Budget: Universal credit changes will mean the 'poorest get nothing'

LONDON, UNITED KINGDOM - OCTOBER 27, 2021: Chancellor of the Exchequer Rishi Sunak holds the Budget box outside 11 Downing Street in central London ahead of the announcement of the Autumn budget and spending review in the House of Commons on October 27, 2021 in London, England. The Chancellor's tax and spending plans in the 2021 Autumn budget are set to be focused on transport, health and education with £5.9bn set for NHS England to cut waiting lists impacted by the Covid-19 pandemic, and pay rises across the public sector. (Photo credit should read Wiktor Szymanowicz/Barcroft Media via Getty Images)
The chancellor has been accused of giving the poorest 'nothing'. (Getty Images)

The poorest people on universal credit will receive no extra from the budget help to make up for the £20 cut to the benefit, a top economist has warned.

Rishi Sunak outlined the government's spending plans in Wednesday's budget, including changes to the universal credit taper rate.

From early December the taper rate will be cut by 8% from 63p to 55p – meaning claimants will be able to keep more of the benefit as they earn more money.

Torsten Bell, chief executive of the poverty think-tank the Resolution Foundation, said the chancellor's announcements did nothing for the poorest.

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Roughly 60% of people who claim universal credit are not in work, some due to disability or long-term illness, or childcare and caring responsibilities.

A £20 a week uplift to the benefit, introduced to help families during the pandemic, was scrapped last month.

"This is helping better off universal credit claimants – the poorest (who generally aren’t working) get nothing to compensate for £20 cut," Bell said.

Changes to the taper rate were hinted at earlier this month following reports of discontent among MPs and ministers over the impact of the cut could have on low income families.

Work and pensions secretary Therese Coffey previously said she was "entirely happy" with the £20 cut.

She later incorrectly claimed that claimants would need to work an additional two hours a week to make up the difference.

Backlash to the cut was significant, receiving criticism from the opposition, poverty think-tanks, footballer Marcus Rashford, and a number of Tory MPs – including the founder of universal credit, former work and pensions secretary Sir Iain Duncan Smith.

However, Sunak refused to reconsider, insisting that the uplift had always been "temporary".

Prime Minister Boris Johnson (right) with Chancellor of the Exchequer Rishi Sunak during a visit to Fourpure Brewery in Bermondsay, London, after Sunak delivered his Budget to the House of Commons. Picture date: Wednesday October 27, 2021.
Boris Johnson and Rishi Sunak visted a brewery after the budget while experts criticised the budget for not doing enough for the poorest in society. (PA Images)

Polly Neate, chief executive of the homeless charity Shelter, also warned the budget did not help the very poorest.

“While lowering the taper rate to allow people in work to keep hold of a bit more universal credit is really good, it won’t reach all of the five million families hit by the recent UC cut, and it doesn’t help people unable to work because they are sick, disabled or have young children to look after," she said.

“The government cannot level up this country if it keeps missing opportunities to sort out the housing crisis.

"Until it commits to building 90,000 green social homes a year, families are going to continue to face the agonising choice of whether to put food on the table or pay the rent.”

(Yahoo News)
(Yahoo News)

Labour criticised the chancellor for announcing cuts to the duty on alcohol products like champagne and prosecco, set to cost around £3bn, while simultaneously failing to reinstate the £20 uplift.

Labour MP Stella Creasy claimed the government had put "prosecco before parents".

Rachel Reeves, shadow chancellor, said "working people on universal credit still face a higher marginal tax rate than the prime minister" and that there was a "cost of living crisis".

"Labour also welcomes the government’s decision to reduce the universal credit taper rate, as we have consistently called for," she said.

"But the system has got so far out of whack that even after this reduction, working people on universal credit still face a higher marginal tax rate than the prime minister."

LONDON, ENGLAND - OCTOBER 24: Rachel Reeves, Shadow Chancellor of the Exchequer speaks to the media after appearing on the Andrew Marr show at BBC Studios on October 24, 2021 in London, England. The weekly news program features Marr, former BBC Political Editor, interviewing politicians and other newsmakers on current events.  (Photo by Hollie Adams/Getty Images)
Shadow chancellor Rachel Reeves said Labour welcome the changes to the universal credit rate but added working claimants face a higher marginal tax than Boris Johnson. (Getty Images)

The Institute for Fiscal Studies (IFS) also highlighted a cost of living crisis, saying "large swathes of the population face a squeeze on living standards over the coming year".

"A group who are likely to find the coming months especially tough are households without someone in paid work," they said.

"Prices are set to continue rising relatively quickly over the winter while their benefits stay the same, and while many will still be adjusting to the removal of the temporary £20 per week benefit uplift."

It is estimated up to 800,000 people could be pushed into poverty as a result of the £20 cut to universal credit that came into effect this month.

The cut – which came into place this month – coincides with soaring household bills, inflation, increases to national insurance, and the end of furlough.

Watch: Rishi Sunak announces 8% cut to Universal Credit taper rate