Taper cut

Analysis of the Autumn Budget changes to Universal Credit

This briefing note looks at the changes to Universal Credit (UC) – the main benefit for low-income families – made by the Chancellor in the Autumn 2021 Budget. The reduction in the taper rate from 63 to 55 percent, and increase in the work allowance by £500 a year, represent a significant, permanent increase in the generosity of one part of the welfare state. The £3 billion a year increase in spending that these reforms require stands in stark contrast to the welfare cuts that have characterised the past decade.

Looked at in isolation, the Budget will benefit 2.2 million families in 2022-23, who – on average – will be £1,000 per year better off. But the Chancellor’s Budget announcement comes just weeks after the end of the pandemic-related £20-a-week boost to UC. When we look at these two changes together, we find that around three-quarters (73 per cent) of families on UC in 2022-23 will be worse off, with one-quarter (27 per cent) better off.

The decision to focus all the increased support on working families leaves the UK with an especially weak safety net for the out-of-work. Workers may have higher incomes today, but they have less insurance against the risk of unemployment tomorrow.