Five reasons why the universal credit decision will hurt families - and five reasons to believe the battle is not over

Wednesday 03 March 2021
Happy father and daughter washing hands at kitchen sink

Today’s Budget announcement that Universal Credit will be cut by £20 a week in October is a setback for families. Imran Hussain, our Director of Policy & Campaigns outlines five reasons why this choice hurts children - and how the decision could still be reversed.

Today’s Budget announcement that Universal Credit will be cut by £20 a week in October is a setback for families – we estimate that 2.5 million families with children currently on Universal Credit or Working Tax Credit will miss out on a combined total of £1.3 billion this year.

But, campaigners have good reason to hope that it’s not the final word.

Here are five reasons for why taking more than £500 in the next financial year (£1000 a year afterwards) from low income families will hurt families with children:

  1. It would mean turning back to benefit levels that are low historically and internationally – UK unemployment benefits are the weakest in the OECD, after a decade of cuts that have hit in-work and out-of-work benefits. And, let’s not forget the Government’s rationale in the first place. When the Chancellor announced the £20 increase in March 2020, he said it was because he wanted to “strengthen the safety net” for “our most vulnerable households”. It’s hard to see why we would want to weaken the safety net for these families simply because we expect the economy to open up later in the year. Why would our most vulnerable families need a weaker safety net this Christmas or next compared to today?
  2. Cutting Universal Credit will see child poverty – already high – rising sharply in the next few years, according to the Resolution Foundation. The only year expected to show a fall in child poverty will be 2020-21, the year of the increased Universal Credit rate.
  3. Even with the £20 increase, many families we work with have struggled financially. At the start of the crisis, Action for Children set up a Coronavirus Emergency Fund. In the past year we have had to give £1m in crisis grants to 20,000 children in families unable to afford basics. Making the families we work with £1000 a year worse off is going to damage childhoods and life chances.
  4. Nor does stripping back support later this year make sense when we know unemployment is not going to return to pre-pandemic levels for some time. The pandemic has increased unemployment from 4% to 5.2%. Last month, the Bank of England had projected it will peak at 7.75% later this year and not return to even 5% until late 2023 – the OBR today paints a rosier picture, but even that sees high unemployment for some time.
  5. That’s unemployment; but there are also many families who are seeing – or will see in the next couple of years - significant cuts to their pay and hours that they now qualify for Universal Credit. Cuts to Universal Credit are cuts to the low paid, like carers, cleaners and security guards.

But there is good reason – in fact five good reasons - to believe the battle is not over, that the Government could end up deciding that it won’t cut Universal Credit.

  1. The strength of the campaign pushed the Government further than it wanted and made implementing this cut in April 2021 too politically damaging. Action for Children’s report on its Emergency Fund was among the first to argue against the cut, but many others, not just those working on poverty issues, have also made the case.
  2. There’s also concern within the ranks of the Government’s own MPs. In January 2021, the Government was so worried about a rebellion on the issue it ordered its MPs to abstain in a vote (six MPs defied this) and the Northern Research Group of Conservative MPs representing ‘Red Wall’ seats called for the cut to be delayed.
  3. Yesterday, Tim Pitt, a former adviser to ex Chancellor Philip Hammond, argued that the Government should strengthen the safety net because its voting coalition is now so different than in the past. Cutting Universal Credit is pain that would be felt by those in ‘Red Wall’ seats which formed the bedrock of its majority. He also argued that it made sense for the Government to provide people with greater financial security at a time of upheaval – such as Brexit and coronavirus – to keep our democracy healthy.
  4. Crucially, public opinion on benefit levels has reversed – a clear majority believe benefit levels are low. In 2013, 37% of people thought benefit levels were too high, now only 15% do. In 2013, 21% said benefit levels were too low, now 37% do.
  5. Fundamentally, the pandemic has revealed that our support for the low paid and for those who lose their jobs is simply not good enough. It’s self-evidently a view the Government accepted, at least to some extent, when it increased Universal Credit. And the furlough scheme – paying at least 80% of earnings - has shown the value of help that’s based on contribution and which protects living standards far more than the meagre levels subsistence ‘welfare’ support provides. This is a theme explored in an interesting new report published yesterday by the Social Security Advisory Committee, which advises ministers.

Money matters for childhoods and life chances. That’s what the research shows and what anyone working with families knows.

So, today’s news, is both disappointing and encouraging.

Disappointing that low income families stand to lose over £500 this year (and over £1000 in future years), but encouraging in the sense that the battle is not over and there’s growing recognition in politics and society that we need to strengthen social security protections.