It gets worse…more cuts in the budget small print
- More cuts to the earnings threshold under Universal Credit for claimants with children – £2,304
- The Work Allowance abolished for claimants without children so payments stop at approx £500/m
- 65% taper rate under (for Tax Credits it’s 48%)
- All workers earning<£12,000/yr will be subject to conditionality, punishable with sanctions & mandated to Jobcentre Plus.
“From April 2016, the government will reduce the level of earnings at which a household’s tax credits and Universal Credit award starts to be withdrawn for every extra pound earned. In tax credits, this point (known as the income threshold) will be reduced from £6,420 to £3,850. The equivalents in Universal Credit (work allowances) will be reduced to £4,764 for those without housing costs, £2,304 for those with housing costs, and removed altogether for non-disabled claimants without children.” 3.4 par.10
Around 500,000 workers without children receive Tax Credits. 30% of new Universal Credit claimants are in work and most have no child dependants.
Jobseekers, who must take any work or risk sanctions face homelessness if their pay doesn’t meet their housing costs as Universal Credit will not bridge the gap.
This runs contrary to the much promoted feature of Universal Credit in that it enables claimants to move into work, even when it is low paid, zero hours, etc.
More cuts to the Work Allowance
Already cut from £6,420 to £3,850, the Tax Credits earnings threshold is cut again under Universal Credit to £2,304. This means that Universal Credit payments (basic+child award) for a single parent with one child will stop completely when earnings reach £13,000 (approx) – for 2 children this would be £17,000 (approx).
Also not mentioned by Mr Osborne; the taper rate, (which increases from 41% to 48% for Tax Credits) is set at 65% under Universal Credit.
A recent report featured in the Independent found that amongst parents earning less than £15,000 /yr, 41% said they were going without food and 73% could not buy food.
As Tax Credits are to be abolished under Universal Credit, the lower rate will eventually apply to all in-work claimants.