The cruelty and lunacy of cutting Universal Credit

30 Jul 2021 Nick Garbutt    Last updated: 30 Jul 2021

Pic: Towfiqu Barbhuiya, Unsplash

The £20-a-week cut to Universal Credit planned for October will be the biggest overnight drop in the basic rate of social security since the foundation of the welfare state, according to analysis from the Joseph Rowntree Foundation.  

Northern Ireland will suffer the most because it will have the highest percentage of households affected – 36%.

The reduction of Universal Credit is scheduled for 6 October which also happens to be the last day of the Conservative Party conference. Many will find this ironic, given that the group of constituencies who are the next most impacted are those in the so-called Red Wall – whose conquest by the Tories at the last election propelled them into power.

There will be those in government who will argue that because the cut reverses a temporary uplift which was introduced as part of the Covid-19 relief measures, it is merely restoring the status quo.

But that argument ignores that by the time pandemic struck early last year unemployment benefits were worth no more than they had been in 1990-91 in real terms and the lowest they had ever been compared to average wages. The increase was not intended as some sort of bonus – it was a belated recognition that benefits were inadequate. Many were hoping that it marked the end of attempts to dismantle the welfare state.

In the past 12 months the numbers claiming support has doubled from three to six million, reaffirming the importance of a safety net for all citizens and exposing the vacuous bigotry of charactering those who need support as “scroungers”.

There are many reasons why it would be unconscionable for the cut to go ahead.  

Some of these relate to fairness:

  • It will drag around 500,000, including 200,000 children into poverty;
  • furthermore families with children will be worst affected;
  • the majority of those families are  in work;
  • it undermines government pledges to “level up” given the areas most impacted are the least well-off: Northern Ireland, the north of England and Wales.

But it is also bad economics. Even those who couldn’t care less about people on low incomes should be capable of understanding that low income households tend to spend all of their earnings, just to get by.

These cuts will take £8 billion out of the economy, which will translate into £8 billion less spending. This at a time when it is desperately important to continue to stimulate economic recovery.

If everyone in political circles accepts that a strong recovery involves stimulating consumer demand which in turn means that this is not the time to increase taxes, how can it be possible to simultaneously insist on cutting benefits? It is economically illiterate.

There’s more to this as well. Scope has recently reported on research from the Resolution Foundation which found that total household wealth across the UK has risen by a staggering £900 billion, with total savings up by £125 billion and debt reduced by £10 billion. 

Most of us have done rather well financially over the past 18 months or so.

However that has not been the case for the least well-off – those dependent on Universal Credit who have seen bills rising over the period due to such factors as home schooling and higher household bills.

The net result has been a sharp rise in wealth inequality over the period with those who own property and other assets such as shares seeing a steep increase in their wealth whilst those on the bottom rung being worse off, with the Universal Credit increase not sufficient to meet rising costs. Many of those affected are key workers who have therefore suffered most both directly (through higher risk of exposure to Covid-19) and economically.

Before the pandemic the UK had one of the highest wealth gaps in western Europe. This has now increased.

This doesn’t just matter because it is unfair and it damages the economy, it is also creates a risk of political and social instability. And with billionaires queuing up to shell out $55 million a pop for Axiom flights into space whilst so many of their fellow citizens are reliant on food banks and the kindness of strangers just to get by, the wonder is that there isn’t more serious unrest.

The real challenge is how to reduce wealth inequality, and measures that are bound to increase it seem reckless and destabilising, not just unfair.

In its research JRF examined the impact of the cut on a series of individuals and families.

It found that for a family of three, with one adult in work:

  • In 2013/14, they would have been £271 a month above the poverty line;
  • cuts and freezes in the decade leading up to the pandemic eroded their income, so that even with the £20 increase in 2020, they are now below the poverty line;
  • If  the cut goes ahead, they will be  £150 per month below the poverty line.

The impending Universal Credit cut is not just an affront to most peoples’ notion of fairness, it is also a threat to the economy and will considerably worsen the poverty gap.

It is the single most serious threat to the wellbeing of so many in Northern Ireland and to our economy more generally.

Yet it is not a done deal just yet, resistance at Westminster is growing, even amongst Conservatives. It is time for our own politicians to be more vocal in their opposition. It is a cause that should unite all parties and civic society. The Universal Credit cut is bad policy and it must be stopped.

 

 

The opinions, views or comments in this article do not necessarily reflect any views or policies of NICVA.

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