The TUC has today warned that millions of low-income workers face a “perfect storm” this April with universal credit (UC) falling behind the cost of living as energy bills and taxes rise.
The warning comes as new TUC analysis reveals that the number of workers on UC has increased by 1.3 million since the eve of the Covid-19 pandemic.
The analysis of official statistics shows that over 2.3 million workers were in receipt of UC at the end of 2021, compared to just over one million on the eve of the pandemic in February 2020.
This represents an increase of 130 per cent over the last two years and means 1 in 14 (7.2 per cent) working adults now claim UC.
The TUC says the huge rise in UC recipients has been driven by working households being pushed into financial hardship during Covid, with millions facing a cost-of-living crunch this year.
Basic value of universal credit now lower than at start of pandemic
The TUC says that the basic value of UC is now lower than at the start of the pandemic as a result of UC not keeping up with inflation.
TUC estimates show that the value of UC has fallen by £12 a month in real terms when measured against CPI inflation and £21 a month when measured against RPI inflation compared to just before the pandemic (February 2020).
The TUC says this trend will only get worse in the months ahead with inflation forecast to rise further.
The TUC warns that millions of low-paid families face a crunch point in April when energy bills and national insurance contributions go up – at the same time as UC continues to fall in value.
New polling – carried out for the union body before last week’s energy cap announcement and Bank of England forecasts – shows that many are already struggling to make ends meet:
One in eight workers say they will struggle to afford the basics in the next six months. And a fifth of working people say they’ll struggle to afford more than the basics.
Low-paid workers are more likely to be struggling. One in six low-paid workers (those earning less than £15,000 a year) say they will struggle to afford basics in the next six months, and three in 10 say they’ll struggle to afford more than the basics.
Parents of young children, disabled workers, key workers and BME workers are more likely to be struggling with nearly one in five families with kids under 11 will struggle to afford the basics
Over one in five disabled workers will struggle to afford the basics, compared to 10 per cent of non-disabled workers
14 per cent of key workers say they’ll struggle to afford the basics in the next six months, compared to 10 per cent of non-key workers
14 per cent of BME workers say they’ll struggle to afford the basics in the next six months, compared to 11 per cent of white workers
The poll also reveals that a fifth of workers say they have Christmas debts to pay off this year – a number that rises to over a quarter for workers with children of school age.
The TUC says the government must do far more to help struggling households to get through the months ahead.
The union body says the cost-of-living support announced by the Chancellor on Thursday is “woefully inadequate” and will provide families with just £7 extra a week – most of which will have to be repaid.
The TUC is also calling for government to use the upcoming spring budget to increase to UC to 80 per cent of the real Living Wage.
Introduce a windfall tax on energy companies, using the money to reduce household energy bills, and boost the minimum wage to least £10 an hour now
TUC General Secretary Frances O’Grady said:
“Millions of low-paid workers face a perfect storm this April.
“At the same time as energy prices and national insurance contributions shoot up, universal credit is falling in value.
“The government must do far more to help struggling families get through the tough times ahead. The support package announced by the Chancellor last week is woefully inadequate.
“Universal credit urgently needs boosting and we need further action to reduce fuel costs for those battling to make ends meet.
“Oil and energy companies shouldn’t be making bumper profits, while many struggle to heat their homes.
“If ministers fail to do what is necessary, more households will be pushed below the breadline.”
On the need to boost pay Frances added:
“The best way to give working families long-term financial security is to get pay rising across the economy.
“That means increasing the minimum wage to at least £10 an hour now, and ministers requiring employers to negotiate sector-wide fair pay agreements with unions.”
Iain Porter, Policy & Partnerships Manager at the independent Joseph Rowntree Foundation (JRF) said:
“Families on low incomes will be looking ahead to April and wondering how on earth they will make ends meet. It is worrying that so many workers on low incomes think they will struggle to afford the basics in the next six months when we know so many are already getting into debt to provide for their families.
“In the face of rising energy costs that will disproportionately squeeze the incomes of the poorest families, the Chancellor has failed to provide the type of targeted, substantial support that would protect those most at risk of hardship.
“With inflation set to rise at more than double the rate of benefits, our social security system is simply not offering adequate support, and until that changes, people on the lowest incomes will continue to be exposed to every economic shock. The situation facing those out of work is extremely worrying, with benefits for this group at a 30-year low, at a time when inflation is at a 30-year high.”
