Activists say millions will not benefit from tax cut for the low paid

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Activists say millions will not benefit from tax cut for the low paid
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Charities have branded the changes to Universal Credit ‘the tale of two budgets for low income families’ and said they do not go far enough to help those who are unable to work.

In his budget yesterday, Rishi Sunak announced a reduction from 63p in the pound to 55p in the universal credit taper rate – the amount in benefits a claimant loses for each pound they earn above a set work allowance.

The move was intended to soften the blow of the withdrawal of the £20-a-week uplift which was introduced during the pandemic.

But campaigners have said while millions will benefit from the change, at least two million people will so no benefit at all because they are either unable to work or don’t earn enough.

Activists say millions will not benefit from tax cut for the low paid

Katie Schmuecker, Deputy Director of Policy & Partnerships at Joseph Rowntree Foundation 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.

‘But the reality is that millions of people who are unable to work or looking for work will not benefit from these changes.

Activists say millions will not benefit from tax cut for the low paid
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Who will benefit from the changes to Universal Credit?

Rishi Sunak announced  that the taper rate of UC will be cut by 8% ‘within weeks’, bringing it down from 63% to 55%.

The taper rate is the amount of benefit taken away from every £1 earned above the claimant’s work allowance – meaning claimants will now be able to keep an additional 8p per £1 of net income. The changes mean that nearly two million families will keep on average an extra £1,000 a year, Mr Sunak said.

The Treasury said that a single mother of two, aged over 25, working full-time and renting will save £100 a month and £1,200 a year. 

Meanwhile, a couple with two children, renting their home with one partner working full time and the other works 16 hours a week, will be £1,800 per year better off. 

However, campaigners say the change does not compensate for the removal of the £20-a-week UC – or do anything to help people who are not in work. 

The taper applies to just over two million families on universal credit, which leaves nearly half those not benefitting from the taper change. 

‘The Chancellor’s decision to ignore them 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 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 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.’

Michelle Wilson, a single mother from Glenrothes in Scotland, told the BBC she will see no benefit because she is currently trying to find employment.

Ms Wilson used to work as a support officer for Fife council, but left her job partly because she struggled with the cost of childcare. 

She said: ‘It’s a real worry because the uplift was almost £100 a month, which is my main shop gone now, so it’s another big stress.

‘My kids have been eating healthier with that uplift and it’s been a big drop when I’m worried about my gas and fuel bills.’ 

Meanwhile, Louise Rubin, head of policy at disability equality charity Scope, said: ‘The Budget does little to address the fears of many disabled people and families about their finances this winter.

‘The cut to Universal Credit, sky-high inflation and spiralling energy costs will hit disabled households hardest.

‘The change to the Universal Credit taper rate is a small step in the right direction for working disabled people.

‘But the change will have zero impact on people out of work. With the disability employment gap stuck at close to 30 per cent, it is disabled people who will continue to bear the brunt of the £20 Universal Credit cut.

Activists say millions will not benefit from tax cut for the low paid

‘We face a bleak winter of soaring prices and sky-high energy costs that come on the heels of a £20 cut to Universal Credit. Those on legacy benefits weren’t eligible for the uplift in the first place.

‘Disabled people already face extra costs of £583 a month on average, and this is set to soar this winter.

‘Levelling up means nothing if disabled people are left behind.’

Sara Ogilvie, policy director at Child Poverty Action Group said the lower universal credit taper rate is ‘good news’ but added that there was ‘nothing for those who cannot work’.

She said these people will still ‘face the same cost pressures as other households and will still have a black hole in their finances after the universal credit cut’.

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