As the final touches are put to the Chancellor’s first Autumn Statement he has the opportunity to re-think plans for uprating the personal allowance and instead target efforts on helping those ‘who are just-about managing’ through putting money back into Universal Credit.
In last year’s Budget, £3.4 billion was cut from the Universal Credit budget. Having crunched the numbers, the CSJ has found a single parent faces losing up to £553 each year, whilst a couple where one person has limited capability to work face losing up to £1,950 each year. Overall we estimate the change will have a financial impact on over three million people. These cuts also undermine the dynamic benefits of Universal Credit in rewarding work something which is a priority for government welfare reforms.
On the steps of Downing Street the Prime Minister made a commitment that her Government would prioritise the “just-about managing”. Living up to this purpose and direction must be a driving mission, not least to heal the rifts in the country which were exposed in the referendum and show that politics, and politicians, can deliver for those who need the support of government the most.
These cuts also represent a double whammy for low income voters, where Universal Credit becomes less generous on average than the current tax credit system. With Universal Credit being steadily rolled out across the country, families claiming Universal Credit will often find themselves worse off than families in the same situation.
The expected rise in inflation, meaning a higher cost of living, and lower wage growth will impact heavily upon those just managing voters. The Autumn Statement presents the Government with an opportunity to show the its actions will not worsen the situation for the families it seeks to support. It is time to put words into action.
In our recent report, The Case for Strengthening Universal Credit Work Allowances, we make the strong case for restoring these incentives, which would benefit those transitioning to work, reduce government spending and boost our economy.
Universal Credit is working. The evidence so far shows that Universal Credit recipients move into work faster, stay in work longer and earn more.
A 2015 Department for Work and Pensions study found that, compared with Job Seeker Allowance claimants, those on Universal Credit are 13 per cent more likely to have been employed, work 12 days more on average, earn more on average and be twice as likely to want to work more hours.
All the money invested in Universal Credit goes directly to people who are reliant on in-work benefits, those who are just-about managing. In comparison, just 25 pence of every £1 invested in increasing the income tax personal allowance will go to those in the bottom half of earners. By choosing to invest in Universal Credit more people will find work and those in relatively low-paid work will be better supported.
We know the Treasury faces a difficult economic backdrop. However, we believe that priority should be given to providing targeted support for the just-about managing, through investment in Universal Credit are reversing last year’s cuts. The Treasury has options as to how this can be achieved. We suggest paying for this re-investment in Universal Credit by slowing down on the planned increase in the personal allowance threshold.
This really matters in terms of welfare reform. Work is the best route out of poverty. Not only does work provide an income, it is also proven to improve people’s self-esteem, their sense of self-worth and their physical and mental health. It is all too easy for a family to be caught in a spiral of unemployment – a child in a workless household is almost three times as likely to be in poverty as a child living in a family where at least one adult works. It’s important that we break the cycle of worklessness by making the transition into work as smooth as possible for those taking their first steps into the jobs market. Investing in Universal Credit, ensuring it has strong work allowances and a generous taper rate enables those on low incomes to keep more of what they earn. This is the best way to ensure work always pays more than welfare.
The Government faces some difficult decisions ahead, but by acting now, and reaching out to those families in most need of support, it will demonstrate to the country just how serious its focus on supporting the just-about managing is.
This article originally appeared on ConservativeHome.