Impact of withdrawing emergency benefit measures

22 Nov 2020 09:21 PM

This report estimates the impacts of reversing the £20 per-week uplift to Universal Credit and Working Tax Credits and reinstating the Minimum Income Floor on Scottish households in 2021-22.

Executive Summary

This report estimates the impacts of withdrawing two emergency benefit measures which the UK Government introduced in March 2020: the £20 per-week uplift to Universal Credit and Working Tax Credits and the suspension of the Minimum Income Floor. It focuses on the impact on household incomes in Scotland in 2021/22, when the measures are due to be withdrawn.

The report estimates that:

• Withdrawing these measures would reduce spending on Universal Credit and Tax Credits in Scotland by nearly half a billion pounds in 2021/22 compared to if the measures were retained.
• Across the population, it is poorer households, single parent families, families with children, and families not in employment which would see their average incomes fall by the largest proportions. As these averages include people who are not affected by the cuts, they take into account the prevalence of losses as well as the magnitude and therefore provide an indication of how the impacts are distributed across society. For example, the poorest 10% of all households would lose 6% of their average income.
• To isolate the magnitude of losses, we can focus on people who are affected by the cuts. A similar pattern emerges using this method, except that losses would be greater for people without children – particularly single adults, who would lose over 6% of their average income. These individuals generally have lower benefit entitlements, meaning that a £20 reduction represents a larger percentage decrease.
• The poverty rate and child poverty rate would both be two percentage points higher in Scotland if the measures were withdrawn than if they were retained, moving 60,000 people, including 20,000 children, into relative poverty.

While there is a considerable degree of uncertainty associated with these estimates, the scale of cuts planned for April 2021 is undoubtedly large: if the cuts go ahead, hundreds of thousands of households in Scotland will see their incomes drop by more than £1,000 per year. These impacts are especially significant given the ongoing effects of the pandemic and the uncertainties surrounding the economic recovery.

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