A new analysis by the Institute for Fiscal Studies, published today, finds that 7 million people will see a reduction to their benefits under the proposal, including 3 million families who will lose out through cuts to Child Benefit.
The Welfare Benefits Uprating Bill, which will be read for the second time in the House of Commons today, would limit increases to most working-age benefits and tax credits to the below-inflation rate of 1 per cent, for the next three years. The current rate of inflation is above 2 per cent.
The IFS analysis shows that because the proposed changes apply to almost all benefits and tax credits, both those in work and those in households without jobs will be affected and that given current forecasts of inflation there would be a cumulative 4 per cent cut to benefits.
But the IFS added, ‘The actual effects of the bill on real benefit rates are unknown, because they depend on future price levels. This exposes the poorest in society to inflation risk. Second, we don’t know the Government’s view on how benefit rates should be indexed in the longer run. We ought to.’
Srabani Sen, chief executive of Contact a Family, said, ‘We are calling on MPs to vote against this squeeze and show they are on the side of hard working parent carers and families with disabled children. Although we warmly welcome the exemption of disability related benefits, in reality many of our families will still be worse off.
'The proposed benefits squeeze would hurt already hard pressed parent carers, who are more likely to be in part-time, low paid jobs due to their caring responsibilities. ‘Many claim a range of benefits across the system and rely on benefits and tax credits to make ends meet.
'This proposed squeeze comes against a backdrop of sustained and continued benefit cuts including reductions in Housing Benefit and Child Benefit. As a result, families with disabled children up and down the country are having to make intolerable everyday choices about whether to put food on the table or heat their homes.’
The Children’s Society has published research to show the extent to which working families from all walks of life will be hit by the 1 per cent cap
Looking at child benefit alone, it says that an estimated 300,000 nurses and midwives, 150,000 nursery and primary school teachers and 40,000 armed forces personnel will be affected.
It shows that a nurse with two children could lose £424 a year by 2015 and an army second lieutenant with three children £552 a year.
Matthew Reed, chief executive of the Children’s Society, said, ‘If this bill is passed, it will make it much harder for millions of children and families across the country to make ends meet. Recent cuts have already forced huge numbers of families to tighten their belt. Many more will struggle to pay for food, heat their homes, and provide other basics for their children as they find it increasingly difficult to keep up with rising prices.
'The Government needs urgently to reconsider this bill. Failure to make sure that benefit rates at the very least reflect rises in the cost of living will deepen inequality and increase poverty.’
The Child Poverty Action Group called the welfare bill a ‘double lockout bill’ that cuts support for workers, jobseekers, carers and disabled people.
In a new report the charity says that the bill will lead to a rise in child poverty. It also argues that the Government should focus on the root causes of the need for benefits and tax credits by prioritising full employment, ‘living wages’, affordable housing and affordable childcare.
Alison Garnham, chief executive of the Child Poverty Action Group, said, ‘The "Double Lockout Bill" will leave low paid families, jobseekers, carers and disabled people locked out from both rising prices and earnings, with the inevitable consequence that child poverty will increase. It’s wrong to punish the poorest and most disadvantaged in our society by cutting social security protection every time growth targets are missed while the better-off are protected.
‘It really would be politics of the worst kind if, as reported, this bill has been laid to create a political dividing line – we are talking about real lives, not political games.
‘Depicting the neighbour with drawn curtains in the morning as a "scrounger" to be scorned is a dangerous game to play. You may find it is a sick or disabled person, whose curtains are only drawn when their carer arrives, or a nurse who just got to bed after her night shift.’
She added, ‘This is a poverty-producing bill that does nothing to reduce the need for support. And since those on benefits have incomes so low they have no choice but to spend all their income, it also sucks money out of the economy.
‘We need a secure future for Britain’s families, and that means ending poverty by making progress towards full-employment, living wages, affordable housing and affordable childcare. The truth is that our social security and tax credits have been left to do far too much of the heavy lifting left by labour market, housing and childcare market failures.’
Yesterday, former children’s minister Sarah Teather said that she would vote against the bill and side with Labour against the proposals.
Ms Teather told BBC Radio 4’s The World at One, ‘We have a huge problem with in-work child poverty and we are only going to make this significantly worse by affecting those at the bottom end of the income spectrum.’
Child Benefit cut
The debate on welfare follows yesterday’s cut to Child Benefit for 1.1 million families in households where one parents earns more than £60,000 a year, which came into force yesterday.
The change makes Child Benefit for the first-time a means-tested benefit and has been roundly criticised by children and family organisations.
Anand Shukla, chief executive of The Family and Parenting Institute and Daycare Trust said the change was ‘historically significant and a worrying shift away from a universal commitment to children and families. Since the late 1940s, Governments of all colours have acknowledged the principle that higher costs faced by families should be recognised through the tax and benefit system.’
He added, ‘The changes transform a flat-rate, universal benefit which was both simple to understand and simple to claim into a highly-complicated scheme which will be difficult to administer. Due to the new self-assessment requirements; we fear this will confuse, and potentially penalise, over a million families up and down the country at a time when they are already struggling to make ends meet and worried about finances.
‘While we recognise that the economic downturn means savings need to be found, it is perverse to introduce a system where dual earner households of up to £100k can still receive child benefit in full, but single earner households of £60k will lose their entire benefit. With no end to austerity in sight, reducing disposable income for any family seems a counter-productive measure.’
