Politics

Sunak's Budget will 'pull 500,000 into poverty'

Analysis from the Joseph Rowntree Foundation warned the decision to cut Universal Credit could have a serious impact and the Budget does not address inequalities.

Chancellor Rishi Sunak on his way to deliver the Budget. Image credit: HM Treasury/Flickr

Chancellor Rishi Sunak’s Budget decision to cut benefits in September will “pull 500,000 people including 200,000 children into poverty” just as the country heads into winter, a major anti-poverty charity has warned.

Universal Credit and Working Tax Credit are set to return to pre-pandemic levels following the Spring Budget, frustrating months of campaigning from charities and support groups to protect some of the most vulnerable in society.

“The OBR’s latest forecasts show that unemployment is expected to increase by a further 500,000 people between now and the peak towards the end of the year,” according to analysis from the Joseph Rowntree Foundation. “Despite that, the Government has chosen to cut the main rate of unemployment support to its lowest level since 1990.”

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Universal Credit was increased by £20 per week in March 2020 to help families who were struggling to pay bills because of the economic impact of the pandemic.

More than six million households now receive the benefit but it has not kept pace with inflation, meaning a return to pre-pandemic levels will be worth less to recipients than it was in 2013, according to recent analysis by Citizens Advice Scotland.

Announcing the cut in his Budget speech, Sunak said “we are shifting our resources and focus towards getting people into decent, well-paid jobs”.

The Institute for Fiscal Studies called the decision to cut benefits so abruptly rather than a phased out approach “remarkable” in its post-Budget analysis, adding that the spending plans elsewhere “don’t look deliverable”.

Paul Johnson, director of the IFS, said: “It is, by the way, remarkable that while the chancellor felt the need for a gradual phase out of furlough, business rates support, stamp duty reductions and VAT reductions he is still set on a cliff-edge reduction in UC such that incomes of some of the poorest families will fall by over £80 between one month and the next.

“Whatever the case for cutting generosity into the longer term, if you’re going to do so the case for doing it gradually rather than all at once looks unanswerable.”

Emma Review, chief executive of food bank network the Trussell Trust said the September cut “could drive one million people to food banks” as unemployment rises.

The Joseph Rowntree Foundation welcomed the extension of the furlough scheme until the end of September, but said the “silence” on support for 700,000 households who are behind on their rent could do further damage to the UK’s recovery.

“These policies will compound the UK’s housing crisis, driving up house prices and making it harder to address the issues faced by people in poverty,” it said.

“The Chancellor should have made the choice to build a different future. One that is characterised by good jobs and investment in people and their skills, where housing is genuinely affordable and where social security is there for us when we need it.

“The Budget fell far short of what the country requires and of the values we share.”

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