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UC and Tax Credit changes to cost households £1,000

Tax Credit

Benefit cuts will affect six million families, with people across the North of England, West Midlands and Wales most likely to suffer an income loss, suggests a new study by The Resolution Foundation

One in three working-age households in “Red Wall” constituencies are set to lose over £1,000 if the temporary boost to Universal Credit (UC) and Tax Credits expire next April, a new study suggests.

The Resolution Foundation said there were “striking similarities” between cuts planned by Chancellor Rishi Sunak and those George Osborne planned to introduce exactly five years ago when he was in the post.

Benefit cuts will affect six million families, compared to 3.3 million in 2015, said the think tank.

People living across the North of England, West Midlands and Wales are most likely to suffer an income loss, it was predicted.

A third of working-age households across the “Red Wall” regions are set to have their incomes cut by £1,000, compared to one in four in the South East, said the report.

Torsten Bell, chief executive of the Resolution Foundation, said: Exactly five years ago, then Chancellor Osborne arrived at Conservative Party conference riding high off an election victory, but with backbench trouble brewing over his plan to cut the incomes of over three million households by £1,000. A month later he U-turned. Today, Chancellor Sunak finds himself in a similar situation, but with two important differences.

The plan to cut household incomes by £1,000 overnight will affect twice as many families, and while the cuts last time were proposed during a period of fast rising employment, it is now increasing unemployment that will provide the backdrop, Bell said.

The £20 a week boost to Universal Credit and Tax Credit this year has been a living standards lifeline for millions of families during the pandemic. But allowing the policy to expire next year would be disaster not just for household incomes but for economic policy too as the Chancellor seeks to secure a recovery next year, Bell said.

A Government spokesman said: We’ve invested an extra £9bn in our welfare system to help those most in need through the pandemic, including by increasing Universal Credit and Working Tax Credit by up to £20 a week, as well as introducing income protection schemes, mortgage holidays and additional support for renters.

The spokesman said, the Government is also focused on supporting people by helping them get into work. This includes launching the Kickstart Scheme, a £2bn fund to create hundreds of thousands of new, fully subsidised jobs for young people.

Important:

This article is for information purposes only.

Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.