Where next for social security after recent Universal Credit announcements?

Following the £20 cut, changes to the taper rate and work allowance give some support for working families - but support for people out of work is woefully inadequate.

On the 6 of October, despite fierce opposition, the £20-a-week increase in the standard allowance of Universal Credit (UC) and Working Tax Credit was cut. This was the biggest overnight cut to the basic rate of social security since the modern welfare state began and impacted over 5.5 million families, making them £1,040 a year worse off.

Shortly after, at the Autumn Budget, the Government announced some changes to Universal Credit. The taper rate (the rate at which support is removed from families as their earnings increase) was reduced from 63 percentage points to 55 percentage points and the work allowance (the amount families with children or ‘limited capability for work’ can earn before the taper kicks in) was increased by £500 a year.

This is a substantial and positive change, equating to an annual investment of £2-3 billion. After a patchwork of ad-hoc packages of temporary support, having a permanent investment in our national support infrastructure is to be welcomed; 2.2 million families will, on average, gain about £1,000 per year. It shows that the Treasury are beginning to acknowledge that, after years of cuts and freezes, levels of support are too low to be effective, even if they are not yet willing to accept the scale of that.

The change, no doubt, is as a result of the huge amount of pressure generated from the charity sector, think tanks, economists, teachers, doctors, claimants and cross-party politicians against the £20 cut to UC. Hundreds of organisations came together, sharing a wealth of evidence and insights. Thousands of members of the public wrote to their MP, sharing their fears for their own budgets and communities, and those MPs raised their alarm to the Government.

However, whilst the budget announcements might be a positive step, for many, the changes will not mitigate the £20 cut or the intensifying cost-of-living crisis we are now facing. Resolution Foundation analysis showed that with these changes, three-quarters of families on UC will still be worse-off compared to if we had simply kept the £20 in the standard allowance. Further, our post-budget analysis details how, even if we forget about the £20 cut, the current cost of living pressures are likely to wipe out most, if not all, of the gains and this is far more prominent for those only able to work limited hours.

For those not in work, and those unable to work, the measures announced offer nothing to mitigate the loss of the cut. These families have been abandoned and it is vital this is not forgotten. The introduction of the £20 ‘uplift’ was a tacit admission from the Government that, without it, the basic rate of support is not enough. It is not enough to protect families when the unexpected happens and income is lost. It is not enough to give stability to allow workers to get back on their feet. It is not enough to protect people unable to work from poverty.

The need for a strong social security system is not temporary: whether you lose your job because of industry changes or because of a global pandemic, you need a system able to support you, and people unable to work should always be able to live with dignity.

Too many families were struggling before the pandemic. In the two years ahead of the pandemic, destitution levels rose by a over 50%. The economic fallout from the pandemic has disproportionately fallen on families on the lowest incomes: our recent debt analysis shows that 3.8 million low-income households across the UK are in arrears, and 4.4 million have had to take on new or increased borrowing through the pandemic. Now, millions of families on Universal Credit and Working Tax Credit have lost £87-a-month just as we are seeing energy bills and prices rising sharply.

Our social security adequacy briefing showed that, even before the pandemic, people on Universal Credit were too often unable to afford food or everyday bills. Our illustrative families showed that in some cases support is not high enough to even protect against destitution, the most severe level of poverty. That is before we consider that many receive even less than that due to higher housing costs, caps and deductions (often repaying advances to cover the wait for the first payment to DWP).

The debate around the £20 cut has improved understanding among decision makers of the essential role of social security in our society, the opportunity to tailor it to the economy we want and how inadequate basic levels of support currently are. This has been helped by previous Conservative Work and Pension Secretaries and Ministers acknowledging that cuts over the last decade went too far and urging the Government to invest in support ‘to allow people to live with dignity’. Baroness Stroud has urged the Government to boost support for those out of work, saying “there is still no safety net, and that should worry us all”. A huge number of Conservative MPs called for the £20 to stay, and there remains fertile ground for continued conversations on further improving the support available.

Over the coming weeks and months, we will begin to see the reality of support being at such historically and internationally low levels and the cost of living rising. Front-line organisations will have to deal with increased need for food aid, advice, mental health and crisis support. As we see this reported, it’s crucial that the many organisations who have come together to warn against the £20 cut, can continue to point towards the inadequacy of our social security system, particularly for those out of work, as a key driver in this, and maintain the pressure on the Government to urgently invest in support.