Real-terms cut to benefits would leave millions ‘starving and freezing in their own homes’

Photo: Kim Mogg/NationalWorld
A low-income family with two children stands to lose around £1,000 per year if benefits are not uprated in line with inflation

Failing to increase benefits in line with inflation would be “cruel” and “show an utter disdain for people in need of support,” charities have warned.

Rishi Sunak promised that benefits would increase in line with inflation in 2023, but comments from a number of senior Conservatives in recent days suggest the policy could now be scrapped.

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Following the mini-budget, which sparked major concern in financial markets due to unprecedented levels of borrowing to fund tax cuts which overwhelmingly benefit higher-earners, government figures have stressed the need to cut other forms of spending.

Analysis from a leading think tank suggests that failing to increase benefits in line with inflation, which currently is 9.9%,  would amount to the largest real-terms cut to the basic rate of benefits in history. It is thought the government may link it to earnings, which will instead be a rise of 5.4%.

Disabled people, carers and single-parents are among the groups most at risk of financial hardship should the government break its pledge.

New Prime Minister Truss could face internal opposition to the move, after a number of Conservative MPs - including Michael Gove and Cabinet minister Penny Morduant- have publicly questioned the idea of enforcing a real-terms benefit cut.

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‘We have to be fiscally responsible’

The prime minister refused to confirm whether benefits will be increased in line with inflation, which could leave the poorest households facing more than a £1,000 annual shortfall.

Speaking to the Today Programme from the Conservative Party conference this morning, 4 October, she said: “We are going to have to make decisions about how we bring down debt as a proportion of GDP in the medium term.

“I am very committed to supporting the most vulnerable, in fact in addition to the energy price guarantee we’re also providing an extra £1,200 to the poorest households. So we have to look at these issues in the round, we have to be fiscally responsible.”

The amount paid to Universal Credit claimants and people in receipt of other benefits could be set to rise by around 5% rather than 10%, which would amount to a 4 percentage point real-terms cut.

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This is despite a pledge by then chancellor Rishi Sunak in May that benefits would rise by the September CPI measure of inflation.

The uprating system has previously been criticised as being insufficient, with the Work and Pensions select committee describing the system as “impotent in the face of rising prices”.

In July, after the April increase was tied to the rate of inflation from seven months earlier, which was much lower than at the time, the committee recommended that the DWP should reduce the length of time between the reference period and the increase being implemented.

Now, after facing significant criticism following a mini-budget which prompted a crash in the value of the pound and saw the Bank of England react with a large financial package to shore up pensions, the government is thought to be looking at a wide range of measures to bring down spending.

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Asked over the weekend whether she would stick to Mr Sunak’s pledge Liz Truss replied: “This is something the work and pensions secretary is looking at at the moment, so she will make a determination on that and we will announce that this autumn.”

Other government ministers including Chris Philp and Jake Berry also refused to rule out the real-terms cut during interviews in recent days.

Majority of people onn Universal Credit in work or can’t work

Analysis by the Resolution Foundation shows that a low-income working family with two children stands to lose over £1,000 a year if benefits rise in line with earnings rather than inflation.

The Joseph Rowntree Foundation has urged the government to clarify that the rise will be implemented as promised, and that it won’t “target cuts at those on the lowest incomes who have been struggling for months to feed their families, cook hot food and heat their homes.”

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Katie Schmuecker, Principal Policy Adviser at the Joseph Rowntree Foundation said: “The government must take urgent action to reassure those on the lowest incomes in our society that it won’t renege on its promise to raise benefits in line with inflation as usual.

“Anything less than raising benefits in line with inflation will amount to the largest permanent deliberate real-terms cut to the basic rate of benefits in history. It is only right the proper process is followed, especially when people are already going without as the cost of essentials soars. This is a time for certainty, not cuts.”

Around 5.8million people claim Universal Credit, with 41% of those in-work. DWP stats for July 2022 show that the largest group of UC claimants have no work requirements, potentially due to health reasons or because of caring responsibilities.

People in receipt of Universal Credit include disabled people who cannot work due to their disability and carers. While these people receive extra support on top of the basic Universal Credit rate, the increase in the rate of these additional payments will be tied to the same measure as the basic rate.

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James Taylor, director of strategy at disability equality charity Scope, told NationalWorld that the government must stick to its promise as well as providing direct financial support now to disabled people.

“If the government U-turns on this promise, it would be devastating and lead to disabled people starving and freezing in their own homes,” he warned.

“Disabled people and their families are the ones in our society who need financial support the most.

“Many disabled people have no choice but to rely on benefits for income. They’ve seen real-terms cut after cut, firstly because of a four-year benefits freeze, and then last year’s failure to increase in line with inflation.

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“Refusing to increase benefits in line with the true inflation rate would show an utter disdain towards people who need this support.

Disabled people are almost twice as likely to be unemployed as non-disabled people, according to ONS data.

Research by Scope has found that disabled people have to spend an average of £583 every month as a result of their disability.

Unpaid could also be carers set to lose out

Around 1.3 million people in the UK receive Carer’s Allowance, with many of those having given up work in order to meet their care needs.

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Joe Levenson, Executive Director of Policy and External Affairs at Carers Trust told NationalWorld that significant numbers of these carers “are being pushed into financial hardship and poverty by a growing cost of living crisis.

He said: “That’s why it is so essential that the UK Government commits to uprating benefits including Carer’s Allowance in line with inflation, as part of a wider package of support to unpaid carers.”

A DWP spokesperson said: “The Secretary of State commences her statutory annual review of benefits and State Pensions in the autumn using the most recent prices and earnings indices available.

“We recognise people are struggling with rising prices which is why we are saving households an average of £1,000 a year through our new Energy Price Guarantee, allowing working people on Universal Credit to keep £1,000 more on average of what they earn and providing eight million of the lowest-income households with additional direct support worth at least £1,200.”

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