Impact of withdrawing emergency benefit measures

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.

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While our estimates come with an inevitable degree of uncertainty, it is clear that the impacts of withdrawing emergency benefit measures would be significant. If the cuts go ahead in April 2021, most people on UC and WTC will be affected, and many will see their annual incomes drop by over £1,000. This report estimates that the reduction in benefit spending in Scotland would total nearly half a billion pounds in 2021/22, compared to if the measures had been retained. This reduction, in turn, would have knock-on effects across the economy as cash-strapped households cut back on spending.[1]

It is also clear that the impacts of the cuts will not be borne equally across society. Poorer households and families with children – particularly lone parents, who are mainly women –are more reliant on the benefit system and would thus be disproportionately affected. Withdrawing the emergency measures would therefore exacerbate poverty and inequality at a time when some of the most vulnerable groups in society have already been hit hardest by Covid-19 and the attendant recession. Furthermore, while this report has focused on the direct impacts to household incomes, the full consequences may be much wider, extending to other domains such as health and wellbeing.[2]

This report has focused on the withdrawal of two existing measures, namely the £20 uplift to UC and WTC and the suspension of the MIF. It has not analysed the potential impacts of new policy proposals, such as extending the uplift to legacy benefits or reforming the MIF, nor has it analysed policies such as the benefit cap and the two-child limit which have become more significant than ever during the pandemic.[3] A wider range of issues will also be important as the economy recovers, including the interaction between earnings and benefit entitlements. Nevertheless, decisions surrounding the retention of emergency measures are time-critical and, as examined in this report, will have significant implications for households in Scotland.

[1] Joseph Rowntree Foundation, October 2020, Strengthen social security for a stronger economy.

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