In last week’s Budget, the Chancellor announced a set of measures to raise wages for the lowest-paid and enable those on low incomes to keep more of what they earn. This is good news for working families. The measures add up to an almost £3 billion investment in social security, which was sorely needed after years of cuts and freezes.
But crucially, these measures won’t benefit the millions of people on Universal Credit who can’t or aren’t expected to work. These people, and their children, make up some of the poorest families in the UK, and they’re still going to suffer the full force the recent Universal Credit cut, combined with rising costs of living.
What does the Budget do for working families?
This package of measures is a significant step towards helping working parents.
Firstly, raising the National Living Wage to £9.50 an hour will benefit more than 2 million of the lowest-paid workers in the UK. It shows that the government recognises the need to boost the pay of those earning the least.
Secondly, lowering the taper rate and raising the work allowances will allow families to keep more of what they earn before their benefits get reduced, while also extending eligibility for Universal Credit to more families.
But every family is different, and the impact of these measures will vary according to individual circumstances. Broadly, those working the most hours gain the most: for example, the Resolution Foundation has calculated that a couple with two children where one parent works full-time and the other part-time will gain almost £50 per week from these measures. By contrast, a single parent with one child working part time will only gain around £15 per week.
But many families are still being left behind
While this is positive news for working parents, it’s a very different story for the millions of people on UC and legacy benefits who aren’t able or expected to work, including those with long-term illnesses, disabilities, or caring responsibilities. This Budget gave no helping hand to these families, many of whom are in the deepest poverty and have been offered little or no support through the pandemic.
And we can’t forget that, even for those in work, this investment comes in the wake of the biggest cut to social security in living memory. Viewed through the lens of the loss of the £20 per week increase to Universal Credit, the new measures look less generous. Although around 1.2 million households on UC will be better off, around three-quarters of households will be worse off as a result of this Budget – because the gains made simply don’t make up for the impact of losing the £20 increase. And rising inflation also means that the increase in the National Living Wage, while welcome, only corresponds to around a 2.2% real increase in take-home pay for a full-time worker.
A difficult winter ahead
The loss of the £20 increase combined with rising costs of energy, food, and other essentials means that many families are already struggling to keep their heads above water.
Parents we work with are increasingly worried about their ability to afford the very basics for themselves and their children: warm clothes, nutritious food, the ability to heat their homes for a few hours a day. Over the next few months, it will become increasingly difficult for family incomes to keep up with the rising cost of living, meaning that children up and down the country are facing a long and difficult winter.
The government has extended a welcome helping hand to working parents – but many more have been left out. These measures should be seen as a first step on the road to making sure that all families have the income they need to stay afloat and give their children the best possible start in life.