key issue is less on the cost size and more on the income side, where you see really hard questions for the lowest-income households, because of the £20 a week removal from Universal Credit.[1]
In a follow-up analysis on this point, the Resolution Foundation noted that:
We have calculated that around 1.6 million families (all of which are claiming Universal Credit and in-work) will have a higher net household income (after housing costs and in real-terms) from before the pandemic to 2022–23, after taking into account: the increase in earnings; the increase in worker National Insurance contributions with the Health and Social Care levy; the increasing cost of living (including the energy price rise); the reduction in the UC taper rate from 63% to 55%; the £200 energy rebate to all households; and the £150 Council Tax rebate to all Households in bands A to D.
To be clear, the rising cost of energy bills are included in the results, but are a part of the broader increase in prices in line with the Bank of England’s inflation forecast. We have assumed inflation effects all households equally.
On average we expect these 1.6 million [Universal Credit] families who will be better-off to have £880 more in household income (4.9%) in 2022–23 compared to 2019–20 (after housing costs and in real-terms). However, we also calculate that around 630,000 low-earning [Universal Credit] families in-work will be worse-off by an average of £830 per year (- 4.2%), and 2.4 million out-of-work [Universal Credit] families to be worse-off by an average £560 per year (-3.3%).[2]
- Given these pressures on the cost of living, both pre-existing and stemming from
the invasion and resulting sanctions, our witnesses provided the following potential
recommendations to the Government. Professor Chadha recommended the following:
- rethinking the tapering of the universal credit and considering whether the scheme ought to be extended;
- introducing a winter grant scheme at local authority level to help households with rising energy bills;
- providing more Government support for food banks;
- considering delaying the National Insurance tax hike and considering an alternative such as a temporary income tax rise on higher earners; and
- providing study grants and support for higher and further education colleges.[3]
- ↑ Oral evidence taken on 31 January 2022, HC (2021–2022) 1094, Q7 [Torsten Bell]
- ↑ Correspondence from the Resolution Foundation relating to ‘The cost of living’ session, dated 8 March 2022
- ↑ Q136
