A new report* from independent think tank, the Institute of Fiscal Studies, presents options for ministers now deciding the future of benefit increases introduced at the start of the pandemic.
In a single introductory sentence the IFS shows the difficulty facing government:
“If the number of UC claimants is the same in March 2021 as it was in May 2020, this would see 4 million families lose an average of 13% of their benefits overnight.”
They say making permanent the £20 a week (£1000 a year) increase in Universal Credit standard allowance would add: “….roughly 10% to the annual cost of UC, though undoing only a fraction of the cuts to benefits implemented since 2010.”
The IFS is also proposing ministers consider making the housing and self-employed elements of universal credit both fairer and more effective.
At a webinar on 09 October, IFS Director Paul Johnson described the time lapsed since the last increase to working age benefits as “extraordinary”. The result was “a very ungenerous system”.
Mr Johnson also pointed to the already serious consequences of increasing UC standard allowance and housing benefit but leaving the benefits cap unchanged. The effect had been a doubling of families with income capped and those with the highest needs hit hardest.
Stephen Timms MP, chair of the Work and Pensions Select Committee, also took part in the webinar. He said the £20 a week supplement was “really a kind of catch-up” that helped get the minimum level to “a tolerable level of security”. Without adequate support in future there would be “excessive hardship”.
Citizens Advice is among leading organisations making the case for government action. In a paper** published 13 October, they ask ministers to i) make the benefits uplifts permanent ii) support people by keeping bills down and iii) help people in debt.
* The temporary benefit increases beyond 2020-21, Institute of Fiscal Studies, 09/10/20
** Coronavirus has hit household budgets: government action can help avoid a debt crisis Citizens Advice, 13/10/20