Savings

Universal Credit cuts likely as government seeks £40bn savings

IN-WORK benefits, Universal Credit Standard Allowance and Disability Support could all be reduced as the UK Government aims to achieve efficiency savings.

Tony Wilson, director of the Institute for Employment Studies, told the Herald he fears the Treasury is planning to make significant savings to the UK’s social security budget to help fund tax cuts from last week for high earners.

He said any change risked pushing low-income and out-of-work families “into misery”.

The comments came as Liz Truss yesterday refused to deny that the planned benefit increase would be cancelled.

The Prime Minister only said it was ‘something the Secretary for Work and Pensions is looking into and will make an announcement in due course, as is normal practice, for the autumn’.

The promise to link benefits to inflation was made by former Chancellor Rishi Sunak earlier this year as he presented his emergency package to help with the cost of living.

In May, he told MPs he expected next year’s benefits to be upgraded, as usual, in line with September’s Consumer Price Index (CPI) figure, which would lead to “a very significant increase”.

On a visit to the British Gas training academy, near Dartford in north-west Kent, the press asked Ms Truss if the raise would still take place, Ms Truss said: ‘The biggest part of the package we announced was support for families on energy while ensuring that we reversed the rise in national insurance.

“In terms of a benefit increase, this is something the Secretary for Work and Pensions is looking at and she will make an announcement in due course, as is normal practice, for the autumn.”

Pressed for more information from reporters, the Tory Prime Minister said: ‘As I said this is something the Secretary for Work and Pensions is looking into.’

According to Mr Wilson, the saving made by not respecting the promise of increase would be between 3 and 4 billion pounds sterling a year.

He estimated the government would be looking to save £40billion a year, which could be difficult given the scale of the cuts made during the austerity years.

Earlier this week, the media suggested that the Treasury would write to Cabinet ministers asking them to cut back on their existing departmental budgets.

Mr Wilson said: “On Social Security, my fear is that they can’t stop cutting the reset because realistically it will only save them a few billion in spending a year compared to the cuts proposed taxes that will cost £40bn a year, or more, to fund.

“But their room to make further cuts is quite limited, given the sweeping cuts already made by the coalition government.

“Their options would be to either cut the standard Universal Credit allowance, which would push low-income, out-of-work families into misery, not to mention poverty; or reduce in-work benefits, which would reduce incentives to return to or remain in employment; or cut support for people with disabilities, where poverty rates are already the highest; or to reduce housing subsidies, which barely cover the lowest local rents; or perhaps even reduce retiree benefits.

“It’s impossible to know what they might be looking to do but, of course, whatever they would try to do would lead to really big income cuts for the poorest, to fund big tax cuts for the wealthy.

“Which would be terrible for those families and for many communities, but doesn’t really make economic sense either, because it will have a much bigger impact on consumer spending and demand than the tax cuts for the rich.”

Polly Tolley, director of Impact at Citizens Advice Scotland, said the government must rule out benefit cuts as soon as possible.

“To not increase benefits with the cost of living would be bad enough, to actively reduce the value would be damaging, dangerous and reckless,” she said.

“This time last year Universal Credit was cut by £20 a week and then bills and prices skyrocketed.

“Actively reducing these payments will lead to more debt, more pressure on public services like the NHS and a wave of crippling stress and anxiety for people who simply cannot afford the cost of living as it is. .

“The government must rule out these plans as soon as possible.”

Kirsty Blackman, SNP spokesperson for Work and Pensions in Westminster, warned that millions could fall below, or even further below, the poverty line.

She said: ‘The Westminster Tories have imposed 12 years of austerity, cut Universal Credit during the pandemic, introduced debt-inducing policies like the room tax and two-child cap, and blown the pound with their recent disastrous mini-budget.

“The minimum they should do is increase benefits in line with inflation,” she added.