Parliamentary reporter

FOUR million households will each lose £1,040 a year in benefits on average if the government ends its temporary £20-a-week increase in universal credit (UC), according to the Institute for Fiscal Studies.

The higher rate was introduced in April, after the coronavirus lockdown was imposed the month before, and is due to end in April next year.

A report by the institute says that withdrawing the extra payment will mean a “significant decline” in finances – 13 per cent a year for the average household. 

“For some, the proportional fall will be much greater,” it says.

“For example, a childless, non-disabled, single owner-occupier with no other source of income would see a 21 per cent decline in benefits.”

The institute added that making the increase permanent would add about 10 per cent to the long-run cost of UC, but would undo up to two-thirds of the benefit cuts made since 2015.

It also said that, even with the temporary increases, Britain has one of the least generous out-of-work benefits systems for those on average earnings out of all countries in the Organisation for Economic Co-operation and Development (OECD).

Mark Franks of the Nuffield Foundation said that the government now needs to make long-term decisions about how best to support people who have lost their livelihood during the pandemic.

Cllr Richard Watts, who chairs the Local Government Association’s resources board, called for the spending review to be used to make “long-term, sustainable” funding pledges for welfare as the benefits system will need to “provide the first line of support.”

A Department for Work and Pensions spokesman said that the government had “already taken significant steps” to support households, including by providing £9.3 billion extra in welfare support.