Benefits changes and freeze to hit lowest-earning families from April

Debt

 

Benefit changes coming into effect from 9 April will significantly squeeze incomes of ‘just about managing’ families – according to new Resolution Foundation research.

The Foundation says the benefits cuts, while not new, will save around £2.5bn – the second biggest welfare saving in a single year since the crash. The rise in the National Living Wage also comes in from April and will affect 1.5 million workers. However, the Foundation says the benefits cuts will outweigh them and will affect the lowest earners. They will lose on average £190 this year, although the Foundation says some families will be thousands of pounds worse off compared to a scenario in which the cuts didn’t take place.

The four key benefit cuts coming into effect are:

  • Year three of the four-year cash freeze in working age benefits, saving £1.9bn and affecting almost 11 million families. The 3% real terms cut in working age benefits this year is set to be by far the biggest of the four-year benefit freeze.
  • Two child limit for benefit claims, costing up to £2,780 to a family having a third child, saving £400m this year and affecting 150,000 families.
  • Withdrawal of the family element of support for new tax credit and universal credit claims from families with children, costing up to £545, saving £200m this year and affecting 400,000 families.
  • Rollout of Universal Creditsaving £200m this year due to lower entitlements than the existing benefit system for long term sick and working families in particular.

David Finch, Chief Analyst at the Resolution Foundation, said: “The Chancellor should expect a borrowing boost from the Office for Budget Responsibility next Tuesday as it upgrades its short-term economic outlook.

“This is welcome news – but it won’t change the fact that families across Britain still face a huge living standards crunch in the coming years, some of which is a direct result of government policy.

“The government is doing the right thing on pay with another big rise in the National Living Wage and ending the cap on public sector pay. But for many families the extra pay will be outweighed by the £2.5bn worth of benefit cuts being rolled out.

“With an average loss of £190, low and middle income families are set for the second biggest welfare squeeze since the crisis, at a time when pay growth remains muted and household incomes are already under strain.

“The Chancellor is keen to stick to his brief of a short speech with no new policies. But given the financial challenges facing families across Britain, a quick change of his predecessor’s policies on benefit cuts would go a long way towards showing that he is on the side of hard-pressed working families.”



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