Universal Credit cuts to hit low income families

Changes to Universal Credit introduced today could see low income families lose up to £200 a month, according to new analysis by the Child Poverty Action Group (CPAG) for the Guardian newspaper.

For disabled people and people with children, the Universal Credit work allowance will be reduced to £192 per month if they have a housing costs element in their claim and £397 per month if there is no housing costs element in the claim.

The work allowance will be abolished altogether for non-disabled claimants without children, resulting in their benefit being reduced as soon as they start earning.

By way of comparison, the current lower work allowance is, for example, £111 per month for a claimant without a child who has a housing costs element in their claim, but as much as £263 per month for a single person with children who has a housing costs element in their claim.

The cuts were announced by the Chancellor, George Osborne in the Summer Budget last year. These reduce the amount people can earn before low-income top-ups are withdrawn at the rate of 65p per £1 earned and will save the Treasury a projected £3 billion a year.

The analysis

CPAG analysis shows that after income tax and national insurance is deducted, and taking Universal deductions of 65p in the pound into account, a full-time sole earner couple would have to work 19 extra days a year to make up for the short fall, and single parents would have to work 46.

The charity estimates that families with a sole earner working full time on the National Living Wage of £7.20 an hour would have to work a 13 month year to compensate for the cuts, and a full-time single parent would have to work a 14 month year.

The cuts will be felt in May because Universal Credit is paid in monthly arrears. The biggest concentration of households affected will be in the North West of England where the roll out of Universal Credit has been extensive.

The Government had promised that households that migrate from tax credits to Universal Credit would have their income protected as it is rolled out over the next three years. People currently receiving the benefit and those on who make new claims will not get support to help them with the shortfall.

‘Universal Credit revolutionising welfare’

A Department of Work and Pensions spokesman told the Guardian newspaper that households affected by work allowance changes would get help from jobcentre work coaches to increase their hours and earnings.

He added that: “Universal Credit is revolutionising welfare, with claimants moving into work faster and earning more than under the previous system. We are simplifying the work allowances under Universal Credit and giving people extra help to progress in work. This is alongside the increase in the National Living Wage and personal tax allowances which are helping to move us to a higher wage, lower welfare society.”

Government pressing ahead with cuts through the back door

Owen Smith, the Shadow Work and Pensions Secretary said: “While the Tories claimed they had listened and learned over their tax credits fiasco, the reality is they are still pressing ahead with cuts to low and middle-paid workers through the back door.

“Tens of thousands of working people are already struggling to make ends meet are set to lose huge amounts of support when the cuts kick in this April.”

What help is available if you are struggling on a low income?

Our website has information on Universal Credit that you may find helpful.

You can also use the free Turn2us Benefits Calculator to check your benefits entitlements. Even if you have checked before, it is worth checking again, especially if there has been a change in your circumstances.

You can also check if you are eligible for a charitable grant or other support by using the Turn2us Grants Search.

You can get further details on all the upcoming benefit changes on the Turn2us Benefits Changes Timetable 2016.

If you are worried about the work allowance changes or any benefit changes and would like further advice, you can use the Turn2us Find an Adviser tool to locate face-to-face advice in your local area.