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Planned cuts to Universal Credit will hit incomes of millions of households unable to afford a minimum living standard

The planned £20-a-week cut to Universal Credit in October is set to leave out-of-work families with children receiving barely half of the income the public believes is required to achieve an acceptable standard of living, while adults without children will receive around a third, according to a new report.

The annual Minimum Income Standard for the UK in 2021 (MIS) report, based on research carried out by the Centre for Research in Social Policy (CRSP) at Loughborough University for the Joseph Rowntree Foundation, acts as a benchmark of minimum living standards in the UK.

It is based on detailed discussions with members of the public about what they think we all need to achieve an acceptable standard of living.

The looming cut to Universal Credit would reduce the value of out-of-work benefits to their lowest recorded levels relative to what the public thinks is an acceptable income. If implemented, it would reduce the value of this support to 55% of MIS for a couple with two children aged 3 and 7, and just 33% of MIS for a single working-age person without children. Working families on low incomes would also see this support fall sharply.

In recent years, some working parents have been able to get closer to MIS due to increases in the National Living Wage, the £20-a-week increase to Universal Credit and more support for childcare under Universal Credit compared to the previous system. The resulting improvement in incomes risks being reversed for most families who have benefited if Universal Credit is cut.

Abigail Davis, one of the report’s authors and Associate Director of Loughborough’s Centre for Research in Social Policy, said: “What we’ve heard from the members of the public drawn from across our society is that what’s needed for a minimum socially acceptable standard doesn’t fundamentally change, even under circumstances as challenging and unprecedented as these. 

“But as COVID constraints lift for many, it is worth bearing in mind that for a lot of households the restrictions of not being able to go out, take kids to after school activities or go on a family holiday remain because those are the things people go without when there isn’t enough to make ends meet.

“Taking money away from low-income households will make it even harder for them to meet this standard of living.”

The report also paints a concerning picture of how low-paid work and inadequate social security combine to pose serious financial risks particularly for single-parent families and single adults without children.

Even with a full-time job on the National Living Wage, a single parent with two children aged 3 and 7 is £46-a-week short of MIS – increasing to £66 if Universal Credit is cut.

A single person without children relying on out-of-work benefits receives less than half of what they need through Universal Credit even before the cut.

A single person needs to earn £20,400 a year to reach MIS, but they would only earn £17,400 if working full-time on the National Living Wage.  

Iain Porter, Policy and Partnerships Manager at the Joseph Rowntree Foundation, said: “It is deeply concerning that millions of households across our country are having to live on incomes that fall so far short of what the public thinks is needed for a minimum standard of living. Social security should be strong enough for all of us when we need a lifeline, but cuts and freezes in recent years have left it to wear thin and threadbare.  

“We urgently need to restore public confidence by investing in adequate social security support for families when they need it. It would be a terrible mistake for ministers to instead weaken Universal Credit further by going ahead with the planned £20-a-week cut this October, leaving millions of families unable to meet their needs.”

A couple with two children aged three and seven can reach MIS if both parents work full-time on the National Living Wage and can get within 5% of this level if one works full-time and the other half-time.

However, only just over one in four couples both work full-time, often because suitable jobs are not available or due to other issues such as the availability of childcare or health conditions within the family.

There are also signs that after a period of low inflation, the cost of living is increasing once again. A family with children saw their minimum cost of living rise by around 2.5%, excluding rent and childcare. While rent inflation was low, childcare costs rose by 3-4% for pre-school nursery places and council tax rose by an average of 4%.

Excluding the £20 increase to Universal Credit, this means that the cost of living is rising at a faster rate than social security support which was only uprated by 0.5% in April 2021 (in line with Consumer Price Inflation back in September 2020).

 

Weekly MIS requirement (excludes rent/mortgage, childcare and council tax)

Annual pensions or earnings requirement

Single pensioner

£191

£12,800

Pensioner couple

£298

£21,000

Single working age adult without children

£213

£20,400

Working age couple without children

£356

£27,400

Lone working age parent with two children (aged 3 and 7)

£389

£27,500

Working age couple with two children (aged 3 and 7)

£482

£34,200

This year’s report sought to understand how the public’s attitudes towards what comprises an acceptable living standard may have changed due to the pandemic. While the pandemic has profoundly affected people’s lives, the public continues to underline the importance of a stable income that allows people to participate fully in society.

In some areas of life, such as shopping and technology, there may be significant changes affecting minimum budgets in the future, but it is too early to assess their long-term impact.

JRF recommends:

The Government must keep the £20-a-week increase to Universal Credit and extend this support to people claiming legacy benefits who have been excluded.

As the UK rebuilds its economy in the wake of the pandemic, the Government should prioritise the creation of decent jobs, that provide stability, pay at least the real Living Wage, and give people options about working hours.

ENDS

Notes for editors

Press release reference number: 21/126

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