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5 reasons Universal Credit change in Budget will still leave millions worse off

Chancellor Rishi Sunak announced a boost to the taper rate and the Universal Credit work allowance in his 2021 Autumn Budget speech – but it comes weeks after he slashed the benefit by £20 a week, and more than half of claimants won’t see a penny

Not everyone will be helped by the Universal Credit change – not by a long shot

Rishi Sunak has today announced changes to Universal Credit to let working claimants keep more as they earn.

The Budget confirmed the ‘taper rate’ – the amount of benefits withdrawn for each pound earned through work – will be cut from 63p to 55p by December 1 at the latest.

And the work allowance – the amount some claimants can earn before the taper kicks in – will be raised by £500 a year.

It is a major U-turn that was called for by Labour and campaigners, and it goes further than claims the Chancellor would only cut the taper rate to 60p. 1.9million families are set to be helped.

But 5.8million people are on Universal Credit – meaning more than half of claimants won’t see a penny of this change. And for those who are helped, the benefits have to be weighed up against the end of a £1,040-a-year uplift just weeks ago.

Social Market Foundation Director, James Kirkup, said: “This welcome change won’t help non-working claimants who have seen the £20 weekly Covid uplift withdrawn – and now face a bleak winter of rising living costs.”









Rishi Sunak with his Budget briefcase outside 11 Downing Street today
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Image:

Anadolu Agency via Getty Images)




Reversing the £20-a-week cut would have handed claimants about £5bn a year, yet the changes announced today will only give them £2.2bn a year.

Shadow Chancellor Rachel Reeves raged: “The arrogance, after taking £6bn out of the pockets of some of the poorest people in this country, expecting them to cheer today for £2bn given to compensate!”

So who is falling down this yawning gap and why?

We explain why the taper rate change is not enough to make up for the £20 cut.

1. It only helps working people

There are 5.8million people on Universal Credit as of August 2021.

But changes to the taper rate can only affect the 2.3million claimants who are in work.

That means 2.5million people will not benefit at all from today’s changes to the taper rate.

Tory ministers may of course argue that some of those people should go out and find a job.

But the 2.5million figure includes 1.3million Brits who not required to work at all due to sickness, disability and caring responsibilities.

2. It doesn’t help people on legacy benefits

The taper rate applies in Universal Credit but not Working Tax Credit, which was also cut by £20 a week this month.

According to the Joseph Rowntree Foundation, around 1.4million families have still not moved across from the “legacy” system so won’t benefit.

Tory ministers will argue that those people should make the switch, but many are still worried about being worse off in the new system.







3. It doesn’t help hundreds of thousands of workers

Even if you are working and on Universal Credit, you won’t necessarily be helped by the change in the taper rate.

That is because many claimants get a “work allowance” that allows them to earn a certain amount before the taper rate kicks in.

Claimants with children or limited capability for work can earn £293 a month (£515 if they don’t get housing support) before the taper is activated. That threshold will be raised to around £335 (£557) by December 1.

The Joseph Rowntree Foundation think tank estimates there are 400,000 families who already earn less than their work allowance – so a change to the taper rate won’t give them an extra penny compared to now.

The DWP confirms 1.9million families on Universal Credit will be helped by the taper rate change.



Chancellor Rishi Sunak boasted he was presiding over a high wage economy
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Image:

Anadolu Agency via Getty Images)




4. Even those who ARE better off have to weigh it against the £20 cut

Rishi Sunak claimed a single mother of two, renting in Darlington, working a full-time job on minimum wage will gain £1,200 a year.

But that is cut down to a much less impressive £160 after the £1,040-a-year cut that happened just weeks ago is factored in.

Likewise he said a couple with two children, renting their home with their two children, where one partner works full time and the other works part-time on minimum wage would gain £1,800.

But after the UC cut, that reduces to £760.

5. And for some, the increase is still wiped out by the £20 cut

The Treasury highlighted how claimants will end up better off, even once the £20-a-week cut is factored in.

But Rishi Sunak didn’t say how many families – and it’s clear that not every claimant will have more in their pocket after the cut.

That is because both the above calculations involve people working full time on the minimum wage.

People with wages which are already above the new £9.50 minimum wage might not get a pay rise next April. That’s up to bosses.

Similarly, those who work shorter hours – as many parents do – will obviously see less benefit from either a pay increase or a taper change.

It’s inevitable that some people would gain less than £1,040 a year – meaning the gains will have been wiped out by the cut.


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