Just weeks before a further public spending squeeze will see the second largest annual cut to the benefits budget since the financial crash, according to the Resolution Foundation thinktank, the changes from April will save around £2.5bn and dent the incomes of the “just about managing” families. The cuts will affect around 11 million families, including 5 million of the struggling families that prime minister Theresa May had vowed to help.
1.5 million workers set to benefit from a 4.4% pay rise when the national living wage increases from £7.50 to £7.83 at the start of April, but that measure will be outweighed by the effective £2.5bn cuts to working-age benefits.
This year’s squeeze will fall on low- and middle-income families. The new analysis suggests these families are set for an average loss of £190 this year alone, though some will be far worse off.
There are four key benefit cuts this year.
Working-age benefits will be frozen for a third year, saving £1.9bn and affecting almost 11 million families. The 3% real-terms cut in working-age benefits this year will be by far the biggest of the freeze, set to last four years.
A measure limiting benefit claims to a family’s first two children, costing up to £2,780 for a family having a third child, saves £400m this year and affects 150,000 families.
The withdrawal of the family element of support for new tax credit and universal credit claims from families with children will cost families up to £545. It saves the public purse £200m this year and will affect 400,000 families.
Finally, the rollout of the controversial universal credit system, which combines several benefits into one payment, saves £200m because some claimants have lower entitlements compared with the existing system, especially the long-term sick and working families.
Paul Johnson, head of the respected Institute of Fiscal Studies, warned that Britain was “nowhere near out of austerity”.
The Joseph Rowntree Foundation shows that the decision to press ahead and freeze most working-age benefits and tax credits this year would see a couple with two children left £380 worse off compared with a scenario in which their universal credit claim had increased in line with prices.