Government cuts risk plunging more than 3 million into poverty in the face of mass unemployment

04 December 2020
  • New Fabian Society research outlines the impact the Chancellor’s planned cut to welfare payments will have on low income families
  • Returning benefits to pre-pandemic levels will leave an additional 1.1million people below the poverty line, based on optimistic assumptions about the economy
  • If mass unemployment becomes reality, the number of people pushed into poverty increases three-fold
  • The Fabians are calling for the 2020 uplift in Universal Credit to be made permanent

New analysis from the Fabian Society reveals that returning benefits to pre-pandemic levels, by reversing April’s £20 per week Universal Credit uplift will leave an additional 1.1 million people in poverty.

In last week’s spending statement, the Chancellor did not commit to the uplift continuing in March 2021. The Fabians’ analysis assesses the impact of this cut against the current economic landscape and OBR predictions for unemployment levels into next year.

The result is startling. If the cut is made and mass unemployment ensues, more than one in five people would be living below the poverty line, with the number of children living in poverty rising by 850,000.

The OBR assumes that unemployment will peak after 1.5 years, which the Fabians remark is a far shorter period than past recessions.

Commenting on the report, Double Trouble, Andrew Harrop, General Secretary of the Fabian Society, said:

“If ministers reverse the temporary benefit rises that sustained millions of low income households this year the consequences will be enormous for families, reducing spending power and driving people into poverty.

“But it could get much worse.

“When furlough and other support measures come to an end in the Spring, unemployment is expected to grow, and many more families will turn to benefits.

“After so many redundancies on the high street this year, there is a chance of unemployment rising to levels last seen in the 1980s and 1990s. Alongside the planned benefit cuts this will push an extra 3 million people into poverty.

“The government must act now and put the 2020 benefit uplift onto a permanent footing.”

Mubin Haq, Chief Executive of the Standard Life Foundation, added:

“Despite recent vaccine breakthroughs, the economic scenario for 2021 looks bleak for millions of families. Further redundancies coupled with a failure to extend the £20 a week uplift to Universal Credit is projected to increase poverty numbers by between two to three million people. A devastating scenario, but one which could be greatly reduced if the increase to Universal Credit continues and there is comprehensive support to get people back into work.

“The Chancellor must act and provide the financial security many need.”

Download the report.