William Eichler 10 October 2017

Benefit freeze ‘biggest policy driver’ of poverty, think tanks finds

Real terms cuts to working-age benefits and tax credits are set to drive almost half a million more people into poverty in 2020, think tank reveals.

A new briefing by the Joseph Rowntree Foundation (JRF) shows the four-year freeze on working-age benefits, introduced in 2015, is the ‘biggest policy driver’ behind the rise in poverty and will result in 470,000 more people living in poverty in 2020/21.

Higher than forecast inflation means the hit to low income families of the freeze will be almost £0.9bn more than the £4bn originally expected from this cut in 2020/21.

In 2019/20, when the freeze is due to end, a couple with two children in receipt of Universal Credit will be £16 per week (£832 per year) worse off than they would’ve been had benefits kept up with prices since 2010, JRF found. A lone parent with two children is £13 per week (£676 per year) worse off.

Both figures are the same whether out-of-work or working full time for the National Living Wage.

JRF called on the Government to use its Autumn Budget to ensure the incomes of the least well-off keep pace with the cost of essentials, by unfreezing benefits and uprating them in line with rising costs.

It recommended unfreezing targeted income related benefits such as tax credits, Universal Credit, the Local Housing Allowance and Job Seekers Allowance, over more widespread benefits such as child benefit.

‘People who are just managing at best are being hit in the pocket by the freeze on benefits and tax credits,’ said Campbell Robb, chief executive of JRF.

‘It means millions of families are finding life even harder to make ends meet - whether paying for the weekly food shop, covering energy bills or finding enough money to pay the rent.

‘While the Treasury gains from this policy in the short-term, more children living in poverty has costs the Exchequer an estimated £6.4bn per year in lost tax revenue and additional benefit spending.

‘The focus should be on making sure low-income family budgets keep pace with the cost of essentials, while reducing the benefit bill through increasing employment and enabling people on low pay to increase their earnings.’

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