Work Allowance Cuts December 2016
Thank you for contacting me recently regarding cuts to Universal Credit and the impact this is having on families and the related Child Poverty Action Group campaign. I share your concerns about this important issue.
Universal Credit was introduced by the Coalition Government in 2013 to replace Jobseeker's Allowance, Income-related Employment and Support Allowance, Income Support, Working Tax Credit, Child Tax Credit and Housing Benefit. Universal Credit was intended to ensure that work pays. However, I am very concerned that the Government's deep and damaging cuts to Universal Credit will potentially leave millions of families worse off.
In the Summer Budget 2015, the Government announced that it would be reducing the work allowances for most Universal Credit claimants from April 2016. While the Government reversed its planned cuts to Tax Credits, the cuts to the work allowance element of Universal Credit - worth £3.4 billion - have remained in place. I believe this has created an unfair postcode lottery in support for low and middle-waged earners, where new claimants of Universal Credit will receive far less support than Tax Credit claimants, including those who transfer across to Universal Credit. It is also the case that the U-turn over cuts to Tax Credits was not a complete reversal of the policy but a delay, because these cuts have been maintained under Universal Credit.
Prior to the Autumn Statement on 23 November 2016, the Opposition called on the Government to reverse, in full, its cuts to Universal Credit. I supported an Opposition motion in the House of Commons on 16 November which called on the Government to do exactly this. Unfortunately, Government MPs voted against the motion and it was defeated.
Instead of reversing the cuts, in the Autumn Statement the Chancellor announced that the Universal Credit taper - the reduction in benefits as a person's salary increases - will be reduced from a rate of 65% to 63% from April 2017. While this may soften the blow, it in no way reverses the deep and destructive cuts to the budgets of working families. The cuts to Universal Credit have taken £2,100 from the pockets of 2.5 million working families and independent analysis shows that the changes announced in the Autumn Statement will give them back as little as £150. Universal Credit was originally designed to ensure that work pays but these cuts will leave millions of working families worse off.
In Nottingham alone close to 2,000 households will be impacted by benefit cap. Current changes to the UC will lead to benefits being withdrawn faster as income increases due to families losing tax credit at £3,850 rather than £6,420.
I am extremely worried that this could increase already high levels of childhood poverty, Nottingham City Council has already estimated that 1,550 households with children will be affected by the new reduced cap
It is clear that the cuts to Universal Credit work allowances will make it harder for work to pay and will further squeeze living standards. The huge cuts to Universal Credit will hit those who are 'just about managing' hard and are a threat to the livelihoods, living standards and the quality of life of millions of low earners and some of the poorest and most vulnerable people in our communities.
I can assure you that my Shadow Frontbench colleagues and I will continue to call for a full reversal of cuts to the work allowance of Universal Credit. Thank you once again for contacting me and for sharing your views.