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MPs vote to end benefits freeze but rise ‘won’t cover costs’

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Written by: Paloma Kubiak
11/02/2020
MPs have voted to end the benefits freeze meaning a range of working-age benefits and tax credits will rise from April.

People in receipt of income-related benefits such as Universal Credit, Child Benefit, non-disability Tax Credits and Jobseeker’s Allowance will see their payments increase in line with September’s official inflation figure of 1.7% from 6 April.

It marks the end of a four-year benefits freeze which saw most working-age benefits (except disability and carer’s benefits) held at their 2015/16 levels.

Data reveals that if there had not been a four-year freeze and benefits had been allowed to rise in line with consumer price inflation (CPI), they would have risen by 6.5% in nominal terms by 2019/20 compared with 2015/16.

At the 2016 Budget, the Treasury forecast the freeze would save the government £3.5bn by 2019/20, but analysis by the Resolution Foundation estimated the move actually saved the exchequer £4.7bn as CPI for the period 2016-18 was higher than expected.

Not enough money to cover costs

Despite the increase this year, charity Citizens Advice said four in 10 households seeking debt advice and in-receipt of the benefits would still not have enough money to cover their costs by 2024, even if the rises were to continue in future years.

In fact, since the benefits freeze began in 2016, the number of people unable to cover their living costs has increased. In the first five months of the new financial year, 40% of those helped by the charity didn’t have enough money to cover costs, an increase of 25% since 2015/16.

In one case seen by the charity, a 64-year-old woman called Sheila, who works part-time and receives Universal Credit, said her payments can change on a monthly basis, making it hard to budget. With council tax and rent arrears, she has had to resort to visiting a foodbank.

Sheila said: “Quite often I don’t have any electric so I’m very cold. I can’t even make a hot water bottle to keep warm, or make a hot drink. I have to stay under the duvet.

“I just don’t have enough money coming in to pay the council tax and rent arrears, the actual council tax, buy food and top up my gas and electric.”

The charity is calling for the government to go further and increase income-related benefits by CPI plus 2% for four years.

Gillian Guy, chief executive of Citizens Advice, said: “Our evidence shows that increasing numbers of people simply don’t have enough money to make ends meet. While a step in the right direction, increasing benefits by inflation will not go far enough to help solve this problem.

“The benefits system was created to support people in times of need. The government should show it’s serious about meeting this ambition of properly investing in working-age benefits, and making sure fewer families are left in a downward spiral with no way to pay their bills.”

How much will you receive in April?

Here are the new rates for some of the working-age benefits:

  • Child Benefit: eldest child from £20.70 to £21.05 a week, subsequent child from £13.70 to £13.95.
  • Jobseeker’s Allowance: age 25 or over from £73.10 to £74.35 a week, under 25s from 57.90 to £58.90.
  • Universal Credit: couple with one or both over 25, from £114.85 to £116.80, single 25+ from £73.10 to £74.35, single under 25 from £57.90 to £58.90 a week.
  • Maternity allowance: from £148.68 to £151.20.

You can see the full list of benefit and pension rates here.

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