Labour is calling for the roll out of Universal Credit (UC) to be halted as new data shows that while wages are failing to keep up with inflation, cuts to in-work social security support have meant most net incomes have flat-lined in real terms and in some cases worsened, with women and people from ethnic minority communities most likely to be worst affected.
Analysis I commissioned from the House of Commons Library shows that real wages are stagnating and in-work support is contracting for both private and public sector workers.
Private sector workers like Kellie, a cleaner at Manchester airport, who is married and has a four year old daughter. She told me how by going back to work after the birth of her daughter resulted in her losing in-work tax credits, which made her day-to-day living costs even more difficult to handle.
Her child tax credits fail to even cover food or pack lunches for her daughter and as a result she has to survive on a very tight weekly budget just to ensure her daughter can eat properly.
This is the everyday reality for too many people in communities across the UK. People like Kellie who have to make difficult and stressful choices that are having lasting implications on the whole family.
Eventually Kellie will be transferred onto UC. She told me how she is dreading the transition onto UC, as she is barely managing to get by on tax credits. The stories she hears about having to wait up to 10 weeks before you receive payment and the failure of payments to match tax credits are causing her real concern.
UC is meant to streamline social security support, and bring together payments for several benefits including tax credits and housing benefit. But it has been plagued by problems in the areas it has been trialled, not least because of the fact claimants must wait six weeks before the first payment. An increased use of food banks has been observed, along with debt, rent arrears, and even homelessness.
The latest evidence came from Citizens Advice in July. The charity surveyed 800 people who sought help with universal credit in pilot areas, and found that 39 per cent were waiting more than six weeks to receive their first payment and 57 per cent were having to borrow money to get by during that time.
Our analysis confirms Universal Credit is just not fit for purpose. It looks at different types of households and income groups, all working full time. It shows single parents with dependent children are hit particularly hard, receiving up to £3,100 a year less than they received with tax credits – a massive hit on any family budget.
A single teacher with two children working full time, for example, who is a new claimant to UC will, in real terms, be around £3,700 a year worse off in 2018-19 compared to 2011-12.
Or take a single parent of two who is working in the NHS on full-time average earnings for the public sector, and is a new tax credit claimant. They will be more than £2,000 a year worse off in real-terms in 2018-19 compared to 2011-12.
Equality analysis published in response to a Freedom of Information request also revealed that predicted cuts to Universal Credit work allowances introduced in 2016 would fall most heavily on women and ethnic minorities. And yet the government still went ahead with them.
It is shocking that most people on low and middle incomes are no better off than they were five years ago, and in some cases they are worse off. The government’s cuts to in-work support of both tax credits and Universal Credit are having a dramatic, long lasting effect on people’s lives, on top of stagnating wages and rising prices.
It’s no wonder we are seeing record levels of in-work poverty. This now stands at a shocking 7.4 million people.
Our analyses make clear that the government’s abject failure on living standards will get dramatically worse if UC is rolled out in its current form.
This exactly why I am calling for the roll out to be stopped while urgent reform and redesign of UC is undertaken. In its current form UC is not fit for purpose. We need to ensure that work always pays and that hardworking families are properly supported.
Labour will transform and redesign UC, ending six-week delays in payment, and creating a fair society for the many, not the few.