Benefits freeze to cost families £200
THE continuing benefits freeze is likely to leave low-income households more than £200 worse off next year, according to analysis by a think-tank.
The Resolution Foundation said the latest inflation figures, due out on Wednesday, would illustrate the ongoing impact of the freeze in working age benefits.
The living standards think-tank called on Chancellor Philip Hammond to use this month’s Budget to cancel the final year of the four-year freeze announced by predecessor George Osborne in 2015.
Benefits are by default increased in April each year in line with the inflation figure from the previous September.
But since April 2016, working age benefits – including Child Benefit, Tax Credits, Universal Credit, Housing Benefit and Jobseeker’s Allowance – have been frozen in cash terms, meaning their real terms value declines every year as a result of inflation.
The CPI inflation rate was 2.7 per cent in August and if that figure remains stable then the impact of the freeze will see the average low-earning couple with children effectively lose £210 next year, while the average single parent in the bottom half will lose £260 next year.
The average loss for households in the bottom half of the income distribution will be £140 next year, with the cumulative impact of the four-year freeze amounting to a £410 loss next year.
It will mean the value of working age benefits falling by 6.4% over the last four years, compared to a forecast of 4.6%.
The Resolution Foundation says that more than 10 million households – including 7.3 million children, 2.4million disabled people and 800,000 people looking for work – will be affected.
Based on a 2.7% inflation figure, the freeze will save the Exchequer £4.7 billion in 2019-20, far more than the £3.9bn originally forecast.
Adam Corlett, senior economic analyst at the Resolution Foundation, said: “While the
Prime Minister this week repeated her claim that austerity is over, significant cuts in support for millions of low-income families are set to continue next year as a result of the ongoing freeze in working-age benefits.
“On Wednesday we will learn the full scale of next year’s benefit freeze, with an average lower-income family with children on course to lose over £200 a year.
“The Budget represents a last chance to cut short the benefit freeze. Scrapping it would send a strong signal that, from the perspective of low-income families, the Government is committed to ending austerity.”
A Government spokesman said: “We’re committed to providing families with the support they need, which is why we spend £90bn a year on working-age benefits, and we will be spending £28bn more on all welfare by 2022 than we do now.
“The reality is there are now one million fewer people living in absolute poverty compared with 2010, including 300,000 fewer children.
“At the same time, we have supported more people into work, introduced the National Living Wage, doubled free childcare and helped workers keep more of the money they earn at the end of every month by cutting taxes for 31 million people.”
Shadow work and pension secretary Margaret Greenwood said: “This is yet more shocking evidence that Theresa May is failing to keep her promise to end austerity.
“Today’s report shows £1.6bn in cuts are yet to come from the Tories’ benefit freeze alone.
“Only Labour will end austerity and transform our social security system so that it provides security and dignity for all.”