The Government has been urged to put £2 billion back into Universal Credit (UC) to boost the living standards of almost 10 million parents and children in working families in the Budget by the Joseph Rowntree Foundation (JRF).

JRF says its new analysis shows almost three million children are now locked in poverty despite living in a working family and record employment in the economy. Cuts announced in the 2015 July Budget mean 3.2 million households will typically be around £50 a week worse off on UC compared with tax credits – most of them are families with children.

Restoring the work allowances (the amount a people can earn before their support is withdrawn) back to their original level would give a boost to family incomes just days after leaving the European Union in March 2019. The Government will be pressed to act in the Commons on Monday (October 15) at DWP questions.

Campbell Robb, Chief Executive of the independent Joseph Rowntree Foundation said “As Britain prepares for Brexit, we need to make sure working families have a firm foundation from which they can build a better life. Reforming Universal Credit by increasing the work allowances for families with children is one step that would help address the rising tide of in-work poverty. Action in the Budget this month would mean working families keep more of their earnings and feel the benefit in their pockets just one week after Brexit. Almost 10 million people in families with children would see this boost – a big step towards tackling the burning injustice of in-work poverty.”

Increasing the work allowance puts more money in the pocket of families in in-work poverty and helps more families exit working poverty compared to reducing the Universal Credit taper.

The work allowance is over five times more effective at getting money into the pockets of low-income working families than increasing the Personal Tax Allowance.

The OBR estimates it will cost £1.4 billion to raise the Personal Tax Allowance (PTA) to £12,500 and the Higher Rate Threshold to £50,000 in 2020. This money would be better spent helping to pay the lion’s share of increased work allowances.