UNISON puts pressure on Treasury to increase universal credit work allowance

Millions of workers on the minimum wage will only see a fraction of any increase, says the union, unless their monthly work allowance goes up too.

This allowance is the monthly amount employees on universal credit get to keep before their benefits are affected.

The Chancellor is likely to announce in next week’s Budget that the minimum wage – currently £7.83 an hour – is to increase next April.

However, UNISON says that people on universal credit will see little benefit unless the work allowance rises too. Instead, any extra money would go straight into Treasury coffers, and not into the pay packets of those who have earned it.    

The universal credit system, which is currently being phased in across the UK, also needs more resources. This is to ensure that people aren't left worse off when they are moved across, says UNISON.

UNISON general secretary Dave Prentis said: “Philip Hammond needs to reinstate the previous chancellor’s cuts. 

“Workers won’t actually see the benefit of any pay rise unless the work allowance goes up at the same time as the minimum wage.

“The Budget is the chancellor’s chance to make amends, otherwise the government cannot claim to be making work pay.

“Universal credit shouldn’t be causing poverty and hardship for families, but that’s exactly what’s happening everywhere the scheme has been rolled out.

“If the chancellor wants to help the poorest, he needs to prioritise increasing work allowances over tax cuts in his Budget.”

Notes to editors:
-The latest figures show than 1.2 million people are now on universal credit. That figure is expected to rise 3 million by the end of 2019. It will eventually reach between 7 and 8 million when it is fully rolled out.
-Former chancellor George Osborne reduced work allowances in the July 2015 Budget for those on universal credit.
-Universal credit payments go down at a current rate of 63p for every £1 of earnings. This is once an employee’s monthly net income (after tax and national insurance) has reached the monthly work allowance (currently zero a month, £198 a month or £409 a month depending on circumstances).
-The impact of a zero increase in the work allowance on the pay of someone on the minimum wage getting a £100 a month rise would be a £20 rise in tax, a £12 increase in national insurance, and a £42.84 cut in universal credit. They would receive just £25.16 of their £100 a month increase, with the rest going back to the Treasury, according to UNISON calculations.
-A couple with children and housing costs receiving universal credit have seen their minimum wage pay increase by £2,420.60 from April 2015, but only received £705.60 of that rise. This is based on one earner on the national minimum wage working 35 hours a week.