Following just twenty minutes after last month’s Royal Wedding announcement was a much grimmer statement. Despite calls to scrap the plan, the four-year benefits freeze announced in summer 2015 will definitely continue until 2019.
The benefits freeze affects child benefit, Jobseeker’s Allowance, Universal Credit, Employment and Support Allowance, Income Support, and tax credits. It doesn’t apply to some disability benefits, pensions, and maternity or sick pay.
What is the Benefits Freeze?
The government used to raise benefits for working-age people to match inflation but stopped increasing benefits from April 2016. This benefits freeze aims to save £3.7 billion for the Treasury by 2020. Heartlessly, this will be at the expense of millions of people with disabilities and families with children.
When inflation occurs resulting from a healthy economy, higher pay offsets the increased cost of living. At the moment, this is not the case. The value of the pound dropped drastically following the referendum on Brexit, causing inflation due to the higher cost of imported goods.
Average earnings do not match up to inflation rates, heavily impacting those with the lowest incomes. The benefits freeze coincides with the longest drop in living standards in the last 60 years. Disposable incomes are consistently dropping, with no predicted increase.
Incomes and benefits are not keeping up with the rising cost of living, which means a continued freeze on financial support will cause losses for millions. The benefits freeze will have a negative impact on 7.3 million children and 2.4 million people with disabilities.
By 2020, the Institute for Fiscal Studies predicts an average drop in benefit entitlements of £450 per year for 10.5 million households. This may not seem like much, but it’s a huge blow for people already barely making ends meet.
Likely as a result of welfare reforms, homelessness in the UK has seen a severe increase this year. According to a survey by Shelter, over 300,000 people in Britain are now homeless. Thanks to the benefits freeze, even more people could end up on the streets or in hostels.
The Joseph Rowntree Foundation predicts that the benefits freeze will push half a million people into poverty by 2020. Struggling to cover living costs, bills, and rent could lead to eviction for many individuals and families.
Admittedly, the government is making some (very) small steps in the right direction. Amendments to the Universal Credit claiming process and the National Living Wage will come into effect next year. These changes might help a little with the fallout from the benefits freeze.
Changes to Universal Credit
As previously reported, opposition to Universal Credit demanded adjustments to be made to the flawed programme. Finally, Universal Credit will eliminate the seven-day waiting period starting in February 2018. From this time, any new claimants will then receive their first payment after five weeks instead of six.
Additionally, claimants who also receive Housing Benefit will get an extra two weeks of Housing Benefit payments to reduce rent arrears. However, this only applies to new claimants from April 2018. Any earlier claims won’t receive any help with arrears built up during the waiting period.
The weeks-long gap is still too long for people to cope without financial support, according to shadow work and pensions secretary Debbie Abrahams. The poor timing means anyone claiming from mid-November still won’t receive anything until after Christmas. At this time of year, struggling families need financial support the most.
The continuation of lengthy waiting periods in the meantime could contribute to people being unable to pay their rent, or for necessities like food and heating in the cold winter months. Abrahams is calling for these amendments to be brought forward and modified further to better help the people who need it.
National Minimum Wage Increases
It may not all be doom and gloom, at least for those in low-paid employment. The UK chancellor Philip Hammond confirmed that the National Living Wage will increase in April 2018. The national minimum wage for workers over 25 will rise by 4.4 percent from £7.50 to £7.83 per hour.
Workers between 21 and 24 years old will receive a 4.7 percent increase to £7.38 an hour, with a 5.4 percent rise for 18 to 20-year-olds to £5.90 an hour. 16 to 17-year-olds will get a smaller increase of 3.7 percent to £4.20 an hour, while a larger 5.7 percent will boost hourly wages for apprentices to £3.70.
Hopefully, these pay rises will be able to keep up with inflation rates, allowing low-paid workers a little breathing room. They’ll still be out of pocket because of the benefits freeze, but with a smaller loss thanks to increased wages.
Due to the weak economy, the government’s aim for over 25s to earn £9 an hour by 2020 is failing. It looks like this target will only be met in 2022, two years behind schedule.