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Sunak must use the Budget to cancel the cut to Universal Credit

by David Scott, CAS Social Justice policy team

This article first appeared in the Herald on 24 February 2021.

One week today the Chancellor will stand up to make his Budget speech. It will be one of the most important Budgets in years, perhaps decades, as it will set out how our economic recovery is handled and how much support will be offered to those still in need. For the thousands of people in Scotland who are in financial crisis – or close to it – it could be the most important ever.

It’s hard to believe that almost a year has passed since pandemic restrictions began. Trapped at home during the strictest periods of lockdown, time has moved glacially slow for many of us. But for others – those whose places of work have permanently closed, who lost working hours on insecure contracts, or were made unexpectedly redundant – things will have felt pressingly urgent. Seeing your income vanish while debts pile up, with no real sense of when the pandemic will end, is a horribly precarious position to be in. A strong social security system is vital for alleviating this pressure.

At the start of the pandemic, the UK Government increased Universal Credit (UC) payments by £20 a week, a move that Citizens Advice Scotland welcomed as a long-overdue improvement to the adequacy of UC overall. £20 a week might not sound like much for some people, but it has made a massive difference to those in need.

Over the last year the CAB network has helped many people on UC through the crisis, and for those clients with multiple or excessive debts, we found that nearly 6 in 10 would be unable to cover their essential costs without the uplift. With that extra £20 a week, however, two fifths of those clients have been able to meet their living costs and avoid falling into further debt.

One CAB adviser told me recently of a client who has been able to clear her arrears for the first time as a result of that increase. ‘She is coping so much better with her finances,’ the adviser said. ‘She's less stressed and no longer has her landlord contacting every month telling her to pay money that she couldn't afford.’ At this difficult moment, the uplift has offered security to those who need it most.

So the £20 uplift to UC was the right thing to do in March, and making it permanent it is the right thing to do now.

Alongside 60 other charities in the #KeeptheLifeline coalition, CAS has called repeatedly for the uplift to be made permanent. Yet the Chancellor has refused to commit to keeping it in place beyond March, instead floating a series of unworkable policies such as a one-off payment to existing claimants or temporary extensions of around six months. This continued uncertainty has put unnecessary stress and strain on all those relying on UC until the economy can reopen.

The Chancellor argues that the £20 uplift was just an emergency measure, one that should be removed as the economy restarts. But there is no logic to this. The economy hasn’t restarted yet so all the factors that led him to introduce the uplift in the first place – the redundancies, the reduced working hours, the falling incomes - still exist.

Moreover, this argument overlooks how deeply UC has fallen behind the cost of living since its introduction eight years ago. Tracked against inflation, the £20 uplift only just returns UC to its original real terms value. If the uplift is now removed, UC will be worth over a tenth (11.5%) less in real terms than it was in 2013. At this profound moment of economic crisis, where the UK economy has suffered its biggest contraction in 300 years (according to the Financial Times), we need a strong social security safety net more than ever. To cut this lifeline for the people struggling the most is simply wrong.

All the more so when you consider how many people are claiming UC for the first time due to the pandemic. 480,000 people in Scotland are now claiming UC, which is an 81%increase since March. For those new to the system, UC has always contained the uplift, so for them failing to make it permanent will not be a ‘return to normal’ but a severe cut of as much as 25% of their income.

CAB advisers tell us that many will not see this income shock coming. Many new claimants who have no prior experience of claiming benefits have already expressed their dismay at how little financial support state benefits actually provide. A £20 per week cut will be a real income shock to these people, and with Ofgem’s recent announcement that the energy price cap is to rise, they could face a perfect storm of reduced incomes and higher bills.

It is also important to remember that UC payments ultimately go back into the economy. It’s common for benefits to be talked about as some sort of drain on government resources, as if the money vanishes once it is paid out. But those claiming UC spend that money on essential goods and services. It goes to shops and businesses – which means it goes back into the economy and helps sustain jobs. 

So maintaining the £20 uplift will not only help those most in need to keep their heads a little more above water. It will also protect jobs and help the economy get back on its feet.

If the Chancellor is committed helping people survive the economic crisis, the case is simple. He must use the Budget to cancel the cut, make the £20 increase permanent, and ensure that everyone can take part in the UK’s recovery.