A leading debt advice charity has warned that over a third of people on benefits could be pushed into debt by a £20 cut due to take place next month.

A survey of over 2,000 people on Universal Credit conducted by Citizens Advice Cymru shows more than a third (38%) would be in debt after paying just their essential bills if their benefits drop by £20 a week.

The average shortfall for people tipped into the red would be £51 a month, increasing to £55 a month in ‘Red Wall’ areas.

The figures come as frontline advisers say they are preparing for a surge in people seeking ‘crisis support’ this autumn. Citizens Advice warns a triple whammy of benefit cuts, rising energy bills and further redundancies as the furlough scheme ends will push families into hardship.

Last week, Powys Labour leader Matthew Dorrance warned that more than eight thousand families in Powys will lose more than £1,000 a year as a result of the cut.

"Thousands of families in Powys are set to lose more than £1000 a year while out of work support will be left at its lowest level in decades," he said.

"The Universal Credit cut comes as furlough ends for thousands of workers and energy bills rise because the price cap is being lifted. The UK Government needs to act now to protect the incomes of the lowest paid in our county."

However A UK government spokesperson said a £20 uplift to universal credit, designed to help people cope with the pandemic, was always temporary.

"It’s right that the government should focus on our plan for jobs, supporting people back into work and supporting those already employed to progress and earn more."

When will the cut happen?

As it stands, the government is set to slash benefits by £20 a week - equivalent to £1,040 a year - from 6 October. The exact date people will see the cut kick in will depend on the day they get their Universal Credit payment. For many, this means September will be the last month they see their benefits paid at existing levels.

How many people will be affected?

If plans go ahead, the cut will hit nearly six million people on Universal Credit. More than a third (38%) of those who’ll see their income hit are already in employment, while one in six (16%) are under 25. Latest figures show roughly 1.9 million families with children will see their benefits cut.

Regions that will see the biggest proportion of residents hit by the cut are London and the North East.

How much could I lose?

While every Universal Credit claim will drop by around £85 a month, the proportion of income claimants will lose will vary depending on their circumstances. Single people under 25 are set to be hit by the biggest drop.

Monthly standard allowances will drop:

  • By a quarter for single claimants under 25, from £344 to £257.33
  • By a fifth for single claimants over 25, from £411.51 to £324.84
  • By 17% for joint claimants under 25, from £490.60 to £403.93
  • By 14% for joint claimants over 25, from £596.58 to £509.91

Previous analysis by Citizens Advice shows £20 a week is equivalent to six days of energy costs or three days of food costs for a low-income family.

Kate Green, Senior Benefits Expert at Citizens Advice, said:

"Many people seeking our advice at the moment are unaware of an impending cut to their Universal Credit. Understandably, when they realise their benefits are set to drop by £20 a week it causes a lot of anxiety.

"If you’re in this position, remember you are not alone and there is support available. As a first step, make sure you’re checking your online journal regularly so you know how much your benefits will reduce by and when.

"Citizens Advice is on hand to help you understand what the cut means and what you can do if you’re worried about making ends meet.”

Morgan Wild, Head of Policy at Citizens Advice, added:

“More than half a million people have come to Citizens Advice for support with Universal Credit since the pandemic. We know the extra £20 a week has often meant the difference between empty cupboards and food on the table.

“The government should do the right thing and keep this vital lifeline. It’s the best way of making good on its ‘levelling up’ promise and supporting households to recover from this crisis.”