Cutting benefits now would cause immense harm to children

Monday 10 October 2022
Teen boy sitting at a kitchen table eating soup served by his father

Amid the worst cost of living crisis in decades, the Government is reportedly planning to slash help for those on low incomes by breaking its commitment to uprate benefits by inflation next April

A benefits cut

A benefit cut would cause immense harm to the low-income parents and children in our services. Many are already facing extreme financial hardship. The purpose of the welfare system is to guarantee income security and a decent standard of living. It's vital the government keeps its promise to uprate benefits by inflation so those on the lowest incomes can afford the essentials.

Benefits are supposed to increase each April in line with the inflation rate from the previous September so they at least keep up with prices. In practice, previous welfare cuts and benefit freezes mean that rates had already fallen out of step with the cost of living. The basic value of Universal Credit (UC) has fallen by 14% in real terms since 2013.

Ministers are drawing up plans to uprate benefits by average earnings (5.4%) instead of the usual September inflation rate (expected to be around 10%). This'll save the government billions of pounds, as it seeks savings to pay for £45 billion worth of tax cuts that the poorest stand to gain very little from. According to the Resolution Foundation, the average working couple with two children on Universal Credit will lose £752.

Increasing benefits by average wages instead of inflation would mean benefits fall even further behind what families need to live on. That would be concerning at any time, but to do so during a cost of living crisis is profoundly wrong.

A broken promise

When benefits increased by only 3.1% in April 2022, this was well below the actual inflation rate of 9%. At the time, it was justified on the basis that benefits would catch up next year. The government is now poised to break this promise. This would, in the words of the Joseph Rowntree Foundation, “amount to the largest permanent deliberate real-terms cut to the basic rate of benefits in history”.

There is no justification for weakening the safety net

Various claims have been aired in recent days to justify targeting benefits for cuts. We'll address some of these below.

The government has provided little in the way of targeted support for low-income households

The government has provided £1,200 in financial support, but around half of this has been provided to almost everybody – not just those on low-incomes or benefits. Most households, including millionaires, will have received the £150 council tax rebate in May and will be benefitting from the £400 energy bill discount this winter. They also stand to gain from billions in tax cuts that will shortly be coming their way.

Targeted support for those on the lowest incomes has been far less forthcoming. Those on benefits did receive a one-off Cost of Living payment of £326 in July, with a further £324 payment to come in November.

These payments were intended to help low-income families with soaring energy bills, but families in our services are also struggling to pay for other essentials. They’ve told us about having to use their Cost of Living payment to get the car fixed, buy food or clothes for their children.

A Trussell Trust survey found that two-thirds (64%) of those who received the Cost of Living payment used it to buy food. Because benefit levels were already so inadequate, for many low-income families these one-off payments are simply papering over the cracks.

Energy bills are still double what they were a year ago – and other costs are rising

The government’s Energy Price Guarantee will keep energy bills at £2,500 a year for an average family for the next two years. But this is based on average consumption, so it could be higher if you have a large family or use a lot of energy. This will prevent the near apocalyptic rises that had been predicted for the winter, but still represents a 96% increase in energy costs since the same time last year.

This'll simply be unaffordable for many of the low-income families we support. Analysis from Loughborough University found that a couple with two children on out-of-work benefits will still be nearly £1,400 worse off than last year even before you take into account other rising costs.

Not uprating by inflation will make people poorer – not incentivise them to take jobs they can’t do

41% of those on Universal Credit are in work. Many of the remainder aren’t expected to work anyway, because they’re too ill, have a disability, or are caring full-time for a family member. Low earners must also grapple with longstanding systemic problems like stagnant pay, insecure work and high housing and childcare costs.

Unemployment is at its lowest rate since 1974, but 1 in 6 workers (17%) earn below the real Living Wage and pay growth is running well below inflation. Cutting benefits will not persuade people to take on work that they can’t do or isn’t available to them – it will simply make them poorer.

It's wrong to target the poorest to fund tax cuts that will disproportionately benefit the wealthy

It has been said that it would not fair for those on benefits to get a 10% rise when wages have only risen by 5.4%. This ignores the fact that a large proportion of benefit claimants are also workers who rely on benefits to top up their incomes to a level their families can live on. It's those with the least that are most exposed to rising costs and therefore most in need of support. This is what our social security system is designed to do.

What needs to happen?

The government must, at a bare minimum, stick to its promise to uprate benefits by inflation. But we should also acknowledge that the continued erosion in the basic adequacy of benefits over many years has left the social safety net seriously weakened. No child should be going hungry or suffering with the cold at home, but this winter many families in our services will be experiencing just that.

Keeping its promise to increase benefits by inflation is the very least the government should be doing. We also need to address the flaws with the existing mechanism for uprating benefits. One possible solution would be to create a new independent body to take some of the politics out of decisions on benefit levels, as our Director of Policy and Campaigns has written about elsewhere.

But these are just first steps towards designing a social security system that protects living standards and promotes decency, dignity and respect. We’ll have more to say about that soon.

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