Income-related benefits are set to increase inline with inflation, which is currently 1.7 percent. This will likely be welcome news for many claimants, with some caps on benefits having been in place since as far back as 2010. Despite the good news however, some feel that ending the benefits freeze does not go far enough.
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New analysis from Citizens Advice details that almost four in ten households that seek debt advice and receive benefits would not have enough money to cover their costs by 2024, even if these new rises are factored in and continue in future years.
Citizens Advice found that the number of people who are unable to cover their living costs have increased since the benefits freeze began in 2016.
In the first five months of the current financial year, 40 percent of the people the charity helped with debt who claimed income-related benefits didn’t have enough money to cover their living costs – an increase of 25 percent since the freeze came into effect.
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The organisation highlighted the story of Sheila, a 64 year old woman who works part time and receives Universal Credit. They detail that her payments can change on a monthly basis, making it hard for her to budget and cover monthly costs. Sheila lives in a council flat and is currently in rent arrears, resulting in her resorting to food banks.
As Sheila details: “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.
“Even in the months when I am paid my full Universal Credit and wages it’s still really hard to afford everything, including food.
“It’s all swings and roundabouts, 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.”
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Citizens Advice is calling for the government to help address these kinds of issues by increasing income-related benefits by the Consumer Prices Index (CPI) plus two percent for four years.
They’re also calling for Local Housing Allowance to be recalculated, which would help support families utilising private tenancies.
Generally, the organisation feels that changes to benefit levels across the board need to be accompanied with wider reforms to the benefits system as a whole.
This would include ensuring Universal Credit gives people enough to live on by reviewing areas such as the amount of money retained by working claimants, and deductions for those dealing with debts or repaying advance payments.
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Dame Gillian Guy, Chief Executive of Citizens Advice, explained: “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 by properly investing in working-age benefits, and making sure fewer families are left in a downward spiral with no way to pay their bills.”
The issues presented by Citizens Advice have not gone unnoticed. In response to Citizens Advice findings a DWP spokesperson said: “From April benefit payments will rise for more than 10 million people across the UK.
“We know some families need more support, which is why we continue to spend over £95 billion a year on working-age benefits.”
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DWP also added additional information for the benefits system and other areas. They detail that 2.8 million people on Universal Credit will see their payments from the benefit rise by 1.7 percent, in line with inflation, as will millions of claimants of legacy benefits. The increase will benefit more than 10 million people.
Local renters will also see a benefit. From April 2020 Local Housing Allowance rates will be increased by 1.7 percent in line with CPI – up to a maximum of the 30th percentile of local rents. The increase means that around 900,000 people could see their benefit rise. The 1.7 percent increase in Local Housing Allowance rates from April will provide an average of around £10 extra a month to affected households in the private rented sector.
The state pension, under the triple lock system, is also set to rise by 3.9 percent. This represents the largest increase in eight years. In April the full rate of the UK’s new State Pension will increase by 3.9 percent to £175.20 per week, meaning an extra £344 a year.
The government has made it clear that it understands the issues that the freeze has brought forward. In a very straightforward statement, the DWP detail that they have no intention of repeating the current freeze. They acknowledge that under the last government the welfare budget increased by 65 percent in real terms, getting it completely out of kilter with wages and making it unsustainable. That, combined with the fiscal pressure faced in 2010, made it inevitable that they had to take action.
The government claim that tackling poverty will always be a priority, adding that income inequality and absolute poverty are lower now than in 2010.