THE Tory-led coalition is deliberately using Universal Credit to worsen the plight of poor families.
A new report shows that millions of lower income working families will find it harder to keep up with the cost of living because of changes to Universal Credit (UC).
Published on Boxing Day by the independent think-tank Resolution Foundation, the report says that the changes will shrink the amount of earnings lower income families can keep by as much as £1,300, meaning they would need a ten per cent pay rise to catch up.
The think tank said: ‘In his recent Autumn Statement, the Chancellor extended the freeze on work allowances – the amount people on UC can earn before their in-work support starts to be withdrawn – by another year so that the original 2013-14 cash levels will remain in place until April 2018.
‘This four-year freeze affects 3.3 million working families. All parties are in principle signed up to UC and none of them have pledged to reverse this cut.’
The Resolution Foundation added: ‘In 2018, the first year work allowances are set to be increased. An eligible couple with children would need to see their combined earnings rise by over £1,300 just to cancel out the loss in income due to the sustained freeze.
‘For a couple with a single earner working full time on the minimum wage, this £1,300 shortfall is the equivalent of their earnings rising around 10 per cent over and above that forecast by the Office of Budget Responsibility (OBR) by 2018.
‘It is likely, therefore, that couples in this situation will now be worse off year after year on Universal Credit, even if their wages rise in real terms over the next four years.
‘The size of the loss arising from freezing work allowances varies according to household circumstance – from £65 for those without children to as much as £430 for a single parent who owns her own home.
‘The effects of the change will vary for different families:
• A couple with children would face a £315 hit in 2018 as a result of the work allowance changes. But because they only get to keep 24p of every £1 of any pay rise, they would need to see their combined earnings rise by £1,325 just to stand still, or by around 10 per cent more than the OBR pay forecast if working full-time at the minimum wage.
• A single parent would lose £430 as a result of the freeze. Their annual earnings would need to rise by £1,815 in order to stand still, or by 13 per cent more than expected if working full-time at the minimum wage.
‘Under UC, millions of households will also miss out on most of the gains from the income tax cuts proposed by the main parties, such as raising the personal allowance and introducing a new 10p tax band.
‘Families will lose 65p of every £1 gained from these policies.’
David Finch, Senior Economic Analyst at the Resolution Foundation, said that ‘millions of hard-pressed households will be running just to stand still’.