Almost 2 million of the poorest households pushed deeper into poverty by welfare cuts

Posted by Jonaid Jilani Press Officer

22nd Apr 2014

Some 1.75 million households in Great Britain have seen their incomes cut in the last three years as a result of welfare reform,  a report by Oxfam and the New Policy Institute (NPI) reveals.

The report, Multiple Cuts For The Poorest Families, warns that wide-ranging cuts are changing the shape of welfare support at a time when rising prices are making it harder for families to make ends meet. As a result, job seekers, carers, single parents or those with a disability or illness who are unable to work are being pushed deeper into poverty.

Some 300,000 households have seen a cut in housing benefit, 920,000 have seen a cut in council tax support and 480,000 have seen a cut in both. 

In the last year alone, 400,000 households have been pushed further into poverty by cuts to housing benefit or council tax support - households affected by both of these cuts typically lose around £18 per week.

Mark Goldring, Oxfam Chief Executive, said: "This is the latest evidence of a perfect storm blowing massive holes in the safety net which is supposed to stop people falling further into poverty.

"We are already seeing people turning to food banks and struggling with rent, council tax, childcare and travel costs to job centres.  At a time when the five richest families in the UK have the same wealth as the bottom 20 percent of the population it is unacceptable that the poorest are paying such a heavy price." 

The welfare state provides the very poorest households with a guaranteed income - made up of various benefits - to cover "normal day to day expenses". Households also get help to pay for the unavoidable costs of council tax and rent. In the last two years the value of the guaranteed income has increased below inflation and cuts to council tax benefit and housing benefit mean that the poorest families have to use the cash-benefit to cover even more costs. This leaves them with less money for the other essentials such as food and fuel.

Tom MacInnes, Research Director at NPI and report author said: "There are two parts to the safety net. One is the means-tested cash benefit such as jobseeker's allowance, which is rising by less than prices. The other is the benefits that help pay for specific unavoidable costs. This is where cuts have been targeted and where the greatest damage to the safety net is being done." 

Oxfam is calling on the Government to determine what the absolute minimum level of support should be for households in different circumstances. It must be high enough to mean that those reliant upon it are not forced to walk the breadline.

Ends
For more information or a copy of the report please contact: Jonaid Jilani on 01865 472 193 or 07810 181 514 or jjilani@oxfam.org.uk

Case studies

Tracie, 24, partner 29, and her daughter S, Ilford, Essex (Tracie and her partner have since broken up).  She had to use a foodbank because of low wages and benefit cap.

Tracie first lived in a hostel aged 16 when her mum had a breakdown. She has previously been homeless and has often lived in temporary accommodation. She has been in and out of low-paid work since leaving school at 16.  She also suffers from long-term depression and is currently on ESA (Employment Support Allowance). 

Although they spent their money very carefully, the family were in debt because their income was so low and so changeable.  S's dad who works as a teaching assistant brought in £300 a month, but because of the school holidays this averaged out at just £200 before tax.  From this they had to pay £70 towards their £300/month rent because of the housing benefit cap, a council tax contribution, and also had to pay off Tracie's £900 social fund loans accumulated over a number of years. They also had to pay their energy, food and other day-to-day bills from this money.

"You don't manage on £6 a week, we have had to borrow off friends and family. I owe about £900 to the social fund, mostly crisis loans from over the last 6 years. I pay for some of it out of my maternity allowance. In 2012 I got 9 crisis loans in one year."

Jeff worked for 35 years as a professional floor layer until the recession hit 4 ½ years ago and work dried up.  

Jeff moved onto job seekers allowance (JSA) but was unable to find work.  Jeff was receiving housing benefit for his three-bedroom property but was unaware that a change in policy meant he needed to pay council tax.  He now owes £4000, a sum he's paying back at £3 a week. 

"I thought they were paying all my council tax but they wasn't.  Nobody told me until I called up and they said "We don't pay it all anymore". It was a terrible situation at the time." 

In November 2013, Jeff moved into a one-bedroom council-funded property and is finding life more manageable. However he still struggles to pay for the basics, relying on his daughters to help fill the gap.

"I only put the heating on when it gets really cold.  I have it on for about twenty minutes and then I'll …wait until it goes cold again and turn it on …I'll only have the TV on at night, no light, no lamp…  I struggle with the price of food, but my daughters help me out a lot.  So tonight I'll be at my daughter's for tea." 

Notes to Editors

The full research report "Multiple cuts to the poorest families" by Hannah Aldridge and Tom MacInnes of NPI was funded and published by Oxfam. 
Family refers to the Department of Work and Pensions definition used to calculate income and benefit entitlement. A family is: A single adult or a couple (either married or cohabiting) and, if they have any, their dependent children. 

When DWP measure income and benefit entitlement they consider all family members. The technical term is a Benefit Unit defined here: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/206837/appendix_1_hbai13.pdf
 

The report focuses on the "poorest families". These are defined here as families whose incomes are so low they qualify for a means-tested cash benefit, i.e. Job-Seekers Allowance, Income Support or Employment Support Allowance, which "passports" the recipient to housing or council tax benefits. They are not readily able to draw on alternative sources of income when their benefit entitlement is cut.

Along with below-inflation uprating of the core means-tested benefit, the report looks at four absolute cuts in benefit entitlement. These are: reducing local housing allowance rates to the 30th percentile of local rents; the under-occupation penalty; the overall benefit cap; and the localisation of Council Tax Support 

Some 400,000 families renting a home in the private sector were affected by reductions in local housing allowance (LHA) introduced in April 2011. The introduction last year of the bedroom tax, council tax support and the overall benefit cap is estimated to have taken this number to 1.75 million families.

Blog post written by Jonaid Jilani

Press Officer

More by Jonaid Jilani