Work and Pensions Committee

Benefit freeze

Inquiry status: open

Scope of the inquiry

It has been predicted in evidence to the Committee that the benefit freeze will “increase poverty more than any other policy”, with a family of four receiving Universal Credit over £800 a year worse off by 2020, when the freeze is set to end, “even if both parents are working full-time on the National Living Wage”.  According to new House of Commons Library analysis, in 2019/20 affected households will have incomes between £888 and £1,845 lower, in real terms, than without the freeze.

The Committee has compiled evidence that shows that ending the benefits freeze - for all frozen benefits other than child benefit – a year early, in this year’s Spring Statement, would lift 200,000 people out of poverty.

Households have seen significant actual cuts to their real income because of the various caps and freezes since 2010: a single earner couple with two children’s income will fall by 0.7% in real terms, and an out-of-work lone parent with one child by 6.7% in real terms, between 2010/11 and 2019/20.

Witnesses have described the underlying issue of working-age benefits already set at levels inadequate to meet basic living costs, compounded by no uprating to match those costs rising annually: “the chronic problem that is driving destitution and indeed poverty is that working-age benefits are paid at far too low a level now and have been for a number of years. Obviously, that has been exacerbated by the benefit freeze, so they are losing value year on year.”  The Trussell Trust said that the optimal way to reduce the need for food banks and relieve hardship is to “ensure incomes, from both work and benefits, can meet people’s living costs”. It recommended that the benefits freeze be lifted and benefits uprated in line with inflation: “in particular, Child Tax Credits and the Child Element of Universal Credit should be uprated in line with inflation to reflect the additional, inescapable costs upon families.”

Ahead of the evidence hearing the Committee has written to Amber Rudd saying “the current freeze was originally designed to save £3bn… the Treasury would still make in-year savings of £2.5bn in 2019/20, even if the freeze was ended a year early. This, combined with the most recent monthly public borrowing figures showing a budget surplus of £14.9bn in January 2019—£5.6bn more than the surplus in January 2018, and the largest January budget surplus on record   - lead the Committee to encourage the Secretary of State to “urge the Chancellor of the Exchequer to consider ending the benefit freeze a year early”.

The Commons holds its annual debate on social security uprating, but the benefits freeze in the Welfare Reform and Work Act 2016 means that the frozen benefits are excluded from this process.

The evidence hearing comes as the Commons holds its annual debate on social security uprating, but the benefits freeze in the Welfare Reform and Work Act 2016 means that the frozen benefits are excluded from this process.

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