Benefit reform – families to be hit by £2.3bn losses

The combined effect of benefits changes and cuts to tax credits this month are set to see low income households in the UK face combined losses of £2.3 billion.

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The year-on-year comparison of household support from the Child Poverty Action Group revealed that consumers may face an uphill struggle to make ends meet in the aftermath of policy changes.

Working age benefits and tax credits uprating are now capped at 1%, presenting the biggest hit to consumer budgets at a loss of £505m.

The introduction of the so-called bedroom tax (housing benefit penalties for excess rooms in the social sector) is also expected to generate losses of £490m.

This is followed by a £485m loss as a result of council tax benefits being localised and devolved budgets being cut by 10%, as well as a £455m loss from tax credit disregards decreasing to £5,000 (the amount of in-year increases to income disregarded from tax credits).

The introduction of a benefit cap is also set to hit low-income families in the UK with £290m in losses, while the fact that local housing allowance will be annually uprated at the Consumer Price Index (CPI) (instead of the Retail Price Index) is set to bring in £90m in losses.

Commenting on the figures, Alison Garnham, Chief Executive of Child Poverty Action Group, said:

“Families already struggling with rising living costs face another body blow as a potentially devastating package of benefit cuts is introduced this month which will grab desperately needed financial help away from families and suck billions of pounds of spending power out of local businesses and communities.

“Cuts that hit families put our children in the frontline of austerity.  All the indications are that they are paying a heavy price; recent progress on child poverty and child wellbeing, after first stalling, is now being slammed into reverse.”

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