Lily and more than 5.5 million other people will lose up to £1,040 from their annual incomes from this month. The government introduced a £20-per-week increase to universal credit payments at the start of the pandemic to support people through the crisis, but – despite rising poverty and Covid-19’s financial shockwaves still being felt across the country – ministers will remove it from October 6.
It is the biggest overnight cut to social security payments since the Second World War and risks pushing half a million people below the breadline. Last month Thérèse Coffey, the UK’s work and pensions secretary, said it would only amount to “two hours’ extra work every week” for claimants.
But for every £1 earned in employment, the government reduces a person’s universal credit payment by 63p. Many claimants are not expected to work at all while others are searching for work but facing skills mismatches, expensive travel costs and eye-watering childcare fees which won’t be covered by low wages.
It means Lily – who has a masters degree, a number of nursing qualifications and cannot progress any further in her current role – is trapped in poverty, seeing no extra cash despite being recently handed a promotion and pay rise.
“It makes me ask why I bothered with the master’s degree, or having the higher, more stressful senior position,” she said.
“I’m stuck in this cycle, no matter how hard I try to escape it. They say do overtime but I can’t because it means I’ll lose more money from my universal credit.
“I can’t get out of this position while I’m in debt and accruing more. I can’t save for a deposit to buy a house so I’m paying rent which is huge. There’s not a month goes by when I don’t have to ask my parents to borrow money to pay a bill or buy food for my daughters, which is embarrassing. No matter what I do, it doesn’t make any difference.”
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The £20-per-week increase wasn’t life-changing for Lily, but it meant “not having to scrape the bottom of the freezer for something to feed the children, or sometimes reaching the end of the month without having to ask to borrow money”. It meant one-off costs, such as a £20 school locker for her daughter or new uniforms, were less likely to devastate her finances for the remainder of the month.
“Coupled with working from home a bit more and not paying for childcare, it did make things just a little bit easier,” Lily said. But now her payments will reduce by £80 per month, nearly as much as she is forced to pay out in upfront childcare costs. There is a real possibility that she will be forced to use food banks or skip meals, she said.
“When the door goes, I constantly worry it will be bailiffs. I’m filled with dread when the postman comes as I just expect more bills.
“Not having enough money to cover everything we need is a huge mental load to carry,” she added. “I’ve already got enough to worry about, I have a stressful job with a lot of responsibility. I go to work, keep people well and safe and keep a smile on my face, but I’m never not worried about what we might have to sacrifice at home that month.”
The government has faced fierce opposition to the universal credit cut but shows no sign of reversing the policy. Making the £20 increase permanent would cost Westminster around £6bn per year and has the backing of a number of Tory backbenchers and former welfare ministers. Jonathan Reynolds, Labour’s shadow work and pension secretary, said the cut will be “an absolute catastrophe for struggling families who are already up against it.”
Action for Children is among more than 100 organisations which have furiously campaigned for ministers to cancel the cut. Recent research published by the charity, commissioned from Child Poverty Action Group, showed the £1,040-per-year cut would amount to much more in real terms after a decade of benefits squeezes.
A typical family with one earner and two children is already losing around £750 a year because of cuts to the welfare system since the Conservatives came to power in 2010, according to analysts. After the universal credit cut, they will be around two and a half times – 140 per cent – more out of pocket than they should be against inflation, amounting to £1,800 annually.
“You can’t level up the country by pushing down the living standards of some of the hardest working families in the country,” said Imran Hussain, director of policy and campaigns for the charity. “Not big earners but people who are proud to work and do everything they can to provide for their children.”
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Around 3.4 million kids live in households which claim universal credit, according to government figures. Plans to cut the benefit are “a recipe for disaster for struggling families”, Hussain added, particularly because it clashes with the end of the furlough scheme and rising energy bills as winter approaches.
Some sources have reported that ministers would rather reduce universal credit now – as fuel and food costs soar – than after an extension in the spring, because it would then coincide with Boris Johnson’s controversial national insurance rise which experts warned will disproportionately harm people on low incomes.
The tax hike will also mean NHS staff could effectively fund their own pay increases. The three per cent pay rise offered by the government has been condemned by nurses’ unions and will do little to help people like Lily.
“Working in the NHS, I’m used to being screwed over by the government,” she said, describing a “terrible” 18 months. “Whether that be in a pandemic, supplying us with PPE or giving us a decent pay rise.
“I’m not able to take a holiday, we don’t go to restaurants, I’m educated and I work as much as I can like I have since I was 16. I can’t even afford to take the girls swimming. There’s such a stigmatised view of people on benefits when really, anyone could end up in this position.”
A government spokesperson said: “We’ve always been clear that the uplift to universal credit and the furlough scheme were temporary.
“They were designed to help claimants through the economic shock and financial disruption of the toughest stages of the pandemic, and they have done so.
“Universal credit will continue to provide vital support for those both in and out of work and it’s right that the government should focus on our Plan for Jobs, supporting people back into work and supporting those already employed to progress and earn more.”