Over three-in-ten people who have started claiming Universal Credit (UC) during the pandemic have either acquired new debts, or seen their existing debts grow, as the crisis enters its eleventh month, according to new Resolution Foundation research published today (Sunday).
The debts that divide us – which includes analysis of a detailed online YouGov survey, supported by the Health Foundation – explores how people who have newly claimed UC during the pandemic have coped financially, as well as their prospects for the coming months.
The Foundation notes that of the almost six million people who are currently claiming UC, around three-in-five made a new claim in 2020, including many of the 1.4 million people who made a new claim at the start of the crisis in April and May of last year.
The research finds that families newly claiming UC have taken a major income hit, even with the vital £20 a week uplift to UC. Almost half (45 per cent) reported seeing their income fall by at least a quarter, while around one-in-three (34 per cent) reported seeing their income fall by at least 40 per cent.
And with the pandemic-induced economic crisis having lasted almost a year, the research shows that the big income losses faced by people moving onto UC are taking their toll on their ability to cope financially.
The research finds that over three-in-ten (31 per cent) new UC families have either acquired new debts or seen their existing debts grow, while around one-in-five (21 per cent) have fallen behind on paying essential (non-housing) bills.
Looking ahead to the next three months, a period in which UC is set to be cut by £20 a week (from 5 April 2021), three-in-five (61 per cent) UC families say they will struggle to keep up or will fall behind on bills, around twice the proportion of families across the economy as a whole (31 per cent).
The Foundation says that the uplift to UC has been essential for protecting family incomes during a pandemic that is lasting far longer than anyone expected when the policy was announced back in March 2020. The uplift is likely to prove just as vital in the coming months too, as more people claim UC off the back of rising unemployment.
It adds that with millions of households claiming UC experiencing real financial hardship, cutting their support in just two months’ time would be a grave error – and extinguish any hopes of a living standards recovery this year.
Karl Handscomb, Senior Economist at the Resolution Foundation, said: “Over three million people have started claiming Universal Credit since the pandemic began, including 1.4 million people who moved onto the benefit right at the start of the crisis.
“As the pandemic reaches its eleventh month – a depressing duration few expected last March – the income shock from with moving onto 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 six 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.”
SNP Shadow Work and Pensions Secretary David Linden MP called on Chancellor Rishi Sunak to “reject austerity and boost incomes” at the Spring Budget “to diffuse this mounting Tory debt bomb.”
He added: “The SNP has repeatedly called for action to put money in people’s pockets.
“The UK government must make the £20 uplift to Universal Credit permanent and extend it to legacy benefits, reverse the Tory public sector pay freeze, deliver support for the 3million excluded, and stimulate economic growth with a fiscal package of at least £98billion.”