William Eichler 27 September 2021

Families with children to lose £20 a week over winter

Families with children to lose £20 a week over winter image

A typical low-income family with children could see their income fall by over £20 a week over the next six months, a think tank has warned.

The Resolution Foundation has warned of a cost of living crunch caused by the ‘triple whammy’ from rising prices and energy bills, and falling income support.

It predicts that over the next six months, Britain will see inflation hit 4% over the winter – the highest in a decade. Energy bills will also rise with the 12% increase in the energy price cap from 1 October, which is likely to be followed by a 19% increase from 1 April 2022.

The think tank also predicts that the £20 a week cut to Universal Credit (UC) from 6 October and the 1.25% Health and Social Levy from next April will also add to cost of living pressures.

The Resolution Foundation’s analysis did identify some positive factors that might relieve some of the pressures, including from next April a 37p (4.2%) increase in the National Living Wage (NLW) and the highest benefits uprating since 2012 as a result of inflation forecast to hit 2.7% this September.

Despite these factors easing the cost of living pressures, the think tank still warned that they would be dwarfed by rising energy bills and the cuts to UC.

The analysis suggests that families with children will be hit the hardest. For example, a couple with two children, both working full-time and earning the NLW and slightly above that rate, would be £23 a week worse off over the next six months.

The analysis also shows that a single parent working part-time could see their income fall by £20 a week over the next six months, while even a low earner without children working full-time on the NLW could see the £9 a week income boost from the forthcoming rise in the NLW wiped out by the rising cost of living.

Karl Handscomb, senior economist at the Resolution Foundation, commented: ‘Britain is about to enter a tight cost of living squeeze over the next six months as high inflation and rising energy bills collide with the Government’s decision to cut benefits and raise taxes. Low-and-middle-income families will face the tightest squeeze.

‘Many drivers of high inflation should be short-lived, but that will be of little comfort to families struggling over the coming weeks and months.

‘While policies like the National Living Wage will deliver a welcome income boost for some, for many low-income families this won’t come close to offsetting the damage caused by cutting Universal Credit.

‘Maintaining the £20 a week uplift will go a long towards easing the coming cost of living squeeze for millions of families.’

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