Plans to scrap the £20 a week increase in Universal Credit (UC) introduced in the wake of the coronavirus outbreak would see four million families losing 13 per cent of their benefits, a new report says.
The Government has so far resisted pressure to abandon moves to end the extra payment from April, which would see a £1,040-a-year loss of income for claimants.
The Institute for Fiscal Studies (IFS) report says that withdrawing the extra payment would mean a “significant decline” in finances for families hit by the move.
The IFS says: “The increase is due to end in April 2021, which would see about four million families losing an average of 13 per cent of their benefits overnight.
“For some, the proportional fall will be much greater.
“For example, a childless, non-disabled, single owner-occupier with no other source of income would see a 21 per cent decline in benefits.
“If the Government instead chooses to make this increase permanent, it would add about 10 per cent to the long-run cost of UC, though would undo at most two-thirds of the benefit cuts made since 2015, let alone those made during the coalition.”
The IFS added: “Even with the temporary increases to UC, the UK has one of the least generous out-of-work benefits systems for workers on average earnings in the OECD.”
Tom Waters of IFS said going ahead with scrapping the payment would ease welfare budgets, but mean big losses for families impacted.
He said: “Even in its optimistic scenario, the Office for Budget Responsibility thinks that the hit to the labour market from the Covid crisis will increase benefit spending by £17 billion this year, and that’s before you account for the £9 billion of temporary welfare measures the Government has brought in.
“Together this will take benefit spending to easily its highest level on record.
“Just allowing these temporary giveaways to expire would certainly go some way to cutting this figure, but would mean significant declines in income for the millions of affected families.”
Mark Franks of the Nuffield Foundation said: “As the full extent of Covid-19 became apparent in the spring, the Government made some necessarily rapid changes to working age benefit policy, which have played a vital role in helping to support millions of families through the first six months of the economic crisis.
“As the economic fallout continues, the Government now needs to make longer-term decisions about how best to provide sustainable support for those who have lost their livelihoods as a result of the pandemic.”
Picture: A family try to plan their finances. (Ivan-balvan).