021 budget.
In July 2021, the Government confirmed that it would not be extended further, insisting that the measure had been conceived from the start as a temporary one, to offer much-needed support to the low-income and the most vulnerable amid the fallout from the health crisis.
On 7 July 2021, when Prime Minister Boris Johnson was questioned on the issue by the House of Commons Liaison Committee, he said that with coronavirus restrictions eased, the emphasis “has got to be on getting people in work and getting people into jobs, and that is what we are doing”.
Concerns had been raised over the impact ending the uplift would have. Thus, the Centre for Social Justice had urged that the uplift be made permanent, arguing that the “consequences of removing it would outweigh the benefits from any savings”.
Similar concerns were voiced in July by six former Conservative work and pensions secretaries. The group wrote to Chancellor Sunak, calling on him to rethink the decision, bearing in mind “record levels of in-work poverty” in the country.
According to data shared by the Institute for Public Policy Research, the number of working people in poverty has spiked over the past decade, going up by approximately 200,000 annually, reaching a current total of 8,280,860 people.
“It does mean that for those people who are on the edge of just about managing, that they may well fall below the poverty line”, the Institute’s Claire McNeil was cited as saying by ITV News.
In another attempt to sway the decision on the Universal Credit cut, in September 2021, a plethora of organisations, charities, public health experts and thinktanks signed a letter to the government, arguing that the decision would “pile unnecessary financial pressure on around 5.5 million families, both in and out of work”.
The Joseph Rowntree Foundation (JRF) also called on ministers to reconsider the move, arguing that the “biggest overnight cut to the basic rate of social security since the foundation of the modern welfare state” would plunge half a million more people into poverty, including 200,000 children.
It was emphasised that the cut would predominantly affect working families, with the blow felt the greatest across the North of England, Wales, the West Midlands and Northern Ireland.
Citizens Advice has claimed that a third of people on Universal Credit will end up in debt once the additional payment is scrapped.
According to data provided by the Resolution Foundation, the measure will now see the standard allowance for a single person aged under 25 drop from £79 a week to £59, which is fall of fall of 25%.
The think tank warns that higher costs and the cut to Universal Credit will render the coming months especially difficult for low-income families. It cited the fact that the Bank of England has forecast that inflation will rise above 4 percent in the coming months, while average weekly earnings are forecast to grow by just 2.25 percent by the end of this year.
Research from the Joseph Rowntree Foundation revealed that over 176,000 working households in Scotland will lose £1,040 per year because of the Tory cut to Universal Credit, with the low-income areas most affected.
Citizens Advice Scotland was cited as warning that 74% of Universal Credit claimants would be left floundering to cope after their income is thus slashed, taking a huge toll on mental health as well.
‘High Skill, High Wage’ Economy
In response, the UK government has insisted that higher wages are a better option for the nation rather than taxpayer-funded benefit rises.
Speaking on Tuesday, Boris Johnson defended the cut to Universal Credit.
“What we won’t do is take more money in tax to subsidise low pay through the welfare system,” he said.
Johnson mapped out his hopes for the UK to be a “high skill, high wage” economy.
Johnson underscored the existence of a £500 million hardship fund, an increase in childcare provision, local housing allowance and warm homes discount to help people, while also urging businesses to start investing in their workforces. He also touted longer-term measures to improve housing supply and move away from fossil fuels, claiming these measures would work towards slashing bills.
Weighing in on concerns regarding supply chain issues in the supermarkets and petrol stations, he told LBC Radio:
“I understand that people feel times are difficult at the moment because we have got an economy that’s coming out of a very tough period with the Covid pandemic and it’s growing strongly now… We’ve got the fastest economic growth in the G7,”
‘Long Overdue Change’
The end to the £20 Universal Credit uplift occurs on the day the Prime Minister addresses the Tory conference in Manchester.
The Labour party and its leader Sir Keir Starmer has levelled scathing criticism at Johnson’s government over the measure, emphasising that it will take an annual £1,040 from six million households, affecting one in 14 British workers.
Boris Johnson, however, is set to deliver an upbeat speech, accusing predecessors of "drift and dither", while he vows a "long overdue" change, reported Sky News.
"We are not going back to the same old broken model with low wages, low growth, low skills and low productivity, all of it enabled and assisted by uncontrolled immigration."
Johnson is purportedly to insist that Brexit and “controlled” migration will result in higher wages, adding:
"And the answer is not to reach for the same old lever of uncontrolled migration to keep wages low. The answer is to control immigration, to allow people of talent to come to this country but not to use immigration as an excuse for failure to invest in people, in skills and in the equipment or machinery they need to do their jobs.”
Johnson will yet again tout his “levelling up” agenda for removing the north-south divide, and will reportedly say:
"There is no reason why the inhabitants of one part of the country should be geographically fated to be poorer than others. Levelling up works for the whole country - and is the right and responsible policy.”