Universal credit rise lifted 400,000 children out of poverty, data shows

Experts say removal of £20-a-week boost and soaring living costs likely to push 1 million below UK breadline

About 400,000 children in the UK were lifted out of poverty during the first year of the pandemic because of the government’s £6bn universal credit boost, official figures have revealed, amid warnings benefit cuts could push more than 1 million people below the breadline.

Statistics published on Thursday showed years of rising relative poverty were reversed after ministers introduced a temporary extra £20-a-week to universal credit in April 2020, together with extra housing support, furlough and other measures in response to the Covid outbreak.

As a result, the incomes of the poorest 20% of households rose by 4% and unemployment stayed low, with campaigners heralding this as proof that investment in social security was an effective way of lifting children out of poverty.

There were 3.9 million children in relative poverty – defined as households receiving below 60% of the median annual income – during the first year of the pandemic, the data revealed, equivalent to 27% of all UK children, and down 400,000 year on year.

Campaigners and experts said the statistics showed this progress was likely to be a one-off as the withdrawal of the extra £20 a week, coupled with the rising costs of food and energy and below-inflation benefit increases, would take their toll on household living standards from April.

Ministers cancelled the £20-a-week boost along with other pandemic support measures in October, arguing – despite widespread opposition – that the government’s focus should shift to getting people into jobs and better paid work as the economy opened up.

The UK has since been gradually engulfed in a growing cost of living crisis, with living standards currently falling at the fastest rate since the 1950s. The energy price cap, council tax and national insurance contributions all rise on Friday, piling pressure on already struggling low-income households.

The Resolution Foundation thinktank estimated 1.3 million people, including 500,000 children, could be pushed into absolute poverty over the coming months as a result of ministers’ decision to increase benefits and the state pension at less than half the 8% inflation rate – equivalent to an £11bn cut in the value of support.

“The lack of targeted support in the recent spring statement means that households’ incomes are set to fall more sharply during the pandemic recovery than they did during the pandemic itself … It is essential that more support is delivered to turn this bleak living standards outlook around,” said the Resolution Foundation principal economist, Adam Corlett.

The Child Poverty Action Group (CPAG) said the figures showed ministers had “the power to protect children from poverty” but their failure to offer serious help in the spring statement last week indicated they had “turned their backs” on families struggling with the cost of living crisis.

“Many of the children who were lifted out of poverty by the £20 increase to universal credit have already been forced back over the brink by the government’s actions. And as millions struggle with spiralling costs, we know the picture will worsen,” the CPAG chief executive, Alison Garnham, said.

Analysis of the figures by the End Child Poverty coalition revealed the highest levels of child poverty at local authority level in 2020-21 were recorded in Middlesbrough, where 42% of children were living below the breadline. At parliamentary constituency level, 51% of all children in Birmingham Hodge Hill were in poverty.

Rishi Sunak’s spring statement included a 5p cut in fuel duty and increased the national insurance threshold but it rejected calls for inflation-matching benefit rises and the chancellor was widely criticised for ignoring the households struggling the most with the cost of living.

Boris Johnson promised an MPs’ committee on Wednesday he would examine a proposal to increase universal credit in line with inflation, after the Conservative MP Mel Stride warned him that claimants would “really suffer” as a result of the below-inflation benefit rise.

The work and pensions secretary, Thérèse Coffey, said in a statement on Thursday the focus would remain on boosting incomes through getting people into work, while a government spokesperson insisted work was “the best and most sustainable route out of poverty”.

The shadow work and pensions secretary, Jonathan Ashworth, said cutting the £20 universal credit uplift had stripped away a vital lifeline. “That choice, combined with soaring energy bills, Tory tax hikes and real-terms cuts to universal credit and the state pension mean hard-pressed families now face the worst fall in living standards ever recorded.”