Budget: Millions of poor families hit, analysis finds

Budget: Millions of poor families hit, analysis finds

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Budget changes to help poorer families fail to offset damage from a £20 cut in universal credit, says a think tank.

The Resolution Foundation said there were some “welcome changes” in the chancellor’s Budget last week.

But some 3.6 million families will still remain worse off because there was nothing to replace the loss of a £20 a week UC boost, it added.

A temporary £20 UC uplift, introduced at the start of the pandemic, was withdrawn last month.

The foundation, which focuses on poorer households, said adjustments to UC will leave 1.3 million families better off than before the withdrawal last month of the £20 a week boost.

And about 330,000 more low income families will be eligible for UC.

But there are still millions of households who got nothing to replace the £20 cut, said Karl Handscomb, senior economist at the think tank.

He said: “The chancellor announced two very welcome major changes to universal credit in the Budget last week, which will boost the incomes of low and middle-income working families.

“These changes will allow millions of workers to keep more of each extra pound they earn as a result of marginal effective tax rates falling to rates last seen a decade ago.

“But while welcome, these changes are not enough to offset the damage from the recent £20 a week cut to universal credit. While 1.3 million families on universal credit will be better off, almost three-quarters of UC families will see their incomes fall this autumn as the cost of living crunch bites.”

He said that UC had “performed extremely well” in helping people during the crisis, but added: “The recent cut in support means that our basic safety net remains far too weak to support families facing economic bad news.”

The analysis, Taper Cut, examined how the £500 per year increase in work allowances and taper rate reduction from 63% to 55% would affect nearly five million families forecast to be claiming UC next year.

About 1.3 million higher-earning families in receipt of UC will benefit. For example, a single-earner couple with two children earning £30,000 will receive £2,800 in UC under these new rules, compared with £2,200 before the removal of the £20 uplift.

But for 3.6 million families these changes will not compensate for the removal of the UC boost. More than half of families on UC will still be worse off by more than £1,000 a year, the foundation said.

A combination of ending the £20 per week boost and the taper changes will mean 120,000 more people living in relative poverty – after housing costs – the report concluded.

A government spokesperson said: “These are significant changes that make almost two million households better off by £1,000 on average, and to help even more families benefit our Plan for Jobs is getting people into work, while the most vulnerable, including those who can’t work, can get additional benefits and help with essential costs through our £500m Household Support Fund.”

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