Poverty and Inequality

13.03.18

Struggling families set to be hit hardest by highest benefit cuts in five years

Families that are “just about managing” will be hit by the biggest year of benefit cuts since 2012, the Resolution Foundation has warned.

Research by the foundation found that benefit changes set to save around £2.5bn will “significantly squeeze” incomes of these families.

The changes, which come into effect from 9 April, will affect 11 million families, including five million “just about managing” families.

A 3% real-terms cut in working age benefits this year will save £1.9bn in the third and biggest year of the four-year benefit freeze, according to the foundation, and will affect almost 11 million families.

The two-child limit for benefit claims will cost up to £2,780 for a family having a third child, affecting 150,000 families and saving £400m.

The withdrawal of the family element of support for new tax credit and Universal Credit claims from families with children will save £200m, but will cost around 400,000 families up to £545.

Around £200m is expected to be saved by through the rollout of Universal Credit by reducing the entitlements for long term sick and working families in particular.

This April’s cuts are the second biggest annual cuts since the financial crisis, with the squeeze “set to fall squarely on lower income families,” according to the foundation.

“Just about managing” families will see an average loss of £190 this year, but some families will be thousands of pounds worse off.

David Finch, chief analyst at the Resolution Foundation said that whilst the expected borrowing boost from the Office for Budget Responsibility is welcome news, it will not change the fact that families across Britain face “a huge living standards crunch” - some of which he said is a direct result of government policy.

“The government is doing the right thing on pay with another big rise in the National Living Wage and ending the cap on public sector pay.

“But for many families the extra pay will be outweighed by the £2.5bn worth of benefit cuts being rolled out,” he explained.

“With an average loss of £190, low and middle-income families are set for the second biggest welfare squeeze since the crisis, at a time when pay growth remains muted and household incomes are already under strain.

“The Chancellor is keen to stick to his brief of a short speech with no new policies.

“But given the financial challenges facing families across Britain, a quick change of his predecessor’s policies on benefit cuts would go a long way towards showing that he is on the side of hard-pressed working families,” Finch concluded.

Top image: Imgorthand

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