More people on social security risk falling into deeper poverty this winter – many will face the impossible decision whether to skip meals or heat their home. Here’s what is behind pushing them further below the poverty line in 2021.
Swingeing universal credit cuts
The temporary £20 uplift to universal credit (UC), introduced in March last year to provide extra financial help to low income people at the height of the pandemic, was withdrawn on 6 October. The move means an estimated 5.5 million low income families will be about £1,040 a year worse off. Emma Revie, the Trussell Trust chief executive officer, describes the cuts as “the largest cut to social security since the second world war”, which will “unequivocally lead to an increase in the number of people experiencing destitution. We won’t know the full impact until the other side of winter, but having spoken to our food bank managers they are seeing more people coming through the door.”
Moreover, chancellor Rishi Sunak’s autumn budget sweetener that the UC taper – the amount of benefit withdrawn from every pound a claimant earns – would fall from 63% to 55% was not the panacea that it may have first appeared. Only UC claimants who are in work will benefit from the move, which means it is unlikely to help the majority of people referred to a food bank.
However a survey by the Joseph Rowntree Foundation, found 50% of people on UC are not confident either of finding a job or, perhaps more significantly, being able to work more hours in order to boost their income. People in low-income jobs often work weekend and evening shifts and are unable to take on extra hours, even if available, because they cannot access the affordable and flexible child care they would need or afford the additional transport costs to work more days.
Revie says: “We need to have a serious look at how we ensure that work is fair, is secure and is fairly paid and enables people to be held out of destitution.”
Household fuel bills and gas prices soar
Home fuel bills went up from 1 October – the second time this year – when the energy regulator Ofgem increased the energy price cap from the £1,138 set in April to £1,277. The average rise of 12% puts an extra £153 a year on dual fuel costs for households on a pre-payment tariff or £139 for those who pay by direct debit. The rise is predicted to push a further 500,000 people into fuel poverty. Figures from the Trussell Trust reveal that in mid-2020, 89% of households referred to food banks in its network had some kind of debt and 36% owed money to their energy supplier. Low income households are also likely to be hardest hit by the energy hike as they are more likely to live in less energy-efficient homes. Announcing the rise in August, Ofgem attributed the cap increase to the more than 50% rise in energy costs in the last six months, with gas hitting a record high as the world comes out of lockdown.
Inflation on the up
In November the Trussell Trust warned that any rise in UK inflation will have a greater impact on people on low incomes compared to those on higher incomes. It predicted more people will have to rely on food aid as they increasingly struggle to pay their essential bills. The comments followed the October announcement that the UK consumer price index, which is based on the value of a basket of goods and services and is used as a measure for inflation, was 4.2% – the highest rate for 10 years.
The Bank of England warned in October that the UK could be heading towards 5% by the end of the year – way above its predicted target of 2%. Shoppers are already feeling the pinch as manufacturers are starting to pass on the rise in inflation. Consumer goods giant Unilever, which owns brands such as Marmite, PG Tips and Knorr, admitted its prices had risen by 4.1% in the three months to September – blaming high levels of inflation alongside higher energy and transport costs. Procter & Gamble – which is behind brands such as Tide detergent, Charmin toilet paper and Crest toothpaste – also warned this autumn that prices will go up.
