The DWP rejected the chance to take 200,000 out of poverty by refusing an early end to benefits freeze, a Common report reveals.
That early end had been recommended by the Commons Work & Pensions Committee given the extent of savings DWP had made through the freeze.
Now, the Committee says that when the freeze ends in 2020/21, a “substantial chunk” will have been taken out of the incomes of some of the country’s most vulnerable households.
In a report assessing stress on the welfare safety net, the committee says lifting the freezes as planned in 2020/21, therefore, is not enough.
The report says that from 2020/21, Government should increase the rates of frozen benefits by CPI plus 2% so benefit rates would, after four years, reach the level at which they would have been set if they had not been frozen.
From that point, the report says, the DWP should commit to uprating benefits at least in line with inflation – producing a medium-term plan for linking the rate at which benefits are set with the real cost of living.
As reported by 24housing, Work and Pensions secretary Amber Rudd last month called on the Prime Minister to end the benefits freeze even in the event of a no-deal Brexit.
Her call coincided with the release of a report revealing destitution is on the rise – with families routinely unable to afford regular meals, wash clothes or provide their children with basic items such as beds and sheets.
Rudd wanted to see a thaw in the benefits freeze by 2020 up for review next year regardless of whether or not the UK has left the European Union with a deal.
The latest Work and Pensions Committee report refences back to 2011 when the then-Government changed the measure of inflation used in uprating – increasing the value of benefits to account for inflation – from the Retail Prices Index (RPI) to the Consumer Prices Index (CPI).
From 2013, most working-age benefits – including payments for people in work, for disabled people in the ESA-WRAG group, and for housing benefit claimants in the private sector via Local Housing Allowance [LHA]) – were uprated by just 1%.
Even without any further changes, the committee concludes this would have contributed to a reduction in financial security for many of the households DWP supports – including claimants who need benefits to top-up income from low-paid work.
But in 2015, the then-Chancellor announced that those same benefits would be frozen in cash terms for five years at 2015/16 rates.
Government said this was necessary because benefit growth had outstripped wage growth following the 2008 financial crisis: the freeze was framed as necessary to ensure “that it always pays to work”.
To the committee, the outcome is that already low rates of benefit have become divorced from the real costs of living.
By this year, the DWP had already saved £4.4bn through the freeze – £0.9bn more than intended.
But the DWP rejected the committee’s request to end the freeze, despite the fact that doing so would, by the committee’s calculations, have lifted some 200,000 people out of poverty.
“The (DWP’s) regrettable decision means that very disadvantaged people are still losing out. When the freeze ends in 2020/21, a substantial chunk will have been taken out of the incomes of some of the country’s most vulnerable households,” the report says.
To the committee, lifting the freezes as planned in 2020/21 is no longer enough.
Instead, from 2020/21, the Government should increase the rates of frozen benefits by CPI plus 2%.
“That would mean that benefit rates would, after four years, reach the level at which they would have been set if they had not been frozen.
“From that point, the Department should commit to uprating benefits at least in line with inflation.
“In addition, the Department should produce a medium-term plan for linking the rate at which benefits are set with the real cost of living,” the report says.