The Government's promise that families will be better off working with universal credit has been broken by seven years of cuts to tax credits and universal credit, research by the Child Poverty Action Group (APPG) and the Institute for Public Policy Research (IPPR) claims.
According to the analysis, entitled ‘The Austerity Generation’, while under universal credit, work incentives are improved for some families, big falls in family income caused by cuts and changes to the new system leave many worse off overall. Any gains from increases in the national living wage, personal tax allowances and help for childcare are lost.
It claims that cuts to universal credit will put 1 million children in poverty by the end of the decade.
Freezes and cuts to universal credit work allowance will leave lone parents worse off by, on average, £710 a year, and couples £250 a year.
The research analyses the cumulative effects of a decade of cuts to social security on the incomes of families of different types and with different working patterns. It covers both changes to the tax credit and legacy benefit system since 2010, looking ahead to 2020, and the introduction and subsequent changes to universal credit.
Introduced in 2016, universal credit, which replaces six existing means-tested benefits including child tax credit, working tax credit and income support, is being rolled out across the UK. The roll-out for new applicants is meant to be completed in autumn 2018.
Families already at greater risk of poverty, including lone parents, families with very young children, larger families and those with a disability, will be especially hard-hit, warns the analysis.
Overall, it finds that under UC, the average family with three children will be £2,540 a year worse off, and the average family with four children or more, £5,000 a year worse off. The poorest 10 per cent of families will lose £450 a year on average, while families with someone that is disabled will be £300 a year worse off and families with someone with a severe disability, £530.
To make up the losses caused by the cut in work allowance, it says that a full-time working couple on the national living wage would have to work 17 extra working days a year. A Lone parent already working full-time on the same rate of pay would have to work 41 extra days a year- equivalent to a 14-month year.
The analysis concludes by making recommendations to the Chancellor about how he can use this month’s Budget to restore Universal Credit’s ‘promise of greater rewards from work’ and to fight poverty, they are to:
- Restore work allowances (the income level at which UC starts to be withdrawn), which would benefit all working families by an average of £150 a year – so those on UC would benefit by much more than this figure.
- Triple-lock child benefit and the child element of UC as this would be the single most effective intervention to reduce child poverty- reducing numbers by 600,000.
Alison Garnham, chief executive of Child Poverty Action Group (CPAG), said, ‘This report is the closest anyone has come to producing a cumulative impact assessment of a decade of social security cuts on families with children. It’s an incredibly detailed piece of work but its basic story is straightforward and shaming: since 2010, rather than investing in our children, Government policy has been creating an austerity generation whose childhoods and life chances will be scarred by a decade of political decisions to stop protecting their living standards.
‘The promise of increased rewards from work made to families with children under the new Universal Credit benefit has been broken. The Universal Credit we see today is not the Universal Credit that was sold to everyone a few years ago. Even after taking into account increases in the minimum wage, rising tax allowances and extra childcare help, working families will be the biggest losers from cuts made to the benefit system.
‘This month’s Budget is an opportunity for the Chancellor to mount a full-scale rescue mission for Universal Credit. The Chancellor should restore work allowances, put a stop to the benefit freeze that’s squeezing families and pledge to give children’s benefits the same protection from rising prices as is given to the basic state pension.’
A DWP spokesperson said, 'We’re committed to supporting families and there are now 200,000 fewer children living in poverty than in 2010.
'This report assumes that people won’t take any steps to improve their lives, which we know is untrue. Unlike the old system Universal Credit rewards those working more hours. Evidence shows that UC claimants look to take on more hours than they did under JSA, and for the first time they get personalised support to help them progress in work.'
