Monday, April 11, 2016

Magicking up more days in the year

Tens of thousands of low-paid working families can expect to lose up to £200 a month as a result of changes to universal credit introduced on Monday – the first wave of £3bn in welfare cuts that will affect 1m households by 2020.

Ministers have said households affected by the changes could work extra hours to make up the difference, but charities have said that will be impossible in many cases, and that the cuts will push more families into poverty. Analysis by the Child Poverty Action Group (CPAG) estimates that families with a sole earner working full-time on the “national living wage” of £7.20 an hour would have to work a 13-month year to compensate for the cuts, and a full-time single parent would have to work a 14-month year.

Working households claiming universal credit currently have a work allowance of £222 per month for a couple with children and £263 for a single parent. The allowances fall to £192 from Monday, lowering the threshold at which the benefit is withdrawn. CPAG estimates that after income tax and national insurance is deducted, and taking universal credit deductions of 65p in the pound into account, a full-time sole earner couple would have to work 19 extra days a year to make up the shortfall, and single parents would have to work 46.

The charity’s policy director, Imran Hussain, said: “Asking parents already working full-time to magic up more days in the year to recoup the cut just isn’t an option.” 

The work allowances cut will hit the majority of 80,000 UK households currently in work and on universal credit. This will increase to about 1m households it rolls out over the next few years, saving the Treasury a projected £3bn a year by 2020. Individual losses will vary according to the particular circumstances of each household. The biggest concentration of households affected is in the north-west of England, where the rollout of universal credit has been most extensive. Liverpool city council estimates that 2,800 low-paid working families will lose out by between £60 and £200 a month.

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