Universal Credit claimants take home as little as £2.24 for every extra hour worked – highlighting how hard it is to work their way out of a huge living standards loss this Autumn 13 September 2021 The six million Universal Credit claimants set for a £1,000 annual income loss from this October are unlikely to make up the shortfall given the scale of extra pay or hours needed to offset the £20 a week cut, the Resolution Foundation said today (Monday). The Foundation says that the 63 per cent taper rate in Universal Credit, which is based on post-tax earnings, means that Universal Credit claimants only take home 37p of extra pound earned (due to a lower benefit award), falling to 25.2p if they earn enough to pay income tax and employee National Insurance. From April this will fall to 24.7p as National Insurance rises. The Foundation notes that a UC claimant earning the National Living Wage (NLW) – currently £8.91 an hour – and with an income of at least £6,100 a year, would not take home an extra £20 a week for two hours work, as Ministers have implied. In fact, they would take home just £6.60, falling to £4.48 if they pay tax and NI. Take home pay would be even lower than £2.24 an hour once any pension contributions or additional childcare or travel costs are taken into account. A Universal Credit claimant on the NLW would need to work an extra six hours a week to make up the £20 cut in support, rising to nine hours if they pay tax and NI. As an example, a single parent working three days a week, eight hours a day, on £10 an hour, would need to increase their earnings by a third (working an extra eight hours) simply to stand still – and that’s assuming no childcare costs. Such large overnight increases in hours worked are simply not viable for many UC claimants, says the Foundation, while arguing that people should work longer hours to make up for the income fall ignores the fact that many claimants are not able or expected to be in work in the first place. Over one-in-four claimants are – by the government’s own rules – not expected to work, for example because they are caring for a child under the age of three, or due to health problems. As a result, the impact of the coming cut to Universal Credit will simply be huge income falls for millions of households. Adam Corlett, Principal Economist at the Resolution Foundation, said: “The Government has tried to justify the coming cut to Universal Credit – and the huge income loss facing millions of households – by saying that it can easily be offset by simply working a few more hours. If only it were that simple. “Many of those receiving Universal Credit aren’t expected to work at all. And even for those in a position to work, a claimant on the National Living Wage will take a home as little as £2.24 from an extra hour’s work. A small increase in working hours will be nowhere near enough to cover the £20 a week cut coming their way in just one month’s time. “Given the scale of losses coming to millions of low-and-middle income households this Autumn, at the same time as bills are rising, the Chancellor should change course on Universal Credit.” Notes to Editors On BBC Breakfast this morning, Work and Pensions Secretary Therese Coffey said that “£20 a week is about two hours extra work every week, we will be seeing what we can do help people perhaps secure those extra hours.” The taper rate in UC kicks in once claimants are earning above their Work Allowance. They are £3,500 a year for those with children, £6,100 a year for those with children and rental costs (and £0 for those with neither).
