Poorest families to lose out on £210 a year owing to benefits cap

Resolution Foundation analysis shows freeze imposed in 2015 is hitting low-income households with children

Low-income families are to lose out on an extra £210 a year from next April because of the cap on benefits imposed by George Osborne in 2015, despite Theresa May’s claim that austerity is over.

Working-age benefits, including child benefit and tax credits, would usually be uprated in line with inflation, which is expected to be confirmed next week at about 2.7% in the benchmark month of September.

Analysis by the Resolution Foundation shows the freeze will cost the average low-income couple with children an additional £210 a year.

The research shows that more than 10 million households will face a real-terms loss of income from the government’s centrepiece austerity measure, introduced when Osborne was chancellor.

The thinktank’s senior economic analyst, Adam Corlett, 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.

“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.”

The chancellor, Philip Hammond, is coming under increasing pressure to loosen the purse strings after used her conference speech in Birmingham to tell voters that next year’s spending review would mark the end of 10 years of cuts.

“A decade after the financial crash, people need to know that the austerity it led to is over and that their hard work has paid off,” she said.

A growing number of Conservative MPs have expressed concerns about the impact of benefits cuts – and the rollout of the controversial new universal credit system.

Margaret Greenwood, the shadow work and pensions secretary, said the Resolution Foundation analysis was “yet more shocking evidence that Theresa May is failing to keep her promise to end austerity. Labour will end the benefit freeze, introduce a Real Living Wage of £10 an hour and put tackling poverty at the heart of government policy again.”

Having fought the 2015 general election pledging to carve £12bn from the welfare bill, Osborne announced in his summer budget that year that working-age benefits would be frozen in cash terms until 2020.

The Conservative-Liberal Democrat coalition had already severed the longstanding link between benefits and price rises, which was aimed at ensuring the standard of living for poor families did not fall behind the rest of society.

Resolution analysis suggestes the cumulative impact of these cuts has been to reduce the real-terms value of working age benefits by more than 6%.

The thinktank calculates that child benefit is already worth less in real terms than in 1999. By April, and for a second child, it will be worth 14% less than when it was fully introduced in 1979.

Attention has focused on the damaging consequences of universal credit for poorer families in recent days, with comparisons to the Thatcher government’s poll tax from two former prime ministers, although the freeze on benefits has much wider-reaching consequences for millions of people.

Alongside preventing increases in universal credit payments, the freeze also blocks real-terms rises in child benefit, tax credits, housing benefit and jobseeker’s allowance, which are paid out to far more people.

About 7.3 million children across the UK, 2.4 million disabled people and 800,000 people looking for work are affected by the freeze.


Heather Stewart and Richard Partington

The GuardianTramp

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