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14 January 2020updated 24 Jul 2021 4:04am

Why ending the benefits freeze won’t undo the damage of austerity

After four years of real-terms cuts, merely allowing payments to rise in line with inflation will do little to help claimants.

By Anoosh Chakelian

The government has announced that the freeze on Local Housing Allowance rates, which calculate housing benefits for private renters, will end after four years. This means that, from 1 April, payments will rise in line with inflation.

Last November, ministers also announced that they would lift the general freeze on working-age benefits this year, ending the policy that George Osborne introduced as chancellor in April 2016. 

The benefits freeze, and the Conservative-Liberal Democrat coalition’s preceding 1 per cent benefit cap, was really a cut, of course – it prevented vital income support from keeping up with the cost of living for some 27 million people, according to Joseph Rowntree Foundation (JRF) figures. More than a third of people affected by the freeze has less than £100 left over a month after rent, food and bills, according to the Citizens Advice service. And 400,000 people have been pushed into poverty as a result, the JRF found.

Considering the proportion of the public affected by the benefits freeze, it could be described as austerity’s harshest blow. Nevertheless, it has slipped under the political radar, with Labour failing to pledge to lift the freeze in its 2017 manifesto, and successive Conservative chancellors maintaining it in every budget.

The government will use its reversal to champion the “extra” money it is putting in people’s pockets (“£10 extra a month” is the boast for the housing benefit lift). But that’s not the reality.

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Firstly, the government isn’t exactly being generous or progressive by lifting the freeze – it was always scheduled to come to an end in 2020. Osborne’s original timescale was 2016-2020. If Chancellor Sajid Javid or his predecessor, Philip Hammond, wanted to lift the cap earlier, they could have done. They chose not to, and simply let it run its course.

Secondly, if you take Local Housing Allowance rates as an example, this isn’t giving people extra money, it’s just cutting slightly less. It’s simply a flat rate increase to around 1.5 per cent: the current consumer price index (CPI) inflation rate. While charities and other interest groups have welcomed the unfreezing of housing benefit, they still point out how little of the damage it reverses.

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“Given rents have risen by an average of 5 per cent, and in some areas more than that over the last 4 years, a rise of 1.5 per cent in the benefit level is not going to be much help to a tenant struggling to afford the rent in those areas and many others,” warns John Stewart, policy manager for the Residential Landlords Association.

“There will still be a big gap between benefits and rents in most areas of the country,” says the chief executive of youth homelessness charity Centrepoint, Seyi Obakin.

Because the allowance was frozen at a time of rapidly rising rents, it should really increase to reflect this change in order to meaningfully reimburse tenants. In fact, when it was first introduced in 2008, it covered the cheapest half of local market rents – brought down to the lowest third of market rents in 2010 under the coalition government. It has not been restored to cover a proportion of local rates.

There is a similar problem with the working-age benefits that are about to be unfrozen. The freeze cut claimants’ income in real terms during a period of wage stagnation and rising prices. Simply bringing them back in line with inflation will not reverse the damage done.