Join Hafta-Ichi to Research the article “Benefit claimants face mounting debt burden, says thinktank | Universal credit”
More than three in 10 people who began claiming universal credit after the start of the pandemic last year have acquired new debts, or seen their existing debts grow, according to a new report by the independent Resolution Foundation thinktank.
The study – which will add to pressure on the chancellor, Rishi Sunak, not to cut levels of support in his budget next month – finds that of almost 6 million people who are currently claiming it, about three in five made a new claim in 2020.
These new claimant families have taken a major income hit, the report finds, even after the vital £20 a week uplift to universal credit was introduced by the government in the first Covid-19 lockdown last year.
Based on examination of polling evidence by YouGov, the Resolution Foundation found that 45% reported seeing their income fall by at least a quarter, while 34% said it had reduced by at least two-fifths. Almost a third (31%) of new claimant families had either acquired new debts or gone further into debt, while about 21% had fallen behind on paying essential (non-housing) bills.
With the £20 increase due to be dropped in the budget, 61% of claimant families say they will struggle to keep up or will fall behind on bills, around twice the proportion of families in the economy as a whole (31%).
The foundation said these would be people who had either lost their jobs and gone on to benefit or who had suffered a large reduction in pay – including many who had been furloughed – meaning they were newly entitled to an element of support because of their income levels.
Last week tensions within the cabinet over levels of support surfaced when Thérèse Coffey, the work and pensions secretary, appeared less than enthusiastic about a plan by Sunak to give a payment of at least £500 to claimants rather than extend the weekly uplift beyond April.
The Treasury is concerned that paying people an extra £1,000 a year in benefits – an extra £6bn on the welfare bill over the course of a yea r – will require more painful cuts to Covid-19 support in other areas.
Coffey told the work and pensions select committee that a one-off payment did not seem the best way to proceed. “Previous experience is that a steady sum of money would probably be more beneficial to claimants and customers.
“I wouldn’t say no to a one-off payment if, in the end, that was the decision that was taken because it still would be financial support. But as I say, there’s a variety of ways we continue to try and consider the financial support to help people during these times.”
Karl Handscomb, senior economist at the Resolution Foundation, said: “As the pandemic reaches its 11th month – a depressing duration few expected last March – the income shock from moving on to universal credit has evolved into mounting debts and arrears on essential bills. The chancellor was right to raise universal credit to support families through tough economic times. And with tough times set to continue as unemployment rises through 2021, this vital boost to family incomes must be maintained.
“Cutting the incomes of 6 million families in just two months’ time, when public health restrictions are still likely to be widespread, makes no sense politically, economically, or in terms of raising people’s living standards.”
Source: The Guardian
Keyword: Benefit claimants face mounting debt burden, says thinktank | Universal credit