Government response on Welfare safety net report published

5 November 2019

As the Government finally confirms it is lifting the 4 year benefit freeze that will have seen the incomes of some of the poorest people in the UK cut by thousands of pounds a year, the Committee publishes the Government's response to our major thematic report on the UK's welfare safety net.

When the Committee reported in July this year the Chair said “The Government has shown that it can make target-busting savings through devastating, cumulative cuts to the incomes of the poor, by capping and freezing benefits … likewise, there is now no effective strategy to increase the life chances of poorer children. It has failed to recognise the unacceptably bleak picture emerging as it shreds our social safety net because it doesn't really look.”

The Government's response received from DWP on Friday did not commit to lifting the benefit freeze – although it has now done so over the weekend, yesterday, saying Universal Credit will rise by 1.7%, in line with inflation, and the state pension will increase by 3.9%.

The Committee also reported separately yesterday that the evident, unintended consequences of the two child limit are such that “no Government should be willing to accept” them, and that it, too, must now be lifted.

Committee Chair Frank Field said:

“A huge chunk has been gouged out of people's incomes, and the Government's plans simply won't plug the gaps that have been left. We called on the Government to make good the cuts made since 2010 – by committing to increases of CPI 2% over four years – so that the long-lost link between benefit rates and the cost of living would at last be restored.”

As the Committee's Welfare Safety Net report noted in July, on the Government's own new measure then, 14 million people - a fifth of the UK population - live in poverty. Of those 14 million living in poverty, four million are more than 50% below the poverty line, and 1.5 million are destitute: unable to afford basic essentials like food, housing and heating for themselves and their children.

The Institute for Fiscal Studies predicted a 7% rise in child poverty between 2015 and 2022, and various expert sources predicted child poverty rates of as high as 40%: meaning almost one in every two children will be poor. The bottom 20% of earners will have lost on average 10% of their income by 2021/22 as a result of changes since 2010.

Conversely, poverty rates amongst pension-age adults had actually fallen from 20.8% in 2001 to 11.4% in 2017. The Committee reported in 2016 that the decision by the then-Government to protect older people from "spending cuts that have been largely been felt by younger groups" had played a significant part in this reduction in pensioner poverty.

This includes the "triple lock" on state pensions. In its welfare safety net report, the Committee called for all benefits to be uprated CPI 2% for four years, to begin to indicate anything like the same commitment to addressing working age poverty and child poverty.

The main points of the Government's response were as follows:

Benefit freeze: the Department reiterates the rationale for introducing the freeze and did not commit to lifting the freeze: now that it has done so in media over the weekend, it has indicated it will be nowhere near the Committee's recommendation of increases by CPI 2% for four years.
Living costs: The Department has ignored the Committee's recommendation on linking benefit levels with living costs. It has, however, commissioned some research on how disabled people use disability benefits to meet living costs and says it at some point hopes to deliver a Green Paper (a draft policy idea document) on the issue
Childcare: The Department has “no plans” to divert funding from people earning up to £200k on Tax Free Childcare. Having previously told the Committee that these households were eligible for childcare support because it provided an important work incentive, the Department now says that TFC hasn't been in place long enough to allow for any analysis of work incentives.
Destitution: The Department will not develop a measure of destitution because “there is no agreed way of defining or measuring destitution”: precisely the rationale for the Committee's recommendation that the Department establish an independent working group to come up with a definition and measure.

Further information

Image: CCo