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30 October 2018updated 05 Oct 2023 8:14am

Why the benefits freeze is the cut that politics forgot

The Budget doesn’t lift it, Labour wouldn’t reverse it – why is austerity’s harshest attack still going?

By Anoosh Chakelian

The horror began where so many do – at Conservative party conference. In September 2014, then Chancellor George Osborne announced to the audience in Birmingham that benefits for people of working age would be frozen for two years.

This was to save over £3bn of benefits spending, as part of the £12bn welfare cut proposed by the Chancellor.

Following a 1 per cent cap on benefit rises under the coalition, this new freeze – intended to come in after the 2015 general election if the Tories won – meant a real-terms cut in jobseekers’ allowance, income support, tax credits, child benefit, housing benefit, part of employment and support allowance and, once it came in, Universal Credit.

And so it turned out. After being doubled to a four-year freeze in Osborne’s summer 2015 Budget, Conservative governments have “frozen” (ie. cut) these benefits ever since April 2016 – meaning they don’t rise with inflation. All the while, inflation has been going up and wages stagnating, meaning millions are worse off.

The impact has been huge. According to the government’s own impact assessment in 2015 it would affect around 30 per cent of households.

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Before last year’s Budget, the Institute for Fiscal Studies found entitlements would be lower by an average of £450 per year for 10.5 million households by 2020. At that time, the Resolution Foundation think tank calculated that a typical working family with two children would lose £315 a year as a result of the policy continuing.

Nearly half a million people would be pushed into poverty if the working-age benefit freeze continued, the Joseph Rowntree Foundation warned the government ahead of its Budget last year. It calculated that a couple with two children claiming Universal Credit is £832 worse off per year than if benefits had kept up with prices since 2010.

Of course, the government did not heed these warnings and again, Philip Hammond in this year’s Budget declined to lift the freeze – which will continue until 2020, as Osborne planned. This will cut £1.5bn from benefits spending. By 2021, £37bn less will be spent on working-age social security compared with 2010 – just under half of which comes from freezing benefits.

The burden is on low to middle income working-age families. Low-income couples with children will be up to £200 worse off each year because of continuing the freeze, according to the Resolution Foundation.

With all the hardship, delay and systemic breakdown of the new Universal Credit welfare system, the benefit freeze has been overlooked by the government and opposition alike. While Conservative MPs urged their Chancellor, with a tiny degree of success, to put more money into Universal Credit (or, more accurately, to cut slightly less), and Labour has justifiably been preoccupied with pointing out its problems, the real-terms cut in benefits – austerity’s harshest blow – has passed Westminster by.

The Labour party did not plan to reverse or even simply stop the benefit freeze in its 2017 manifesto. Aside from reforming Universal Credit, its welfare policy consisted of scrapping benefit sanctions and the bedroom tax, reinstating under-21 housing benefit, reversing cuts to bereavement support and employment and support allowance, and increasing carers’ allowance. Nowhere was the benefit freeze mentioned.

The shadow chancellor John McDonnell has since come out, days before the Budget this year, to say Labour would uprate benefits in line with inflation when elected (Jeremy Corbyn has previously suggested ending the freeze, but it’s never been incorporated into policy). But he stopped short at reversing the freeze, or reversing its effects so far, with the justification that Labour’s other policies (minimum wage increase, stronger trade union and workers’ rights) would help people out of welfare.

It would of course be very expensive for the Labour party, which tries to make a show of costing all its policies, to reverse what is essentially a large-scale dismantling of the welfare state by consecutive Tory governments. It would cost over £4bn to halt the further planned welfare cuts alone.

But Labour failing to include scrapping the freeze in its future economic programme, and the Chancellor only mildly easing Universal Credit cuts, suggests “post-austerity” politicking will do what austerity always has: punish the worst-off.

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