Photo credit: NEFATRON via photopin cc

An independent thinktank has called on the UK government to scrap the freeze to income-related social security benefits, warning the cruel policy is likely to push half a million more people into poverty by 2020/21.

Former Chancellor George Osborne announced that most working-age benefits would would be frozen for a further four years at the 2015 Budget, despite concerns it would hit thousands of the poorest households.

Now a new briefing from the Joseph Rowntree Foundation (JRF) thinktank warns the majority of those affected by extending the freeze come from working households, adding it is “the single biggest policy driver behind the expected rise in poverty by the end of the Parliament”.

JRF analysis found that higher inflation means low-income households will be left almost £0.9bn worse off than the £4bn originally expected as a result of the benefits freeze. Extra savings for the Treasury… but more pain for people already struggling to make ends-meet.

The thinktank estimates that 470,000 more people will be forced into poverty by 2020/21, as a direct result of the benefits freeze and its impact on their incomes.

By the time the freeze is lifted in 2020/21, if it isn’t extended again, JRF forecast that a couple with two children in receipt of Universal Credit will be £16 per week (£832 per year) worse off, while a lone parent with two children will see their income slashed by £13 per week, or £676 per year. This is regardless of whether they are out-of-work or working full-time for the ‘National Living Wage’.

Campbell Robb, chief executive of JRF, said: “People who are just managing at best are being hit in the pocket by the freeze on benefits and tax credits. It means millions of families are finding life even harder to make ends meet – whether paying for the weekly food shop, covering energy bills or finding enough money to pay the rent.

“While the Treasury gains from this policy in the short-term, more children living in poverty has costs the Exchequer an estimated £6.4bn per year in lost tax revenue and additional benefit spending.

“The focus should be on making sure low-income family budgets keep pace with the cost of essentials, while reducing the benefit bill through increasing employment and enabling people on low pay to increase their earnings.

“No government wants to fight an election on a record of rising poverty and falling living standards. Circumstances have changed, so policy needs to change too. As prices rise, the priority should be to protect the budgets of the lowest income families. It’s time to lift the freeze.”

JRF has urged the UK government to unfreeze income related benefits such as tax credits, Universal Credit, the Local Housing Allowance and Job Seekers Allowance.

The thinktank says uprating income related benefits (not including child benefit) by the CPI inflation measure from 2018/19 would result in 380,000 fewer people in poverty in 2020/21. Of these, 9 in 10 would be families with dependent children and 17 in 20 would be working families, at a cost to the Treasury of £2.8bn in 2020/21.