Universal Credit changes ‘not enough’ to stop millions falling into poverty

Universal Credit changes ‘not enough’ to stop millions falling into poverty

The Resolution Foundation is sounding the alarm that millions of families are still set to be worse off following the Government’s cut to the £20 uplift to Universal Credit. Despite this, the think tank acknowledges changes to the taper rate, which were confirmed in last week’s Budget, will specifically help 1.3million households get out of poverty. Furthermore, the taper rate reduction will see 330,000 more families eligible for Universal Credit support from the Department for Work and Pensions (DWP).

In relation to Universal Credit, the taper rate is the rate at which someone loses money from their benefit payments if they acquire additional income from elsewhere, such as a job.

During his Budget announcement, Rishi Sunak confirmed the Universal Credit taper will be reduced by eight percent.

Prior to this change, the Universal Credit earnings taper rate stood at 63 percent which meant that for every pound someone earned outside of their benefit payment, they would lose 63p in Universal Credit.

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As per the Chancellor’s announcement, the taper rate has been reduced to 55 percent and will save claimants around £8 per week.

Following this change, an additional 333,000 families will become eligible for Universal Credit due to a lower taper rate expanding support in terms of income distribution.

However, following the Government’s £20 cut to Universal Credit payments, the Resolution Foundation is warning that over half of households still on the payment will remain worse-off by £1,000 by a year.

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In its report, the Resolution Foundation highlighted how the Government’s changes to Universal Credit will likely affect poverty levels in years to come.

The think tank stated: “The report finds that the Budget package will significantly reduce relative poverty, but not by enough to outweigh the poverty increase caused by the removal of the £20 uplift.

“The combination of ending the £20 per week boost and the taper changes will mean 120,000 more people living in relative poverty (after housing costs).

“Because the taper rate benefits higher-earning working families on UC, there will be 40,000 fewer people in poverty in working families, but 160,000 more people in poverty in out-of-work families.

Karl Handscomb, Senior Economist at the Resolution Foundation, elaborated further on what the Government has got right and wrong in its decision-making over Universal Credit.

Mr Handscomb said: “The Chancellor announced two very welcome major changes to Universal Credit in the Budget last week, which will boost the incomes of low- and middle-income working families.

“These changes will allow millions of workers to keep more of each extra pound they earn as a result of marginal effective tax rates falling to rates last seen a decade ago.

“An additional 330,000 families will also become eligible for Universal Credit.

“But while welcome, these changes are not enough to offset the damage from the recent £20 a week cut to Universal Credit.

“While 1.3 million families on Universal Credit will be better off, almost three-quarters of UC families will see their incomes fall this Autumn as the cost of living crunch bites.

“Universal Credit has performed extremely well during the crisis.

“But the recent cut in support means that our basic safety net remains far too weak to support families facing economic bad news.”

Published at Sat, 06 Nov 2021 11:08:51 +0000