New analysis by the Joseph Rowntree Foundation (JRF) has shown that if the Government chooses to renege on the pledge made in April by then-Chancellor Rishi Sunak to uprate benefits in line with inflation as usual, it will amount to the largest permanent deliberate real-terms cut to the basic rate of benefits in history.
The suggested increase of 5.4%, would amount to the biggest permanent real-terms cut to the basic rate of benefits ever made in a single year.
Failing to uprate benefits in line with inflation combined with personal tax changes made at the fiscal statement would be profoundly regressive, with the poorest 10% losing 2.6% of their income (£214 a year) while the richest 10% gain 4.3% or over £5000.
Prime Minister Liz Truss must urgently confirm benefits will be increased in line with rising prices. This will provide reassurance and avoid inflicting harm on people who are already unable to afford the essentials.
The Government has cut the real value of benefits in 7 of the last 10 years. This was a failed approach already and has seen poverty deepen and more people go without the essentials. Trying to do more of the same, but this time against an alarming backdrop of rising energy and food prices, will only make matters worse.
They are now targeting their hostility towards those on low incomes at a time when 7 million households, equivalent to every family in the north of England, have missed out on essentials like food, heating, toiletries or showers because they couldn’t afford it.
JRF argues it is morally indefensible to target the incomes of the poorest in this way in order to attempt to stem the political and economic fallout following last week’s fiscal statement, which triggered a wider economic crisis which has run out of control.
According to today’s analysis, uprating by 5.4% would mean that values are around 15% below April 2016 level (when benefit freeze started to bite) in real terms. This amounts to a loss of £470 a year in the value of the Standard Allowance for a single adult aged 25+ and £740 for a couple aged 25 or over compared to if benefits had been uprated normally over the period, with the child element of Universal Credit £340 lower per child.
If benefits were uprated by only 5.4%, the poorest 10% would see their incomes fall by 2.6% or £214 per year once personal tax changes announced at the fiscal statement were taken into account. The richest 10% would see a gain of 4.3% or more than £5000.
As well as being a devastating blow to families around the country, this decision would be profoundly regressive, and risks leaving people who are already cutting back on essentials to make impossible choices.
