Benefit changes ‘will push more families into poverty’

7 Jan 13
Government plans to limit benefits increases to 1% in each of the next three years will push more families into poverty, campaigners warned today.
By Vivienne Russell | 7 January 2013

Government plans to limit benefits increases to 1% in each of the next three years will push more families into poverty, campaigners warned today.

The Child Poverty Action Group said the changes, contained in the Welfare Benefits Uprating Bill going through Parliament, would create a ‘double lockout’ for workers, jobseekers, carers and disabled people, hitting their real incomes by 4%. This is in contrast with the ‘triple lock’ guarantee that the government has given to pensioners, which increases state pensions in line with average earnings, inflation or 2.5%, whichever is highest.

CPAG chief executive Alison Garnham 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.’

She added that it would be ‘politics of the worst kind’ to create a political dividing line between different kinds of benefit recipients.

Garnham said: ‘This is a poverty-producing bill that does nothing to reduce the need for support.’

Meanwhile, the independent Institute for Fiscal Studies has calculated that the Bill will reduce the entitlement of 2.5 million workless households by around £215 a year by 2015/16. Around half of the 14 million working households will lose £165 a year. This includes those affected only by the Child Benefit cuts, which took effect today.

The IFS added that the effects of the Welfare Benefits Uprating Bill needed to be considered alongside wider changes to the tax and benefit system and the fall in real earnings, which have hit people on middle and higher incomes hardest.

‘When cutting public spending dramatically to help reduce an unsustainable budget deficit it is almost inevitable that spending on benefits and tax credits – which account for 30% of the government’s total budget – will be targeted. This policy achieves savings through an across-the-board reduction in the real value of benefits for people of working age at a time when real earnings have been falling,’ the IFS said.

‘But we don’t know two things. First, 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.’

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