The Chancellor has an important decision to make — he must keep the lifeline

With the £20 a week Universal Credit uplift set to end in April, millions of families are waiting for financial certainty for the months ahead

The pandemic has plunged millions of families into hardship. While millions have been extended a lifeline — and kept afloat — by the £20 a week uplift to Universal Credit and Working Tax Credit, that lifeline is due to end on 5 April — long before this crisis will abate.

Ahead of the Budget scheduled for 3 March, the Chancellor, Rishi Sunak, has an important decision to make on the uplift.

With 5.9 million people claiming Universal Credit today, his first priority must be giving them certainty that they’ll get the support they need to weather this storm. The Chancellor must keep the lifeline.

The temporary uplift — one of the government’s most successful pandemic policies

The temporary increase to Universal Credit and Working Tax Credit, alongside the enhancements to Local Housing Allowance, have been one of the huge success stories of the government’s response to the pandemic. While the Job Retention Scheme currently protects most of millions of people’s salaries, the increase in Universal Credit has cushioned the blow for those who found themselves without a job or with far fewer hours once the pandemic hit.

At Citizens Advice, we’ve helped over 300,000 people with a Universal Credit issue since then. Most striking has been the impact for those we’ve helped who have a ‘negative budget’ — people whose necessary outgoings exceed their income. They look at their bank balance at the end of the week and they simply don’t have enough to make ends meet.

One of the main factors holding back financial ruin for many of these families is the uplift. If it was removed, we’d be seeing a much higher rate of Universal Credit and Working Tax Credit claimants not being able to afford basic necessities — increasing from 43% to 75%.

Stories like Sanisha’s, who came to us for help, are common.

Sanisha lives with her son and partner. After paying her rent, her priority debts and other bills, she has £18 a month left to spend on essentials like food and toiletries. It’s hard to imagine how she keeps going like that as it stands. But, if the uplift were taken away, she’d be so far in the red that she wouldn’t be able to cope.

As Sanisha’s story shows, this hasn’t been a panacea — but it has been a crucial lifeline. And the mitigating impact of the uplift bears out on a wider scale too.

New claimants to Universal Credit suffered around a 40% decrease in income compared to their pre-crisis position. Without government intervention, it would have been over 60%. In the immediate aftermath of the pandemic, the income of those on the lowest incomes actually increased on average as a result of this much-needed money being injected into the welfare state.

The government’s decision to uplift Universal Credit and Working Tax Credit has had a big impact for those who’ve needed it most during the pandemic. But this good work can’t go to waste — especially as this help still hasn’t reached everyone.

The government didn’t apply the uplift to those still on the old benefits system, many of whom have seen their costs increase in the pandemic. The government should make sure people aren’t disadvantaged just because of what benefits system they’re on.

The economy will recover, but not overnight

Restrictions on our social and economic life seem inevitable well into the spring. Many people are facing an uncertain future and the jobs recovery is unlikely to be quick.

There hasn’t been a lower vacancy rate this century than what we saw in the immediate aftermath of the pandemic outbreak. There are currently 5 claimants to every single vacancy. For many people, there simply won’t be enough jobs available until normal economic activity returns — especially as the scheduled end to the Job Retention Scheme at the end of April could herald further rounds of redundancies, meaning more people chasing few jobs. People need help in what looks like bleak months ahead.

But the uplift is also essential to a broad-based, fair economic recovery.

At a time when the economy is on life support, the uplift pumps almost £500 million a month into local economies — straight into the hands of people who most need to spend it. Turning off that tap in April would mean lower spending at high street businesses, just when we’ll need it most to help the economy come roaring back.

This economic recovery also needs to be fair. The 10% most deprived neighbourhoods have seen the number of people claiming out of work benefits increase at over twice the rate of the 10% least deprived. While high income households have been able to save during this crisis, many families will find themselves in a far worse financial condition than a year ago.

And even with the uplift lifeline, we estimate that lockdown debts have already reached £1.6 billion. 2 million households are behind on their energy bills and half a million tenants are behind an average of £730 on their rent — a sum it would take people we help 7 years to pay off.

Keeping the uplift gives people room to breath

The story of the recovery from this crisis risks being defined as a return to normal for some and extraordinary hardship for others.

Many people — through no fault of their own — have lost their livelihoods, their jobs, faced awful choices between paying rent and putting food on the table. Keeping the uplift just gives them a little bit more room to breathe. Removing the uplift will put many people much closer to the financial cliff edge.

That’s why the Chancellor must do the right thing — and keep the lifeline.

You can read our full submission to the Budget 2021 consultation.