At the end of this month, the government plans to make the biggest overnight cut to benefits since the creation of the welfare state. The basic Universal Credit payment for a single person aged over 25 (which increased by £20 a week last March to help people through the Covid-19 pandemic) will drop by £87 a month (or £1,044 a year) in October. This change means half a million more people face being pulled below the poverty line, including 200,000 children.
From the anti-poverty campaigning footballer Marcus Rashford to six former Conservative Department of Work and Pensions (DWP) secretaries, opposition to the cut is mounting as ministers insist there will be no U-turn.
The latest justification for the cut was put forward by DWP Secretary Thérèse Coffey during a broadcast round two days before a House of Commons debate triggered by Labour on ending the uplift.
Her argument, during an appearance on BBC Breakfast, was that “£20 a week is about two hours extra work every week. We’ll be seeing what we can do to help people perhaps secure those extra hours, but ideally, also to make sure they’re in a place to get better-paid jobs as well.”
Yet this does not reflect how Universal Credit works. In reality, a claimant would have to find more than five hours of extra work to make up for the £20-a-week cut, if we accept Coffey’s premise of them being paid £10 an hour (which is questionable in itself, as the minimum wage is £8.91 an hour).
Above the monthly Universal Credit work allowance of £293 for those receiving housing support, every £1 working claimants earn means a 63p reduction in their benefits, which are tapered as incomes rise. This means that a claimant earning £10 an hour will only gain £3.70 for each extra hour they work above the £293 threshold. Therefore, it would take over five more working hours at £10 an hour to make the £20 cut back.
If we assume, unlike Coffey, that the claimant in question is earning the minimum wage, then this would mean working more than six hours a week extra to compensate for the cut.