UP TO £660 PER YEAR COULD BE SLASHED FROM HOUSEHOLD INCOME
In a letter to the chancellor last week, the Bank of England stated that it expected inflation to be “around 8 per cent” this spring. With Universal Credit set to rise by just 3.1 per cent in April, families with children on universal credit now face a real-terms cut of around £660 per year, on average.
This is an increase on Child Poverty Action Group’s original analysis which showed a cut of £570, when inflation was expected to be 7.25 per cent.
The £20 cut to universal credit last October plunged out-of-work benefits to their lowest level in 30 years. Latest analysis shows that the picture for families is going from bad to worse.
Without government action, families will be pulled deeper into poverty. Increasing benefits by anything less than 8 per cent risks pushing those with already stretched budgets past breaking point.
Anti-poverty charities wrote to the Chancellor last week calling for a minimum 7% benefits rise:
Prices are rising at the fastest rate in 30 years, and energy bills alone are going to rise by 54% in April. We are all feeling the pinch but the soaring costs of essentials will hurt low-income families, whose budgets are already at breaking point, most.
There has long been a profound mismatch between what those with a low income have, and what they need to get by. Policies such as the benefit cap, the benefit freeze and deductions have left many struggling.
And although benefits will increase by 3.1% in April, inflation is projected to be 7.25% by then. This means a real-terms income cut just six months after the £20 per week cut to universal credit.
Child Poverty Action Group’s analysis shows families’ universal credit will fall in value by £570 per year, on average. The Joseph Rowntree Foundation has calculated that 400,000 people could be pulled into poverty by this real-terms cut to benefits.
The government must respond to the scale of the challenge. Prices are rising across the board. Families with children in poverty will face £35 per month in extra energy costs through spring and summer, even after the government’s council tax rebate scheme is factored in. These families also face £26 per month in additional food costs. The pressure isn’t going to ease: energy costs will rise again in October.
A second cut to benefits in six months is unthinkable. The government should increase benefits by at least 7% in April to match inflation, and ensure support for housing costs increases in line with rents. All those struggling, including families affected by the benefit cap, must feel the impact.
Much more is needed for levels of support to reflect what people need to get by, but we urge the government to use the spring statement on 23 March to stop this large gap widening even further. The people we support and represent are struggling, and budgets can’t stretch anymore.
Alison Garnham, Chief Executive, Child Poverty Action Group
Emma Revie, Chief Executive, The Trussell Trust
Graeme Cooke, Director of Evidence and Policy, Joseph Rowntree Foundation
Morgan Wild, Head of Policy, Citizens Advice
Dan Paskins, Director of UK Impact, Save the Children UK
Imran Hussain, Director of Policy and Campaigns, Action for Children
Thomas Lawson, Chief Executive, Turn2us
Sophie Corlett, Director of External Relations, Mind
Dr Dhananjayan Sriskandarajah, Chief Executive, Oxfam GB
Caroline Abrahams, Charity Director, Age UK
Eve Byrne, Director of Advocacy, Macmillan Cancer Support
Kamran Mallick, CEO, Disability Rights UK
Katherine Hill, Strategic Project Manager, 4in10 London’s Child Poverty Network
Mubin Haq, Chief Executive Officer, abrdn Financial Fairness Trust
Bob Stronge, Chief Executive, Advice NI
Dr Ruth Allen, Chief Executive, British Association of Social Workers
Joseph Howes, Chief Executive Officer, Buttle UK
Helen Walker, Chief Executive, Carers UK
Balbir Chatrik, Director of Policy and Communications, Centrepoint
Gavin Smart, Chief Executive, Chartered Institute of Housing
Leigh Elliott, CEO, Children North East
Niall Cooper, Director, Church Action on Poverty
Lynsey Sweeney, Managing Director, Communities that Work
Anna Feuchtwang, Chair, End Child Poverty Coalition
Claire Donovan, Head of Policy, Research and Campaigns, End Furniture Poverty
Victoria Benson, CEO, Gingerbread
Neil Parkinson, co-head of casework, Glass Door Homeless Charity
Graham Whitham, Chief Executive, Greater Manchester Poverty Action
Yasmine Ahmed, UK Director, Human Rights Watch
Sabine Goodwin, Coordinator, Independent Food Aid Network
Jess McQuail, Director, Just Fair
Gemma Hope, Director of Policy, Leonard Cheshire
Paul Streets, Chief Executive, Lloyds Bank Foundation for England & Wales
Jackie O’Sullivan, Director of Communication, Advocacy and Activism, Mencap
Mark Rowland, Chief Executive, Mental Health Foundation
Chris James, Director of External Affairs, Motor Neurone Disease Association
Nick Moberly, CEO, MS Society
Anna Feuchtwang, Chief Executive, National Children’s Bureau
Charlotte Augst, Chief Executive, National Voices
Jane Streather, Chair, North East Child Poverty Commission
Tracy Harrison, Chief Executive, Northern Housing Consortium
Karen Sweeney, Director of the Women’s Support Network, on behalf of the Women’s Regional Consortium, Northern Ireland
Satwat Rehman, CEO, One Parent Families Scotland
Mark Winstanley, Chief Executive, Rethink Mental Illness
James Taylor, Executive Director of Strategy, Impact and Social Change, Scope
Irene Audain MBE, Chief Executive Scottish, Out of School Care Network
Steve Douglas CBE, CEO, St Mungo’s
Richard Lane, Director of External Affairs, StepChange Debt Charity
Robert Palmer, Executive Director, Tax Justice
Claire Burns, Director, The Centre for Excellence for Children’s Care and Protection (CELCIS)
The Disability Benefits Consortium
Dr. Nick Owen MBE, CEO, The Mighty Creatives
Peter Kelly, Director, The Poverty Alliance
Elaine Downie, Co-ordinator, The Poverty Truth Community
Tim Morfin, Founder and Chief Executive, Transforming Lives for Good (TLG)
UCL Institute of Health Equity
Dr Mary-Ann Stephenson, Director, Women’s Budget Group
Natasha Finlayson OBE, Chief Executive, Working Chance
Claire Reindorp, CEO, Young Women’s Trust
Businesses in Scotland are also calling for the Chancellor to announce new measures to help with rising costs ahead of his Spring Statement tomorrow, according to a recent survey from Bank of Scotland.
As inflation hits the highest levels seen since 1992, over half (55%) of Scottish businesses said that direct help with energy bills and rising costs tops their wish list for the Chancellor. This was followed closely by calls for a reduction in VAT, cited by two-fifths (40%), while almost a quarter of firms (23%) want increased funding to help create new jobs and develop skills.
Rising prices remain a key challenge for business. Almost half (46%) of respondents said they are concerned about having to increase the costs of goods and services and over one in ten (14%) stated that inflation is reducing profitability. Almost one in ten (9%) said rising prices had caused them to worry about having to make staff redundant and a further one in ten (9%) were concerned about not being able to pay their bills.
To help specifically with rising prices Scottish businesses are asking the Chancellor for a VAT reduction (46%), while a third (35%) have called for grants to cover rising energy costs. A further quarter (23%) called for grants to support investment in energy saving measures.
The data comes as businesses face continuing supply chain challenges, which are reducing the availability of stock (40%), causing hikes in freight costs (39%) and disruption through Rules of Origin and VAT requirements from EU suppliers (33%).
Fraser Sime, regional director for Scotland at Bank of Scotland Commercial Banking, said: “Rising prices are causing multiple challenges for businesses across Scotland and the pressure from inflation shows no sign of abating in the near-term.
“As we wait for the Chancellor’s Spring Statement, we’ll continue to remain by the side of business in Scotland and support the country’s ongoing economic recovery from the pandemic.”
Responding to the ONS public sector finances statistics for February Chancellor of the Exchequer, Rishi Sunak said: “The ongoing uncertainty caused by global shocks means it’s more important than ever to take a responsible approach to the public finances.
“With inflation and interest rates still on the rise, it’s crucial that we don’t allow debt to spiral and burden future generations with further debt.”
“Look at our record, we have supported people – and our fiscal rules mean we have helped households while also investing in the economy for the longer term.”
All will be revealed when the Chancellor delivers his Spring Statement (Budget) at Westminster tomorrow.
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