Inflation and benefits freeze deal 'double blow' to living standards

By agency reporter
October 18, 2017

Rising inflation is dealing a double living standards blow to low and middle income working families from squeezed pay packets and reduced state support, the Resolution Foundation (RF) said in response to the latest inflation figures.

The figures – which saw CPI increase to three per cent and CPIH to 2.8 per cent in September – confirm the scale of the benefit freeze taking place next year. RF analysis has found that a working family with two children are set to lose out on £315.

Benefits and tax thresholds are normally uprated every April in line with the CPI figure for the previous September. However, because working age benefits are being frozen in cash terms, today’s figures confirm that tax credits, child benefit, JSA, ESA and Universal Credit will instead be subject to a three per cent real terms cut.

With the vast majority of savings from the benefit freeze – worth £1.9 billion next year alone – falling on low and middle income households, the Foundation is calling on the Chancellor to unfreeze working age benefits next year to provide much needed living standards relief.

Today’s inflation figures also mean that the Resolution Foundation now expects Britain’s pay squeeze to have deepened across the late summer and early Autumn – something that could be confirmed in official labour market statistics as early as 18 October 2017.

David Finch, Senior Economic Analyst at the Resolution Foundation, said, “Rising inflation is dealing a double living standards blow to families on low and middle incomes, who are facing shrinking pay packets and reduced state support.

“But rather than addressing the squeeze, government policy is making things worse by freezing benefits at a time when inflation is almost three per cent.

“The Chancellor should use his Budget next month to unfreeze working age benefits and provide some much-needed relief for young families in particular. He could fund the policy by freezing the personal tax allowance which would bring in around £2 billion, largely from better off households.”

* Resolution Foundation


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