The temporary increase in Universal Credit and Working Tax Credit Contents

Conclusions and recommendations

The impact of removing the increase

1.When the Chancellor announced the temporary increase in March 2020, few of us imagined that we would still be in the grip of the coronavirus pandemic nearly a year later. Since March, the number of people claiming Universal Credit has risen from 3 million to around 6 million. The numbers of job vacancies remain far below their pre-pandemic levels. Removing the increase now, while the impact of the pandemic is still being keenly felt, would plunge hundreds of thousands of households, including children, into poverty. For the millions already living in poverty, it would drag them down into destitution. We urge the Government not to end the temporary increase in Universal Credit and Working Tax Credit, as planned, on 6 April 2021. (Paragraph 16)

One-off payments

2.We share the Secretary of State’s view, echoed by evidence from front line support organisations, that a steady income is the best way to support people. Like her, we are concerned that one-off payments could increase the risk of fraud. We are also concerned about the risks that one-off payments can create for some vulnerable people, including people with some mental illnesses. (Paragraph 31)

3.We were encouraged to hear from the Secretary of State that one-off payments are not DWP’s preferred approach, but they nevertheless seem to be an option that the Government is actively considering. We urge the Government to abandon any plans for a one-off payment to claimants of Universal Credit and Working Tax Credit. (Paragraph 32)

Our proposed way forward

4.We stand by our recommendation—made in October 2020—that the increase in Universal Credit should be maintained, with annual inflation-based increases. But we recognise that, in the short term, the Chancellor faces some very difficult decisions about the public finances amid a great deal of uncertainty about the future. We have considered carefully whether the increase should last only for the duration of the effects of the pandemic, but we are conscious that the Chancellor in his Budget statement will need to make a specific announcement. We therefore recommend that, if the Chancellor cannot yet commit to making the increase permanent, he should at the very least extend it for a further 12 months. The Government should then announce its future plans for the rate of Universal Credit no later than the Autumn Statement 2021, to give claimants enough time to plan and budget. (Paragraph 40)

Published: 9 February 2021 Site information    Accessibility statement