How families on benefits will be affected by Sunak’s Budget
RISHI SUNAK said in Wednesday’s Budget that his changes to Universal Credit would help the lowest income families keep more of their money.
However, for those on the benefit, it isn’t quite as simple.
Mr Sunak announced the Universal Credit taper, which he described as a “hidden tax on work”, would be cut.
“The Universal Credit taper withdraws support as people work more hours,” he said, explaining with the current rate of 63%, it means for every extra £1 someone earns their Universal Credit is reduced by 63p.
Under the new changes announced yesterday, this will be cut to 55p of every pound.
An increase to the work allowance of £500 would mean nearly two million families will keep, on average, an extra £1,000 a year, the Chancellor said, and it will be brought in no later than December 1.
However, charity the Joseph Rowntree Foundation said while it will help those in work, for those who are not it will not offer any benefit and “risks deepening poverty among this group”. The rising cost of living wipes out much of the financial gain some families will receive from the Universal Credit (UC) changes announced, their figures show.
The Resolution Foundation published its findings about the impact of the budget on Thursday morning and said the poorest fifth in the country will be around £280 a year worse off as a result of the £20 cut to Universal Credit.
Researchers said three-quarters of households on UC will be worse off as a result of the changes, even with new tapering rules and a rise announced by Mr Sunak.
Tax bills for households will be £3,000 higher since Boris Johnson became Prime Minister as a result of changes announced in the Budget, according to the leading think tank.
Wages are also unlikely to rise in real terms this year due to high inflation and will only increase by around 2.4% between the financial crisis in 2008 and 2024, compared to a one third rise recorded in the 16 years prior to 2008.
The calculation of taxes increasing by £3,000 by 2026/27 means the tax take will be at the highest level since 1950, RF found.
What will the changes announced mean? James Smith, research director at the RF, said: “We’re becoming a bigger state and more higher tax state.
“The total increases in taxes since Boris Johnson has become Prime Minister is equivalent to around
£3,000 for each household in the UK, so this is a really chunky change, although most of that falls on people on higher and middle incomes.
“We’re not set for the low-tax economy that the Chancellor wants or the high wage economy that you see on the horizon.
“Slow growth is really casting a shadow over what’s happening in terms of the overall health and outlook, and household finances are still in pretty bad shape and a huge challenge.” Deputy director of policy & partnerships at JRF, Katie Schmuecker, said: “This is a tale of two budgets for families on low incomes.
“For those in work, the change to the taper rate and work allowance, alongside the National Living Wage increase, are very positive steps, allowing low-paid workers to keep more of what they earn.
“Together these measures improve our social security system for working families and demonstrate a serious intent to turn the tide on the prepandemic trend of rising in-work poverty.
“But the reality is that millions of people who are unable to work or looking for work will not benefit from these changes. The Chancellor’s decision to ignore them today as the cost of living rises risks deepening poverty among this group, who now have the lowest main rate of out-of-work support in real terms
This is a tale of two budgets for families on low incomes KATIE SCHMUECKER
since around 1990.
“Among the people in our society who cannot work are cancer patients, people with disabilities and those caring for young children or elderly parents.
“Their energy bills and weekly shop are going up like everyone else’s and they face immediate hardship, hunger and debt in the months ahead. The Chancellor had an opportunity to support families on the lowest incomes to weather the storm ahead, and he did not take it.”