The energy price cap will increase just as ministers introduce higher national insurance payments. Image: No 10/Pippa Fowles
Changes to universal credit kick in from Wednesday, but millions of people still face a difficult winter with no extra support to help them “live with dignity”.
In the autumn Budget, Chancellor Rishi Sunak announced the taper rate for universal credit – the amount of benefits deducted based on how much a claimant earns through work – would move from 63p for every £1 earned to 55p.
The government is also changing the amount some people can earn before their universal credit entitlement is impacted. People whose ability to work is limited and those responsible for children can, from today, earn £500 more at their jobs before the taper rate kicks in.
It means some low-income households will get to keep more of the money they earn. But around 60 per cent of people on universal credit are not in work and are still reeling from the £20-per-week cut made in October.
Around 1.9 million households will benefit from the change, government figures show, and could be an average £1,000 better off next year.
But this leaves nearly two-thirds of universal credit claimants grappling with the cost of living crisis on historically low social security payments.
Changes to the taper rate and work allowances represent “a major living standards boost to low-income families,” said Karl Handscomb, senior economist for the Resolution Foundation, “improving people’s incentives to enter work and allowing them to keep more of their earnings.
“But while these changes mean more support for higher-earning families on universal credit this winter, the recent £20 a week cut in support means 3.6 million families will still be worse-off overall, particularly those who have lost their jobs or who are unable to work.”
Speaking as the changes were introduced, Sunak said the UK should be “a country that rewards hard work by helping the lowest income families keep more of their hard-earned cash”, calling the move “an effective tax cut worth over £2bn”.
However the chancellor continues to come under fire – from claimants, anti-poverty experts and opposition MPs – for making the widely-condemned £20-per-week cut earlier this year and removing £1,040 from the incomes of nearly six million people.
The cut meant the basic rate of out-of-work income support is at its lowest levels in real terms in three decades, according to Iain Porter, policy and partnerships manager at the Joseph Rowntree Foundation.
The taper rate reduction and increased work allowance is a “significant and positive step”, he added, but “do nothing to support many families who are currently seeking work, or who are unable to work, due to caring responsibilities, sickness or disability”.
“Families on low incomes are facing mounting pressure on their finances as the cost of energy and prices on the shelves continue to rise.
“The government must ensure that support offered by our social security system allows those unable to work to live with dignity, and provides families seeking work with the stability needed to seize opportunities.”
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