Imagine this. It’s Tuesday 7th September 2021 and the government is about to announce a tax rise. There has been widespread speculation of unrest on the backbenches and in the Cabinet, but the chancellor and prime minister are determined to press ahead.
However, it isn’t a national insurance rise, costing a worker on £20,000 a year £130, £505 for someone on £50,000 and over £1,000 for someone earning £100,000, along with a rise in employer contributions and for those with share dividends.
Instead, it is a tax rise of £1,000 a year targeted solely on those with the lowest incomes in the country—low paid-workers, single parents with babies, disabled people and carers. It won’t hit people on higher incomes at all. It will have the severest impact in Yorkshire, the northeast and northwest of England, and the west Midlands.
Can you imagine the uproar that would ensue?
At the moment, that is effectively what the government is planning to do. On 7th October, 5.5m families will see their incomes drop by over £1,000 a year as the cut to Universal Credit comes into force. The impact will blow out of the water the £100 tax rise they will also experience when the new Health and Social Care Levy kicks in. This will be the biggest overnight cut to benefits since the Second World War. The government’s mantra is that this isn’t a cut, it’s just an end to a temporary uplift. But potentially millions of those affected have only known the system in its current state (and even with the increase, many were shocked at the low level of support.) In the real world, if it looks like a cut and feels like a cut, then we might as well call it a cut.
While the government argues over semantics, a remarkable range of people and organisations have been lining up to beg ministers to think again. In a joint letter to the PM, 100 leading organisations set out the urgency of keeping the lifeline that has helped so many stay afloat for the last 18 months. Groups representing teachers, doctors, debt advisers, landlords, mental health workers, homelessness experts, food bank volunteers and social workers signed the letter, knowing that they will see first-hand the devastating impacts of the cut on the families and communities they serve.
£20 a week may not sound like much to people on higher incomes, but for some families it is the cost of a weekly food shop. That £20 is the difference between being able to go to the supermarket or facing the humiliation of going to a food bank, depending on charity for the essentials. Many families are now in a state of fear and panic, knowing they’re facing a cold, hungry winter, having to choose between giving their kids a nutritious meal or a hot bath; between replacing worn out shoes or a broken kettle.
“Over 400 constituencies will see more than a third of working-age families with children hit by the cut”
A leaked official impact assessment of the (much smaller) national insurance increase warned of impacts “on family formation, stability or breakdown as individuals who are currently just about managing financially, will see their disposable income reduce.” The scenario predicted by internal government modelling of the impact of the UC cut has been described as “catastrophic. Homelessness and poverty are likely to rise, and food bank usage will soar. It could be the real disaster of the autumn.” Ministers are braced for a backlash that “will definitely eclipse social care as a political problem.” The Health Foundation has warned that the cut will impact most severely those places with the worst health already, triggering mental illness and widening health inequalities. Which is ironic, given that the government has just announced the creation of a new Office for Health Improvement and Disparities.
The government’s defence of the cut tends to focus on jobs, with the prime minister saying recently that decently paid jobs are the solution and people should rely on their own “efforts” instead of Universal Credit. Yet the majority of those likely to be affected are already in working families, and Universal Credit was expressly designed (by a Conservative-led government) to help people into work and then support them to increase their earnings.
So far, the UK’s labour market seems to be bouncing back well, which is excellent news, but doesn’t change the case for keeping the lifeline. After all, despite record employment, four million workers were trapped in poverty pre-pandemic. In the most recent Queen’s Speech the government decided not to go ahead with a long-promised Employment Bill which could have helped create more of the decent jobs the prime minister wants to see. And frankly, it borders on insulting to justify this cut by suggesting that low-paid care workers, nurses and supermarket staff should just work harder. Or that the exhausted single parent who has been up all night with a baby, or the person caring for a severely disabled loved one, can somehow make up for an enormous drop in their income by “working harder.”
Thérèse Coffey, the current secretary of state for work and pensions, suggested this week that people could make up the lost income by working two more hours a week. She appeared unaware of the most basic features of the system she runs—that most people on Universal Credit keep only 37p in every extra £1 they earn, falling to 25.2p if they make enough to pay income tax and National Insurance (and down to 24.7p next April, when National Insurance rises). Someone earning the National Living Wage (£8.91 per hour if they’re over 23) would have to work an extra nine hours a week to make it up—more than that if they also have to pay for extra childcare and travel.
The government won the Health and Social Care Levy vote easily in the end, but five Conservative MPs rebelled and 39 abstained. Red Wall Tory MPs are already facing a backlash over the plan, but this will be dwarfed if the government presses ahead with the Universal Credit cut. The leading Conservative metro mayor Andy Street has spoken out over the impact of the reduction and outlined the steps he is taking to mitigate the suffering it will cause. Around 50 Conservatives have publicly expressed their opposition or nervousness about the effects, including six former Conservative secretaries of state for work and pensions.
The level of disquiet is hardly surprising, given that over 400 constituencies, including 191 with Conservative MPs, will see more than a third of working-age families with children hit. That includes 53 which were newly won for the Conservatives at the last election. The numbers affected are far higher in some places. I wouldn’t want to be the Conservative MP for Peterborough, trying to explain why I support an enormous cut to the incomes of nearly two thirds of families with children in my constituency. Or the MP for Burnley, having to justify a cut to the incomes of nearly six in ten families on my patch.
The government came to power on the promise of “levelling up” those parts of the country which have been left behind. But cutting Universal Credit is the essence of “levelling down”—sucking money out of local economies that most need a strong and speedy recovery. The question now is whether all those on the Conservative benches who recognise the damage this cut will do can persuade an increasingly isolated chancellor and PM to see sense—and change course before it takes effect in October.
