Impact of withdrawing emergency benefit measures

Introduction

At the outset of the Covid-19 pandemic, the UK Government introduced a range of benefit measures to help mitigate the economic crisis. Among others, these included increasing Universal Credit (UC) standard allowances and the basic element of Working Tax Credits (WTC) by around £20 per week and increasing UC payments to self-employed workers with low earnings by suspending the so-called Minimum Income Floor (MIF).[1] At a time when economic recession has pushed record numbers onto the benefit system, these measures have gone some way to strengthening the social safety net, which had been significantly weakened by welfare reforms over the decade prior to Covid-19.[2]

However, the UK Government plans to reverse the £20 uplift and reinstate the MIF in April 2021, at the same time that the Job Support Scheme and the Self-Employment Income Support Scheme are due to end. Unless the UK Government changes course, hundreds of thousands of people in Scotland will therefore face a significant reduction to their benefit entitlements at a time when unemployment could well rise further.[3] What is more, the record so far indicates that the impacts of these cuts will not be borne equally across society, but will rather exacerbate existing inequalities.[4] This is particularly true during the Covid-19 pandemic, which has already had a disproportionate impact on some of the most vulnerable groups in society, including lone parents, children, and those who experience socio-economic disadvantage.[5]

This report uses the microsimulation model UKMOD to estimate the impacts of withdrawing the £20 uplift and reinstating the MIF on the incomes of Scottish households in 2021/22. The report examines how different groups of the population would be affected; the overall effects on poverty levels and poverty rates; and the total reduction in benefit expenditure. Annex A contains further details on our methodology.

[1] For a full list of the emergency benefit measures introduced by the UK Government, see House of Commons Library, June 2020, Coronavirus: Support for household finances. For an indication of their withdrawal dates, see House of Commons Library, September 2020, Coronavirus: Withdrawing crisis social security measures.