NEW ANALYSIS by the Jospeh Rowntree Foundation (JRF) has shown that if the Government chooses to renege on the pledge made in April by then-Chancellor Rishi Sunak to uprate benefits in line with inflation as usual, it will amount to the largest permanent deliberate real-terms cut to the basic rate of benefits in history.
Key findings:
- The suggested increase of 5.4 per cent would amount to the biggest permanent real-terms cut to the basic rate of benefits ever made in a single year.
- Failing to uprate benefits in line with inflation combined with personal tax changes made in the fiscal statement would be profoundly regressive, with the poorest 10 per cent losing 2.6 per cent of their income (£214 a year) while the richest 10 per cent gain 4.3 per cent, or over £5000.
Prime Minister Liz Truss must urgently confirm benefits will be increased in line with rising prices, says the JRF. This will provide reassurance and avoid inflicting harm on people who are already unable to afford the essentials.
The government has cut the real value of benefits in seven of the last 10 years. This was a already a failed approach and has seen poverty deepen and more people go without the essentials. Trying to do more of the same, but this time against an alarming backdrop of rising energy and food prices, will only make matters worse.
The JRF says the government is now targeting their hostility towards those on low incomes at a time when 7 million households, equivalent to every family in the north of England, have missed out on essentials such as food, heating, toiletries or showers because they can no longer afford them..
The Foundation argues that it is morally indefensible to target the incomes of the poorest in this way in order to attempt to stem the political and economic fallout following last week’s fiscal statement, which triggered a wider economic crisis, now running out of control.
According to current analysis, uprating by 5.4 per cent would mean that values are around 15 per cent below April 2016 level (when benefit freeze started to bite) in real terms. This amounts to a loss of £470 a year in the value of the Standard Allowance for a single adult aged 25+ and £740 for a couple in the same age range when compared to the outcome if benefits had been uprated normally over the period. The child element of Universal Credit would be £340 lower per child.
If benefits were uprated by only 5.4 per cent, the poorest 10 per cent would see their incomes fall by 2.6 per cent, or £214 per year once personal tax changes announced in the fiscal statement were taken into account. The richest 10 per cent would see a gain of 4.3 per cent, or more than £5000.
As well as being a devastating blow to families around the country, this decision would be profoundly regressive, and risks leaving people who are already cutting back on essentials to make impossible choices.
Katie Schmuecker, Principal Policy Adviser for JRF said: “Reneging on the promise to raise benefits in line with inflation as usual would be a hostile and harmful act of historic proportions. It is morally indefensible for a government who have chosen to target tax cuts at the richest, to target spending cuts at those on the lowest incomes who are not responsible for this crisis.
“This will terrify millions who have been enduring a cost of living emergency for months. They are facing a harsh winter – struggling to feed their families, cook hot food and heat their homes.
“If the government goes down this track it will be a devastating blow to low earners, families with children, those who are carers, sick or disabled. These families are suffering a cost of living emergency now.
“Liz Truss says she had to take ‘urgent action’ on the economy. She must also now take urgent action reassure those on the lowest incomes in our society that she understands what they are going through. She must now urgently confirm she will not make a real terms cut to the benefits they desperately need to get by.”
* Source: Joseph Rowntree Foundation