Universal Credit claimants will begin to be told how changes to the benefits system will bolster their incomes ahead of Christmas – but there are warnings that millions of families will still be worse off overall.
At his autumn budget last month, the Chancellor Rishi Sunak announced a reduction in the Universal Credit taper rate from 63% to 55%, along with a £500 per year increase to claimants’ work allowances.
Mr Sunak promised the alterations would be introduced no later than 1 December.
But the government has now hailed how the changes – which they estimate will see almost two million of the lowest income working households on Universal Credit around £1,000 a year better off on average – are being brought in a week earlier than planned.
The Department for Work and Pensions said, by bringing in the changes today, up to 500,000 more people could benefit before Christmas.
Claimants will be notified how much Universal Credit they will be awarded in their usual monthly statement, with the first of those to reflect the changes being issued today.
The chancellor said: “We want this to be a country that rewards hard work by helping the lowest income families keep more of their hard-earned cash.
“That’s why at the budget, I announced an effective tax cut for two million people worth over £2bn.
“These changes come into force today and will mean that with Christmas approaching, hard-working families will keep an extra £1,000 a year of what they earn.”
Work allowances are the amount Universal Credit claimants can earn before their benefit payment is affected.
The taper rate is the amount a person’s Universal Credit is reduced by when their earnings are more than their work allowance.
The DWP said the increase in work allowances by £500 per year will mean many families will be able to earn over £500 per month before their benefits are tapered off.
Mr Sunak’s changes at last month’s budget followed criticism of his decision to not continue a £20 per week uplift to Universal Credit that had been introduced at the beginning of the coronavirus pandemic.
And charities warned that, despite Mr Sunak’s boost to work allowances and the taper rate, the end of the £20 per week uplift would still leave some families struggling.
Karl Handscomb, senior economist at the Resolution Foundation, said: “The welcome boost to Work Allowances and the taper rate in Universal Credit will benefit over two million families next year, who will be over £1,000 better off on average.
“This represents a major living standards boost to low-income families, by improving people’s incentives to enter work, and allowing them to keep more of their earnings.
“But while these changes mean more support for higher-earning families on Universal Credit this winter, the recent £20 a week cut in support means that 3.6 million families will still be worse off overall, particularly those who have lost their jobs, or who are unable to work.”
Iain Porter, policy and partnerships manager at the Joseph Rowntree Foundation, said: “The reduction in the taper rate and increase in the work allowances is a significant and positive step for supporting working families and shows a serious intent to turn the tide of rising in-work poverty.
“However, the measures implemented today do nothing to support many families who are currently seeking work, or who are unable to work, due to caring responsibilities, sickness or disability.
“The recent £20-a-week cut to Universal Credit has now reduced the main rate of out-of-work support to its lowest levels in real terms in 30 years.
“Families on low incomes are facing mounting pressure on their finances as the cost of energy and prices on the shelves continue to rise.
“The government must ensure that support offered by our social security system allows those unable to work to live with dignity, and provides families seeking work with the stability needed to seize opportunities.”