Fancy working a 14 month year? The real impact of UC work allowance cuts | CPAG

Fancy working a 14 month year? The real impact of UC work allowance cuts

Published on: 
21 April 2016
Written by: 

Josephine Tucker

Head of policy and research

Anyone following the story of Universal Credit’s painfully delayed roll-out will already be familiar with its time-bending qualities, but this month’s cuts to its work allowances mean that many hard-pressed parents now need to work a thirteen- or fourteen-month year just to protect current income levels. 

These cuts to work allowances – slashed for parents and disabled people and removed completely for everyone else - were the latest in a succession of cuts which have reduced the generosity of UC and led to fears that its early promise as a poverty-reducing benefit will soon lie in tatters. Similar cuts to tax credits were reversed following outrage last year, but UC did not escape the axe.

So, how have we reached a position where the Government’s flagship policy for working families may end up asking the impossible of so many families if they are to avoid being worse off?

Here’s how:

Before this month, working households with children could earn £222 per month for a couple and £263 for a single parent (assuming they are in rented accommodation and receiving support for housing costs, as the majority will be) before seeing their UC withdrawn.

This, now, has been reduced to £192 per month for both groups. Working parents will now lose 65p in UC for every £1 reduction in the work allowance – equating to £19.50 per month for a couple and £46.15 for a single parent.

The government has argued that people can simply ‘[work] three to four additional hours a week at the national living wage to which they are entitled’ to make up for this loss. Setting aside the fact that more than one in ten people in work already want to work more hours but can’t get them, we decided to look at just how many extra hours would be required to make up this loss.

The results are startling. A single parent working full time on the new over-25 minimum wage will take home just £1.71 per additional hour worked after tax, National Insurance and UC withdrawals. To make back the £46.15 per month, a single parent, already in full time hours, will have to find the time to work 27 extra hours per month, or 46 extra days in the year. That’s two whole additional working months to be squeezed in each year. A couple where one parent earns and one stays at home with the children will have to find 19 extra days a year of work between them, just to stay in the same financial position they were before.

It’s not just people on the new minimum wage who are affected, as the table below shows: people in all sorts of jobs will have to work extra days or lose out.

 

Extra days per year

Job

Hourly wage (gross)

Couple (sole earner)

Single parent

‘National Living Wage’

£7.20

20

46

Bricklayer

£11.66

12

29

Undertaker

£11.28

12

29

Security guard

£8.69

16

38

Roofer

£10.74

13

31

Bank clerk

£10.78

13

31

Hospital porter

£9.40

15

35

Glazier

£9.38

15

35

Van driver

£8.85

16

38

Care worker

£7.86

18

42

Teaching assistant

£8.80

16

38

Fishmonger

£7.29

19

46

Cleaner

£7.24

19

46

Relatively few people are claiming UC now, but those who are will notice an overnight loss. Others who claim in the future will find that the system they sign up to is far less generous than it was originally designed to be, and may be shocked to find they are in the same boat as if the Chancellor’s tax credit cuts had gone ahead. Families will also find that they receive less for their first child, and nothing for third or subsequent children, thanks to other cuts to support for children under UC.

All this probably explains why the government, once proud to assert how much UC was going to reduce child poverty, now won’t even answer questions about its impact.

It doesn’t have to be this way.

Stephen Crabb speaks passionately about UC as a system to transform people’s lives for the better. But this will take more than just having a ‘human being in the Jobcentre staying with you as you move into work and progress’. Vital though good employment support is, it can’t magic up an extra two months in the year.

The new Secretary of State has inherited a huge challenge, freighted with political risk, in Universal Credit. Arguably, there is no tougher cabinet brief than getting UC implemented properly and meeting its policy objectives. Doing that successfully will require an increase in the work allowance for single parents to a fairer level, instituting a work allowance for second earners in couples to help them get into work, and reversing the monstrous forthcoming ‘two-child limit’ on UC and tax credit payments.

In other words, for Stephen Crabb to do the seemingly impossible of making Universal Credit a success, he’ll need to ensure working families aren’t being asked to do the impossible just to protect current incomes.