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The Resolution Foundation think tank says the benefits freeze appears to be over for major benefits, but the impact is likely to be felt for many years.
The major working-age benefits will rise in cash terms in April 2020 for the first time in five years, according to the Resolution Foundation think tank.
It says benefits will increase by 1.7 per cent, based on new figures released today – assuming no change in government policy.
It adds that the state pension will rise by a higher 3.9 per cent and states that the difference between the two increases highlights the fact that working-age benefits “will continue to be eroded in value relative to earnings and pensions”.
The Resolution Foundation says that the rise in a range of benefits – including Child Benefit, Universal Credit, (non-disability) Tax Credits, Housing Benefit limits, Jobseeker’s Allowance, Income Support, and Employment and Support Allowance (except the support group component) – will be the first cash increase in basic entitlements since April 2015, due to the benefit freeze introduced by then Chancellor George Osborne.
It adds that, after adjusting for price increases, the benefit freeze has cut the real level of benefits by 6 per cent, and in many cases that has come on top of earlier cuts.
The Foundation says that, although it welcomes the end of the benefits freeze, the cuts have taken a big toll and mean working-age benefits are now lower than they were pre-freeze and pre-austerity. It says the real value of basic out-of-work support in 2019-20 is – at £73 a week (£3,800 a year) – lower than it was in 1991-92, despite GDP per capita having grown by more than 50 per cent since then. Moreover, child benefit for a second child or beyond is worth less in 2019-20 than when it was (fully) introduced in 1979.
The Foundation says that, relative to earnings, unemployment support has fallen to a record low of 14 per cent, down from 27 per cent at the emergence of the Beveridge system. It predicts that, although this level will fall slower now that the benefit freeze is over, the fall is expected to continue with earnings rising faster than prices (and therefore benefits). Similarly, compared to average earnings, child benefit for a second child is now less than half as generous as it was in 1979-80 or 1946-47 (5.9 per cent), and still falling, it says.
The Foundation points out that it has been many years since the UK ‘gave a pay rise’ to carers (through Carer’s Allowance) or new parents (e.g. through Statutory Maternity or Paternity Pay) and calls for the stagnation in these benefits to be ended.
It adds that, despite the end of the benefit freeze, the turning point for departments, and the abandoning of previous fiscal rules, some benefit cuts continue to be rolled out, including the two-child child benefit cut. Universal Credit will also mean many families lose money, it adds.
It states: “The benefit freeze is over, but – unless and until policy changes – its impacts are now here to stay, and benefit erosion continues.”
Meanwhile, the Government has updated Universal Credit and childcare rules to say parents will have up to an extra five weeks to claim back the cost of childcare. The changes came into effect this month.
Previously, Universal Credit claimants needed to report the amount spent on childcare within the same assessment period in order to claim it back. Claimants now have until the end of the next assessment period, an extra calendar month, to report their childcare costs.
Neil Leitch, chief executive of the Early Years Alliance, said: “The change that providers and parents really wanted to see was help with making childcare payments up front. However useful this latest change is to parents, my worry is that, without support for those initial up front costs, any impact it has will be limited.”