The Government appears to have underestimated the severity of its four-year freeze on working-age benefits, with the cap set to hit claimants by almost 50 per cent more than official estimates, according to exclusive new analysis.
The research from the House of Commons Library shows that, due to rising inflation, the measure introduced last year is now expected to reduce support by £13bn over the next four years, compared with the recent official Government forecast, of £9bn.
The figures come as Theresa May puts into force a raft of new austerity measures this week, hitting thousands of the most disadvantaged people across the country, including parents, widows, the disabled and young people.
The four-year freeze on working-age benefits, which includes the main rates of Jobseeker’s Allowance, Income Support, Employment Support Allowance and Housing Benefit, as well as Child Benefit and other working tax credits, came in last April and was expected to affect 11 million families across the UK.
Labour, who conducted the analysis, are now calling for the Government to urgently review the policy, saying it risks pushing people into poverty.
Shadow Work and Pensions Secretary Debbie Abrahams said: “With higher than expected inflation, this is now a cut that runs four billion pounds deeper than the Tories intended.
“As a result, the living standards of millions of families who rely on tax credits, child benefit or other forms of social security will be put under even greater pressure.”
Ms Abraham’s comments echo those of Conservative MP Iain Duncan Smith, who resigned as Work and Pensions Secretary shortly before the freeze came in. He said in November last year that the Government should review the policy because it would likely be hit by harsher than expected inflation.
“When the original benefit freeze was set it was set against an estimate of a much lower rise in inflation,” he told an audience in Westminster last year.
“Therefore I’m sure the Treasury will want to look at to keep that under review because the purpose was not to have such a dramatic effect on incomes against a forecast of rising inflation.”
A Government Spokesperson said: “By cutting taxes for millions of people; giving the lowest earners a pay rise with the National Living Wage; doubling free childcare for nearly 400,000 parents and freezing fuel duty, we are helping people who need it most.”
This week’s benefit cuts, a hangover from David Cameron’s administration, are set to hit parents, widows, the disabled and 18 to 21 year-olds – with one leading charity warning in a letter to The Independent that people’s lives will be put at risk due to the abolishment of housing benefits for young adults.
The array of imminent cuts appear to fly directly in the face of the Prime Minister’s stated intention to run a Government for the “just about managing”, while Labour are claiming the scale of the cuts is set to fundamentally alter “the nature of the safety net we’ve relied on since the formation of the welfare state” in the early twentieth century.
The welfare changes that come into effect in the first week of April 2017, include:
* Housing benefit for 18-21 year-olds abolished
* Child tax credit claims limited to two children
* Eldest child premium scrapped
* The so-called “rape clause” comes into effect
* Bereavement allowance cuts
* ESA benefits reduced for work-related activity group
The raft of austerity measures – first announced by the former Chancellor George Osborne at the summer 2015 Budget to reduce the cost of the UK’s social security bill – will be phased in over this week.
In a controversial move, the Government has removed housing benefits for 18 to 21-year-olds for new claimants. Despite fears the imminent changes to strip people of housing benefit could result in increased homelessness – and no departmental assessment of the changes – ministers will press ahead with the plans.
In a letter to The Independent the Albert Kennedy Trust, an LGBT charity, claims that Government changes will “exacerbate homelessness and housing problems among young lesbian, gay, bisexual and trans people in this country”.
“The coming housing benefit changes will force more LGBT young people to risk their safety and their lives for the basic human right of a roof over their heads,” added the charity’s chief executive Tim Sigsworth.
The independent Institute for Fiscal Studies (IFS) estimates the changes to Employment Support Allowance (ESA) benefits that come in on Monday, to those deemed healthy enough to carry out “work related activities” will get up to £1,500 less each year than existing recipients.
It will reduce the benefit for the work-related activity group (Wrag) from £103 to £73 a week.
Then, from 6 April, the Department for Work and Pensions will introduce the “two child” policy in relation to claiming child tax credits. It will mean that for new claimants benefits will be limited to just two children. At the moment around 870,000 families with more than two children claim tax credits, according to HMRC.
In a separate move the higher rate of child tax credits for the first child will also be abolished. The IFS says support for families as a result of this change will be around £500 lower a year.
The changes to child tax credits will also mean if a woman has a third or subsequent child as a result of rape she will still be able to claim child tax credits but will be forced to provide evidence to third party healthcare professionals.
The exemption – dubbed the “rape clause” by its opponents – has been described as “chaotic” due to the inadequate sexual violence training given to doctors and social workers, according to the SNP MP Alison Thewliss.
In an overhaul of the Widowed Parent’s Allowance (WPA) benefit bereaved parents will receive payments for just 18 months. Currently, grieving parents receive support for lost income until their youngest child leaves school.
The Childhood Bereavement Network (CBN), a hub for those working with bereaved children, young people and their families across Britain, estimates that a widowed parent will lose out, on average, £12,000 due to the changes. It will affect those whose partner dies after the 6 April, meaning those who are set to lose out are currently unaware.
Ms Abrahams added that the cuts combined will “radically alter the nature of the safety net we’ve relied on since the formation of the welfare state” in the early 20th century.
Tim Farron, the Liberal Democrat leader, described this week's cuts as an “absolute disgrace”, adding they were “yet another attack by the Tories on the young and the ill”.
He continued: “They are also completely counterproductive to the Tory’s own agenda. The ESA cuts will not encourage anyone with a serious illness back to work, and only an additional 140 young people would need to become homeless before the cut to housing benefit for 18-21 year olds will end up costing more than it saves.
“Once again, the Government have shown they are completely tin-eared to the concerns of society’s most vulnerable”.
A DWP spokesman, however, told The Independent: “Our welfare reforms are restoring fairness and are supporting people into work. Having a welfare system that offers work for those who can, help for those who could and care for those who can’t is part of our plan for Britain to build a fairer society for all."