The £20-a-week increase to universal credit, brought in to support those on low incomes during the pandemic, is now being withdrawn.
The government says that higher wages, rather than taxpayer-funded benefit rises, will be the better option as the country emerges from Covid restrictions. Yet, many MPs want the universal credit boost to be permanent.
How is universal credit changing?
In response to the pandemic, a temporary £20 increase to universal credit payments was introduced.
The scheme officially ends on 6 October.
However, the exact date the money will stop being paid will vary depending on the day you usually receive universal credit.
What is the likely impact?
The standard allowance for a single person aged under 25 is going to fall back from £79 a week to £59. That is a fall of 25%.
Compare that to a couple, where either one of them is 25 or over, and their allowance drops from £137 a week to £117 – a fall of 15%.
Under the rules, universal credit payments become less generous as income rises. So, a £20 a week increase in wages will not make up for the reduced benefits income.
Why is the timing significant?
The withdrawal of the universal credit uplift is coinciding with increases in the cost of living.
The Bank of England has forecast that inflation (ie the rate prices increase) will rise above 4% in the coming months. This pace is unlikely to be matched by wage growth in many sectors of the economy.
There are also price rises being recorded among groceries and petrol.
How many people are affected?
Universal credit is claimed by more than 5.8 million people in England, Scotland and Wales.
Almost 40% of them are classed as being in employment.
The charity Citizens Advice has warned that a third of people on universal credit will end up in debt when the extra payment is removed.
It said the average shortfall would be between £51 and £55 a month.
The government has defended its decision. It says the £20 uplift was always meant to be temporary and that people getting back into work is the best way to tackle poverty.
What is universal credit?
Universal credit is a benefit for working-age people, which was introduced to replace six benefits and merge them into one payment. The replaced benefits are:
- income support
- income-based jobseeker’s allowance (except for some people with severe disabilities)
- income-related employment and support allowance
- housing benefit
- child tax credit
- working tax credit
Most people who would have made a new claim for these individual benefits now make one for universal credit. It was designed to make claiming benefits simpler.
A single universal credit payment is paid directly into claimants’ bank accounts. This happens monthly in England and Wales, but there is the option of payment every two weeks in Scotland and Northern Ireland.
It can be claimed whether you are in or out of work.
Universal credit may not be appropriate or available for everyone. Claiming it can affect other benefits, and it is vital to get some advice – available for free – before applying.
What are the concerns about universal credit?
It is complicated to work out exactly how much universal credit you might receive. Some people, such as those with £16,000 or more in savings, are not eligible.
Others may find what they receive depends on their circumstances, including any income their family has, as well as housing and childcare costs.
It usually takes five weeks from the date of claiming to receiving a first payment, although an advance loan may be possible.
You may be able to claim a reduction in council tax when on universal credit, and get help with childcare costs. There is also support to pay the rent, which works in different ways across the UK. In time, there may also be assistance in paying the mortgage, although there are some strict criteria involved.
What other benefits are still available?
This is worth £59.20 a week, if you are under 25, or £74.70 a week if you are 25 or over.
You can get this for up to six months and it will be paid into your bank, building society, or credit union account every two weeks. Unlike universal credit, your partner’s or spouse’s income will not affect your claim.
You may be able to claim new-style JSA as well as universal credit.
Where can I go for help?
There is free guidance and advice available, including: