Austerity continues for low income families who are set for a further £210 cut in support next year

Published on Tax and Welfare

Chancellor has one last chance to end the benefit freeze in his Autumn Budget

Next week’s inflation figures are set to confirm that austerity is continuing for millions of low-income families, with the average lower income couple with kids on course for a further cash loss of £210 next year as a result of the ongoing benefit freeze. This is according to new analysis published today (Saturday) by the Resolution Foundation.

Benefits are by default uprated in April each year in line with the inflation figure from the previous September. The latest figures are due out this Wednesday. However 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 as a result of the four-year freeze announced in July 2015 by the then Chancellor George Osborne.

The analysis, based on CPI inflation coming in at 2.7 per cent again next week, finds that the four-year benefit freeze is expected to save £4.7bn next year (2019-20), far more than the £3.9bn it was originally forecast to save.

The flipside of these bigger than expected savings however is even greater losses to low-income families, with the value of working age benefits falling by 6.4 per cent over the last four years (compared to a forecast of 4.6 per cent). The Foundation says that over 10 million households –  including 7.3 million children, 2.4 million disabled people and 800,000 people looking for work – will be affected.

The Foundation notes that the bulk of the savings from the benefit freeze will fall on households in the bottom half of the income distribution. The average loss for these households will be £140 next year, with the cumulative impact of the four-year freeze amounting to a £410 loss next year.

The greatest losses will be felt by low-income families with children. The average couple with children in the bottom half of the income distribution will lose £210 next year as a result of the benefit freeze, (with a cumulative loss from the four-year freeze of £620), while the average single parent in the bottom half will lose £260 next year (with a cumulative loss of £720).

The Resolution Foundation notes that the working age benefit freeze has been one of the most vivid examples of austerity in recent years as it represents a direct real-terms cash loss for millions of low-income families.

The Foundation says that should the Chancellor cancel the final year of the benefit freeze in his Budget later this montah, it would send a clear signal that, when it comes to boosting living standards for low-income families, the government is serious about ending austerity.

 

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 kids 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.”