Unions have urged the government to do more to help low-paid workers weather the cost of living crisis, after research found the number claiming universal credit has more than doubled since the start of the pandemic to at least 2.3 million.
The TUC said the 1.3 million increase in working universal credit claimants had been caused by households being pushed into financial hardship during Covid and called for a substantial rise in the payments and a higher minimum wage to head off a “perfect storm” of costs coming in spring.
From 1 April, energy bills will rise on average by £700 to £2,000 a year and a few days later the chancellor’s 1.25% national insurance surcharge will start hitting wage packets. Unfixed mortgages will start rising in March, while food, rent and other prices have all been increasing at their fastest rate for 30 years.
While the Treasury announced some support on Thursday to mitigate the squeeze, the TUC said that without further intervention, millions more working people would find themselves pushed below the breadline.
Low-paid workers, mostly those with young children, are able to top up their incomes by applying for universal credit, and about 40% of all claimants are in work.
The TUC said 12% of workers told researchers that they expected to struggle to afford the basics in the next six months, while 22% said they would find it hard to afford “more than the basics”. The analysis found that a fifth of workers have Christmas debts to pay off this year, a number that rises to more than a quarter for workers with children of school age.
Frances O’Grady, the TUC’s general secretary, said ministers need to urgently raise universal credit payments to 80% of the living wage – which is set to rise to £9.50 in April.
“The government must do far more to help struggling families get through the tough times ahead. The support package announced by the chancellor last week is woefully inadequate,” she said.
“Universal credit urgently needs boosting and we need further action to reduce fuel costs for those battling to make ends meet. The best way to give working families long-term financial security is to get pay rising across the economy.”
O’Grady’s call for the minimum wage to rise to at least £10 an hour will put her further at odds with the governor of the Bank of England, Andrew Bailey, who caused a storm of protest last week when he called on Britons to show wage restraint to stop inflation spiralling out of control.
Bailey, who earns close to £600,000 a year, made the comments a day after the Bank raised interest rates to 0.5%, and warned household disposable incomes were on track to shrink by 2% this year, the biggest fall since comparable records began in 1990.
In the face of the cost of living crisis, Rishi Sunak and Boris Johnson have come under pressure to scrap the national insurance surcharge, which Labour has called the “wrong tax at the wrong time”.
On Monday the Federation of Small Business (FSB) added its voice to the calls to axe the increase, joining the likes of the Institute of Directors. The UK’s largest business group called for the surcharge to be ditched to reverse the 250,000 drop in the number of young people being offered apprenticeships.
The FSB national chair, Mike Cherry, said: “By looking again at its approach to NICs, the government can make a real difference here – directly, by bringing down the immediate costs of taking an apprentice on, and indirectly, by freeing up more funds for recruitment and training at a moment when cash reserves are depleted.”
Economic data released on Monday by the financial services firm Deloitte said consumer confidence fell to -11% during the last quarter of 2021 as consumers started to feel the squeeze.
It came as the leading economic forecaster EY Item Club downgraded its prediction for UK GDP growth in 2022 to 4.9% from 5.6% in its November report.
