Universal Credit cuts risk turning the North-West of England into a “poorhouse” where single parents could see their incomes plummet by more than £2,000 per year, one of the UK’s largest unions has warned today (Monday).
According to an analysis by Unison, who represent employees in both public services and the private sector, nearly 31,000 single parents in the North-West stand to lose out from cuts announced by George Osborne in the Summer Budget last year.
The Chancellor revealed changes to the way Universal Credit awards will be calculated, cutting the amount households can earn before payments are reduced – otherwise known as ‘working allowance’.
Universal credit currently includes a work allowance of £222 per month for a couple with children and £263 for a single parent. From Monday, these allowances fall to just £192 per month – part of £3bn in welfare cuts that will affect 1 million households by 2020.
Working allowances will also only be made available where a claimant or joint claimant has a child dependent and/or where they’ve been found to have ‘limited capability for work’.
Analysis based on the new work allowance suggests that low-paid workers in the North-West who are single parents could lose up to £2,600 per year.
Couples with children could also see their incomes fall by around £1,000 per year, while couples without children are set to lose more than £800 per year.
Unison’s North West regional secretary Kevan Nelson said: “The chancellor may have beaten a retreat on tax credits but still wants to cut in-work benefits for the low and middle income workers who have already been moved onto the new universal credit benefit.
“Universal credit is meant to help meet the essential needs of families on low incomes who pay every penny of their taxes. It helps them pay the rent and put food on the table, it’s not spare cash they are able to salt away in shady tax havens as others are able to do.
“Today there will be 31,000 people on universal credit losing out in the North West, that’s two in every five of those people to suffer cuts across the country.
“As universal credit is rolled out more people will suffer cuts to their already low incomes. The chancellor is in danger of creating a northern poorhouse, rather than a northern powerhouse.”
Further changes to Universal Credit will see the amount a person’s income can rise within a year (income disregard) before their claim is reassessed halved, from £5,000 a £2,500.
And the speed at which Universal Credit is removed will be increased to 65 percent, meaning claimants will lose 65p for every additional pound earned. Opponents say this could deter people from looking for work or increasing their hours.
Estimates by the Child Poverty Action Group (CPAG) shows that a full-time sole earner couple would have to work 19 extra days a year to make up for the cuts, while single parents would have to work an additional 46 days a year.
Imran Hussain, CPAG policy director said: “Asking parents already working full-time to magic up more days in the year to recoup the cut just isn’t an option.”
Osborne has also been accused of “conning” the public into believing the new National Living Wage (NLW) will offset cuts to Universal Credit.
Liverpool City councillor Jane Corbett says the cuts will result in the incomes of Liverpool families drop by between £60 and £200 a month.
“The government have no idea how people are surviving on very low incomes”, she said.
“They don’t understand that even a fiver here or there hits hard, so if you are losing between £60 and £200 a month, how on earth are people going to manage that?
“The government are conning people that the National Living Wage is going to cover the difference and it’s not.
“The government is not doing the basic maths on this.”
New Work and Pensions Secretary, Stephen Crabb MP, is expected to announce this week that the Government will press ahead with cuts to Universal Credit, despite opposition concerns over how the changes could impact on families who are “already struggling to make ends meet”.
Labour’s Shadow Work and Pensions Secretary, Owen Smith MP, accused the Government of “pressing ahead with cuts to low- and middle-paid workers through the back door”.
“Tens of thousands of working people who are already struggling to make ends meet are set to lose huge amounts of support when the cuts kick in this April”, he added.
A Department for Work and Pensions spokesperson said: “Universal credit is revolutionising welfare, with claimants moving into work faster and earning more than under the previous system.
“We are simplifying the work allowances under UC and giving people extra help to progress in work.
“This is alongside the increase in the national living wage and personal tax allowances which are helping to move us to a higher wage, lower tax, lower welfare society.”