Families to lose over £1,000 as a result of child benefit freeze and cap

By agency reporter
December 30, 2012

Families with two children will be over £1,000 worse off by the end of 2015 as a result of the government's decision to freeze and then cap child benefit, according to a new report published by the Trades Union Congress (TUC) on 30 December 2012.

The study, 'Child Benefit: a bad case of neglect?', shows that just by preventing child benefit from rising in line with top-rate inflation (RPI - the retail prices index) the Treasury will be leaving all families with two children still in receipt of child benefit £1,079 poorer.

In June 2010, Chancellor George Osborne announced that from April 2014 the government would be using what tends to be a lower measure of inflation (CPI - the consumer prices index) when up-rating benefits. In addition, families would also have their child benefit frozen from 2011 for three years.

The TUC says that as a result of this freeze - due to end in 2014 - a family with two children suffered a real-terms cut in child benefit of £80.60 in 2011-12, will lose £183.56 over the course of 2012-13 and £234.00 during 2013-14.

The Chancellor's announcement, in this month's autumn statement, that child benefit would only increase by one per cent (well below the projected rate of inflation) in 2014-15 and 2015-16 means that families will face even larger real-terms cuts in the future, says the TUC.

The TUC report shows that as a result of child benefit being capped at one per cent from 2014 and no longer keeping pace with the RPI measure of inflation, a family with two children will lose £268.32 in 2014-15 and £313.04 in 2015-16, bringing their total loss over five years to £1,079.52.

The TUC says the real-terms reduction in child benefit is yet another blow for low-income families, who also face large cuts to their tax credits. The TUC estimates that some families could lose over £3,000 as a result of as a result of the government's ongoing tax credit cuts.

The research also highlights how plans to introduce a new sliding-scale for people earning between £50,000 and £60,000 will see higher-earning households with two children lose, on average, an additional £1,300 from 2013-14. This reduction in support will be on the top of the £1,079 they will suffer from the freeze and cap on child benefit.

TUC General Secretary Designate Frances O'Grady commented: "The government's decision to freeze child benefit has already hit millions of families at a time when real wages and living standards are falling.

"Many low-income households face even greater losses in the near future as a result of George Osborne's refusal to keep child benefit in line with RPI. Cutting the value of benefits for families means those in greatest need will get less, with the poorest children suffering the most."


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