Right - some facts in the "just do another few hours work to make up for losing £20/week" nonsense
Key issue: 63% taper rate in Universal Credit (of POST-tax earnings) means claimants only take home 37p of extra £1 earned. That falls to 25.2p if they earn enough to pay income tax and National Insurance (falling to 24.7p next April when National Insurance rises)
Would someone working another 2 hours take home £20? Nope, a UC claimant on National Living Wage (£8.91/hr) would take home just £4.48 if they pay tax (£6.60 if they don't). They'd get even less than this £2.24/hr once any pension contributions /childcare costs are considered
How long would a Universal Credit claimant on the NLW have to work to make up the £20 cut? NINE hours if they pay tax and NI. Ask yourself if you could do more than another day's work each week?
Here's an example: a single parent working three days a week, eight hours a day, on £10 an hour, would need to increase their earnings by a third (working an extra eight hours) simply to stand still. And that’s (ludicrously) assuming no childcare costs
This focus on working more hours also ignores the HUGE fact that many claimants are not able or expected to be in work in the first place: over one-in-four claimants are – by the government’s own rules – not expected to work (e.g they have a young child or health problem).
The big picture here is that we shouldn't convince ourselves that cutting millions of families' incomes by £1000 will do anything other than make them a lot poorer - the government is taking that decision and can't just wish away the consequences
Some people have asked whether Universal Credit's work allowances (which allow you to earn some money before your benefit payment starts to be tapered away at the 63% rate) mean that people won't face these high deduction rates. The answer is no in most cases (although not all)
Why? 1) there's no work allowance for anyone without children or a limited capability to work 2) the level of the allowances is fairly low (ie as soon as a renter earns over £293/month they're on the 63% taper).
But it's true that there will be a wide variety of deduction rates - in part because of the work allowances issue. One of my favourite @adamcorlett charts brings this diversity out well (as well as showing that it's those on lower incomes that face the highest deduction rates)

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More from @TorstenBell

21 Aug
NEW: everyone keeps saying the stamp duty holiday caused the bonkers house price boom we’ve got going on. Is that true? Nope - in fact prices have risen fastest in the places where the tax break has had least impact
In fact the tax break doesn’t even appear to be the main driver of the recovery in transactions (except of course the surge right when there’s a cliff edge of it coming to an end/reducing - people aren’t stupid)
The fact that house prices have surged as fast (or even faster) in other advanced economies during the pandemic also points to the role of UK specific tax breaks being overdone vs common pandemic related trends (ie low rates/high savings/changes to demand)
Read 7 tweets
19 Jul
This is 1) predictable 2) a terrible idea
Raising taxes to help deliver a half decent social care system is👍 - something governments have needed to do but ducked for two decades. This crisis only reinforced the urgent need to deal with this national disgrace
It's predictable this would be a serious option because politicians think raising National Insurance sounds less like a tax rise, and the public does in some ways associate it with the NHS.
Read 13 tweets
12 Jul
Such an odd crisis: what comes alongside the biggest GDP fall in 300 years? A wealth boom. Here's a breakdown of whose wealth has been booming... 🧵
The anatomy of the Covid wealth boom:
Savings up £200bn +
Debt down £10bn +
House prices up 8%
= total UK wealth up by £900 billion to £16.5 trillion.
What's going on? Two unrelated effects. First the direct impact has seen the usual wealth falls for those losing their jobs (hugely unusually) outweighed by Covid restrictions = big spending falls for higher income households = lots of savings
Read 9 tweets
8 Jul
This whole "we need to cut Universal Credit to boost jobs" thing is really winding me up. There are six million people on Universal Credit, in a lot of different circumstances....
2.6m are already working or preparing to work - how does them having £20/week less to live on create any jobs?
1.2m aren't working and it's government policy that they shouldn't (e.g they've got a child under 1). Has the government changed their mind and their policy to say they should work? No. So it's just making them poorer.
Read 5 tweets
7 Jul
Here’s the PM’s defence of cutting £20/week from 6m households in October. The argument = “we need to cut it because we care about jobs.” This is nonsense - here’s why… 🧵
1. loads of the people having their benefits cut ARE WORKING. The share of Universal Credit claimants working has actually gone UP in the crisis (35% before to 37% now). We’re talking 2m people gov.uk/government/sta…
2. The PM’s implicitly saying we must cut benefits so people have an incentive to work. But that incentive is VERY strong: if we cut the £20 benefits would be at their lowest level EVER vs earnings Image
Read 6 tweets
7 Jul
This is political and economic madness bbc.co.uk/news/uk-politi…
Cutting the incomes of 6 million households by £1,000 a year from October is a huge hit to family incomes just as the recovery is getting going. The poorest households in the country will see their incomes fall by 5% overnight
Even if you somehow think (despite widespread food insecurity amongst poorer families) that the current level of benefits is too high, here's three reasons why the context of this Autumn means a huge cut isn't a good idea
Read 8 tweets

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