Budget  

'Half a million more in poverty' if benefit squeeze goes on

'Half a million more in poverty' if benefit squeeze goes on

Half a million more people will live in poverty if the Government maintains its benefits freeze, new research has warned.

Analysis by the Joseph Rowntree Foundation published today (Tuesday) highlighted how the freeze will hit families in the pocket - the majority of whom are in work.

The data found it will result in 470,000 more people living in poverty in 2020/21.

It also found higher than forecast inflation means the hit to low income families – and savings for the Treasury - will be almost £0.9bn more than the £4bn originally expected from this cut in 2020/21.

Campbell Robb, chief executive of the Joseph Rowntree Foundation, said: "People who are just managing at best are being hit in the pocket by the freeze on benefits and tax credits.

"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.

"No government wants to fight an election on a record of rising poverty and falling living standards. Circumstances have changed, so policy needs to change too. As prices rise, the priority should be to protect the budgets of the lowest income families. It’s time to lift the freeze."

The data predicts that in 2019/20, when the freeze is due to end, a couple with two children in receipt of Universal Credit will be £16 a week worse off than they would have been had benefits kept up with prices since 2010.

The research also found a lone parent with two children is £13 per week worse off.

Both figures are the same whether out-of-work or working full time for the National Living Wage, meaning the freeze will result in 470,000 more people living in poverty in 2020/21.

This comes after the 2015 Budget when then-Chancellor of the Exchequer George Osborne froze most working-age benefits for four years, including benefits to top up low wages and out of work benefits, from 2016/17 to 2019/20.

The Joseph Rowntree Foundation is now calling on the Government to target its resources better at struggling families.

Rather than increase the personal tax allowance to £12,500, which it said would overwhelmingly benefit better off families, the foundation is urging the Government to remove the benefits freeze.

Only £1 in every £6 spent on raising the personal tax allowance goes to the bottom half of the income distribution, the foundation said.

It has called on the Government to use its Autumn Budget to unfreeze 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.