One in three working-age families in so-called “red wall” constituencies won by the Tories from Labour at the last election will be £1,000 a year worse off if government plans to cut universal credit benefit rates go ahead.
The potentially dramatic impact on low-income households’ in “left behind” former industrial areas in the north of England, Midlands, Northern Ireland and Wales is highlighted in an analysis by the Resolution Foundation thinktank.
The hit would fall disproportionately on families in areas the government has promised to “level up” economically. These include 62% of working-age households in Blackpool South, and 44% in Great Grimsby, Birmingham Northfield and West Bromwich West.
By contrast the percentage of working-age families affected by the cut in non-red wall Conservative seats is 24%. “You are 50% more likely to lose out in the red wall regions than in the south-east [of England],” the analysis says.
The cut, which would affect 6m households across the UK, would take £20 a week off the basic allowances for universal credit and tax credits, and is predicted to push an estimated 700,000 households into poverty at a time of rising unemployment.
The temporary £20-a-week boost was announced by the chancellor, Rishi Sunak, in March to help some low-income families cope with extra costs of Covid-19. The increase is due to run out next April and ministers have yet to say whether it will be retained.
The removal of the £20-a-week increase would result in the level of unemployment support in the UK falling to its lowest real-terms level since 1991, and its lowest ever level relative to average weekly earnings, the analysis says.
The Resolution Foundation chief executive, Torsten Bell, said removing the £20-a-week increase would be “bad politics and bad economics” as well as a disaster for low-income families. “The £20-a-week boost to universal credit and tax credits this year has been a living standards lifeline for millions of families during the pandemic.”
To illustrate the impact on household budgets, the analysis shows how a single worker with no children would have lost just 17% of their income under furlough. Losing their job and moving to universal credit would result in them losing 70% of their income. A further £20 benefit cut in April would result in their income dropping by 77%.
The analysis draws parallels between the £1,000 cut option facing Sunak and the similarly sized cut to tax credits proposed by the former chancellor George Osborne in 2015. Osborne was forced to scrap his proposals a month later after a Tory backbench rebellion.
That U-turn came, the analysis suggests, because “Conservative MP after Conservative MP realised that legislating for a huge income hit to their poorest constituents wasn’t the best politics or economics”.
A government spokesperson 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 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.”