Universal credit: what the £20 a week cut will mean for UK households

After a year and a half, the temporary £20 increase to universal credit introduced during the Covid-19 pandemic is coming to an end.

The adequacy of benefits has deteriorated gradually over the past decade. In 2010, the family safety net was worth about two-thirds of the minimum income standard for families with children. Today it is barely half. This £20 cut will be a sharp blow to the 6 million claimants already struggling to get by on low incomes.

To understand the implications of the cut, we need to compare what people can afford while on universal credit, to what they actually need.

For the past 13 years, my team at Loughborough University’s Centre for Research in Social Policy has captured what the public considers to be a minimum living standard, allowing people to meet their material needs and participate in society.

This minimum income standard is compiled by asking groups of members of the public to discuss and agree on a detailed list of items that should go into a minimum household budget.

After costing and adding up these lists, we estimated that in 2021 a single person would require £213 a week, with different amounts specified for households according to how many children and adults live in them. More than one in four people in the UK do not have enough to afford these budgets, but they represent what people think is needed to live in dignity in the UK today.

The £20 cut to universal credit will place many hundreds of thousands of households below this minimum income standard.

The following cases illustrate how this cut could impact the livelihoods of two different households – with and without children – in urban areas outside of London.

Case 1: a single person, driven to destitution

A single person over the age of 25 and out of work will have their entitlement cut from £94.70 to just £74.70 per week. This is to cover all their costs other than rent and a partial rebate of council tax, to which people on very low incomes are eligible. This is only about a third of what they need to reach the £213 minimum income standard.

Let’s look at what they can afford on that £74.70.

They will typically have to contribute about £3.50 a week to council tax, not covered by the rebate.

Then they will need to cover travel costs. Most out-of-work people receiving universal credit will need to show that they are looking for work, across a wide area, and they need to travel to do that. If they cannot show this, their income will be zero. Many will also need to travel to shop for food.

A bus pass, plus any expenses to travel further afield to look for work, typically costs about £30 a week. This leaves only £41 a week to cover everything else –- food, heating, clothes, household goods, toiletries and other everyday expenses. It’s sobering to realise that the £20 weekly temporary universal credit increase, which seems modest to most people, has given some people half as much to spend on these items.

£41 a week is less than £6 a day available to spend on life’s necessities, compared to £9 a day before the cut in universal credit. In our research, we estimate that food alone costs a minimum of £7 a day. This makes the rising use of food banks unsurprising, and it shows how the the “safety net” offered to someone in this situation does not in fact guarantee any form of safety. Rather, it produces what the anti-poverty charity Joseph Rowntree Foundation classifies as “destitution” – not being able to afford certain essential items, including food and heating.

Case 2: a couple with two children, struggling to keep afloat

For an out-of-work couple with two children, the entitlement is £266 a week – just over half of the £482 they need to meet the minimum income standard, according to our budget costings. In theory, this is just enough to cover food, utilities, clothes and toiletries, and therefore does not automatically guarantee destitution.

But families in this situation could only afford to meet these fundamental material needs properly if they cut back on a range of other items that our study showed the public consider part of a minimum living standard. This includes things that enable their children to fit in with peers, such as participating in sport, bringing a present to a birthday party or going on a school trip. Evidence has repeatedly shown that parents in this situation prioritise the needs of their children, often making sacrifices themselves such as missing meals.

Our research on families living below the minimum required income shows that over time, they almost all go through periods of crisis or hardship, where unexpected expenses disrupt carefully balanced budgets. These families may only have just enough to cope if nothing goes wrong. Inevitably, things do go wrong, and families who do not have friends or relations to help them out are often faced with a choice between hardship and mounting debt.

The uproar this £20 cut has created could be a significant moment in the conversation about benefits. The irony is that, after a decade of cuts to the income safety net, it has taken 18 months of a temporary improvement for people to notice its failings.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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