The benefits freeze has left families out in the cold – but just £20 per month for families would help restore children’s benefits and keep 100,000 out of poverty.
Child poverty has risen by half a million since 2010, to 4.1 million or 30% of children. The Institute for Fiscal Studies has projected a continued rise to 5.2 million by 2021/22. The government cannot in good conscience allow this to happen, but unless it is willing to invest in restoring some of the money which has been taken from low-income families as a result of recent policies, it is on a one-way path to rising poverty.
In the recent spring statement, the Chancellor ignored a chorus of voices calling on him to lift the freeze on benefits. Inflation had been higher than expected during the first three years of the freeze, so by this point the freeze had already saved in three years the money it was expected to save in four. To put that another way, the gap between the actual cost of living and what families relying on benefits or tax credits can afford has already been widened as far as the policy had ever intended. It was time to stop. Yet despite this knowledge, the government decided not to act, leaving people even further behind.
We are told that the freeze will not continue after its fourth year, meaning that support should start to rise at the same rate as inflation from 2020/21 onwards. But one of the most pernicious things about a freeze like this is that even when it ends, families are left facing a permanent shortfall. Simply returning to normal uprating practices, but starting with benefit levels which have been held down over four years, will never allow people to catch up: benefits will rise in step with inflation but will never get any closer to the actual cost of living. Only an above-inflation uplift will allow them to catch up, and that’s what we need to see in 2020/21.
Working with the Institute for Public Policy Research, we have modelled the impact which reversing the freeze on children’s benefits alone would have on poverty and family incomes. By this we mean restoring the value of child benefit and the child element of tax credits and universal credit through additional investment in the next generation.
This analysis shows that by the time universal credit is fully rolled out in 2023, the child element of universal credit will be worth nearly £16 per month less (6%) than if the freeze had never happened (Table 1). Children’s needs will be the same – they’ll still need the same food, clothes, bus fares, school equipment, sports kits and so on – but families will have to find this £16 from elsewhere. It’s not clear where, as that’s on top of the ongoing shortfall families will face in help with rents (also frozen) and financial support for adults who are unemployed or unable to work because of illness (those have been frozen too). Meanwhile low-paid working families have seen only small increases in wages, which have been largely stagnant for some time.
Table 1. Value of universal credit child element over time
|Benefits never frozen||£231.67||£231.44||£233.52||£240.45||£246.22|
|With the effect of the freeze||£231.67||£231.67||£231.67||£231.67||£231.67|
|Monthly shortfall due to the freeze||£0||-£0.23||£1.85||£8.78||£14.55|
|Benefits never frozen||£251.40||£256.13||£261.25||£266.47|
|With the effect of the freeze||£236.54||£240.99||£245.81||£250.73|
|Monthly shortfall due to the freeze||£14.86||£15.14||£15.44||£15.74|
Source: analysis of 2016/17 family resources survey using the IPPR tax-benefit model
When the freeze on child benefit is also taken into account, families with children will be almost £20 per month – £230* per year – worse off – as a result of the freeze on these two benefits alone. For families who have to count the pennies, that’s a lot. 100,000 children will be pushed into poverty simply because payments meant to pay for essentials for children have been frozen. It’s time for the government to start putting right the losses families have faced, and putting the next generation of children first. Reversing freezes such as this one would be a good way to start.
* Revised on 9 April 2019; this blog previously stated the figure was £240 per year.