There are suggestions that the government is planning
to extend the £20 a week uplift to Universal Credit for only 6
months. This is despite widespread consensus that this
would be the wrong decision for the government to make
and the Chancellor himself acknowledging at the Spending Review
that ‘our economic emergency has only just begun.’
-
Unemployment already stands at 5% and is
not forecast to peak until later this year,
just as the 6-month extension would end – cutting unemployment
support at the very moment it is most needed
-
Cutting the £20 lifeline as unemployment peaks
would be bad policy and undermine the economic recovery –
pushing families into debtand
depressing consumer spending
-
A short-term fix ignores the most likely economic
scenario in the Autumn, where unemployment remains high –
leaving the government little option but to make another
politically damaging last-minute policy change and extend the
£20 uplift again
-
Extending the uplift for 6 months will not prevent
a predicted 500,000 people being pulled into poverty, including
200,000 children – only delay it until unemployment is forecast
to be even higher
A 6-month extension fails to reflect economic
reality. It also fails the 6.2 million families who are relying
on Universal Credit or Working Tax Credit to stay afloat during
this crisis and are facing a cut to their annual income of
£1040.
Unemployment is rising and will not peak
until later in the year
Unemployment has already hit 5% and the Office for
Budget Responsibility (OBR) and Bank of England forecast that it
will continue to rise sharply as furlough is unwound, up to a
peak of at least 7.5% later this year. In the third quarter of
2021 the unemployment rate is still expected to be well
above its current high rate, with the OBR forecasting
7.4% and the Bank of England 7.8%. The OBR predicts that the
unemployment rate will stay above 7% (2.4 million people) until
the Spring of 2022.
A 6-month extension would see the £20 uplift
withdrawn just as unemployment peaks. This peak could
come later if the furlough scheme is extended or unwound slowly.
It makes no policy sense to cut Universal Credit during
the period when unemployment will be at its
highest.
Cutting support during a recession is bad for
families and the economy
The impact of the cut would be greatest in places
that have been worst affected by the economic crisis and will
find it hardest to recover. These include many Red Wall
constituencies and communities across the North of England,
Wales, the West Midlands and Northern Ireland – undermining the
government’s commitment to ‘levelling up’.
The £20 lifeline has not only supported families’
incomes but has also provided an essential boost to the economy.
People on low incomes are more likely to spend rather than save,
so maintaining the uplift is an effective way of generating
consumer spending. Cutting it while unemployment is at its peak
would force millions of families to cut back on spending and push
many into debt, which would act as a significant drag on our
economic recovery.
Extending for at least the full fiscal year
makes good policy sense
A short-term extension would be a gamble on
the best-case scenario for the economy in the months
ahead. The government has been criticised in other areas of
pandemic policymaking for being overly
optimistic in its forward planning, resulting in
last-minute policy changes. The same mistake must not be made
with Universal Credit, where a 6-month extension risks forcing
the government into a another damaging last-minute extension
later in the year when unemployment remains high. Families on
Universal Credit and Working Tax Credit need
certainty.
Extending the £20 uplift for at least the full fiscal
year would provide certainty, support people while jobs are
created and allow decisions about the longer-term future of
support to be made at a more appropriate time.
Widespread consensus
In his speech at the November 2020 Spending Review,
the Chancellor himself acknowledged that ‘even with growth
returning, our economic output is not expected to return to
pre-crisis levels until the fourth quarter of 2022. And
the economic damage is likely to be lasting.’ Cutting support
prematurely would be a grave error.
Leading think tanks from across the political
spectrum, including the Centre for Social Justice,
Resolution Foundation, Legatum Institute and Bright Blue, have
raised concerns about a short-term extension to the £20 increase,
with widespread consensus that the uplift should be
maintained.
Politicians from all parties agree
that the uplift must be extended for at least a year, including
Conservative former Secretaries of State for Work & Pensions
, Iain
Duncan-Smith and . Both the Work
& Pensions Committee and the Lords Economic Affairs Committee
have recommended that the extension is made
permanent.
Over 60 organisations and bishops issued a
joint open statement after the Spending Review warning it
would be a terrible mistake to cut Universal Credit. Earlier this
month they were joined by many leading health organisations who
wrote to
the Prime Minister warning that withdrawing the £20
lifeline would harm the health of millions of
people.
Polling
from the Health Foundation and Ipsos MORI found 59%
of the public support making the uplift permanent,
including 42% who strongly support it.
ENDS
Notes to editors
Our latest briefing on why the £20 uplift to
Universal Credit must be kept for at least the next fiscal year
is available here
(February 2021).
