New universal credit claimants have seen a 40 per cent fall in their net income during the COVID-19 crisis

New analysis from the Institute for Fiscal Studies highlights consequential falls in spending and a rise in the non-payment of bills compared with other households

New universal credit claimants have seen a 40 per cent fall in their net income during the COVID-19 crisis, according to the Institute for Fiscal Studies (IFS).

In new analysis, the IFS highlights that many recipients of government support after the onset of the coronavirus crisis saw their income fall one or two months before receiving support and, in the period in between, household spending hit a low and non-payment of bills hit a high. This, the IFS says, particularly affected those who started claiming universal credit, with many experiencing falls in income of more than two-thirds in the month before support was paid, and even afterwards their average incomes had fallen by 40 per cent relative to before the crisis.

NB - the IFS says that, for households with a furloughed employee (whose employer did not top up their support to full pay) the equivalent figure is 13 per cent, and for those receiving support from the Self-Employment Income Support Scheme it is just 4 per cent.

Elsewhere in the analysis, the IFS highlights that, between seeing a fall in income and receiving support, recipients of universal credit reduced their spending by 11 per cent, compared with otherwise-similar households whose incomes were stable; and about half of new universal credit claimants who had been repaying a mortgage stopped doing so, almost entirely before the first universal credit payment arrived.

Commenting on the findings, Isaac Delestre, a Research Economist at the IFS, said -

‘In the wake of the crisis, the government implemented two new income protection schemes - for furloughed employees and self-employed workers - and extended an existing one, universal credit. Once the cash arrived, these programmes have provided huge amounts of protection, though to differing extents. But the long-standing controversy over the infamous five-week wait to receive universal credit rightly identifies that the timing of payment is also very important. While those who were furloughed generally experienced no gap between income falls and income support, many universal credit ... recipients had one or two months between the loss in income and the receipt of their support. For many recipients, this seems to have been a tough period, with significant falls in spending and a rise in the non-payment of bills compared with other households.’

For more information, see Government support helped cushion the financial blow of COVID-19, but many faced financial difficulties before payments arrived.