Nearly one in three children will be living in poverty if working-age benefits are not increased in line with inflation next year, according to a leading think-tank.
Not uprating benefits in April would reduce the incomes of nine million households by an average of £470, according to research published on Friday by the Resolution Foundation.
This would plunge an additional 400,000 children into poverty – meaning they would be living in a household with income that is 60 per cent below that of a typical household.
The consumer prices index (CPI) inflation figure for September, published next Wednesday and forecast by the Bank of England to be 6.9 per cent, is typically used by the Government to calculate the increase to benefits such as universal credit.
In recent months it has been suggested that ministers are considering increasing benefits by less than this figure. This would be the fifth time this would have been done in the past decade.
Any decision not to increase benefits in line with inflation would widen the gap between benefits and the state pension, which is protected by the triple lock and will increase in line with average earnings (8.5 per cent) in April 2024.
The Resolution Foundation has warned that scrapping the benefit uprating would hit the incomes of 45 per cent of working-age households, and this would include 62 per cent of working-age households where at least one member has a disability, 73 per cent of couples with children and 93 per cent of single parents.
The report’s authors have said that freezing the cash value of universal credit entitlements next year would save around £2.9bn, while also freezing other “non-protected” working-age benefits such as child benefit, jobseeker’s allowance, tax credits and statutory maternity and paternity pay would save around £4.2bn.
But it would hugely hit household incomes. A working couple in receipt of universal credit with two children would see their annual income reduced by £1,241, should the freeze go ahead. Child poverty in the UK would increase from 26 per cent to 29 per cent, according to the think-tank.
Lindsay Judge, research director at the Resolution Foundation, said: “The Government is reportedly considering returning to a tried-and-tested way of saving the Exchequer money, by not uprating benefits in line with prices next year.
“At a time when the incomes of the poorest half of the population are already set to fall next year, failing to uprate working-age benefits in line with prices would be hard to defend, deepening a cost of living crisis that is already hitting low and middle-income households the hardest.”
Working-age benefits have decreased in value rapidly over the past 13 years.
While the state pension has seen a 14 per cent increase in its value – once inflation is factored in – basic unemployment support is down 9 per cent for example.
This is because although the state pension has increased at a faster rate than inflation on several occasions, other benefits have been increased at a slower rate several times.
A government spokesperson said: “We increased benefits by over 10 per cent this year in order to protect the most vulnerable from the impact of high inflation.
“As is the usual process, the Secretary of State will conduct his statutory annual review of benefits and State Pensions in the Autumn, using the most recent data available.”
