From the TUC

Benefits leave people in poverty and government policy will make this worse

07 Jul 2010, by in Society & Welfare

Research published yesterday by the Joseph Rowntree Foundation shows that benefits leave people far short of a minimum income standard – for single people they can provide less than half the income necessary. The government’s change to uprating policy is set to make this situation even worse.

Each year the Joseph Rowntree Foundation publishes a report that suggests a income standard for the UK, based on research into what members of the public think is the minimum acceptable for different types of family. A budget that provides these items is used to calculate the minimum income standard. There is a ‘minimum income calculator’ on the web where you can work out the standard for your family.

People who rely on benefits for their income have difficulty meeting the minimum income standard (excluding rent, council tax and childcare):

  • A pensioner couple can just about manage this: their minimum income standard costs £203.65 and their Pension Credit entitlement is £207.19.
  • A lone parent with one child’s minimum income standard costs £217.48, but her Income Support entitlement is just 65% of that – £140.42.
  • A couple with two children has a minimum income standard that costs £381.17, but their IS/JSA entitlement is 62% of that – £235.29.
  • A single working age adult is worst off of all – their minimum income standard costs £161.41, but their IS/JSA entitlement is just 42% of that – £65.45.

This position is deteriorating because of the way benefits are ‘uprated’ each year to take account of inflation. Currently, the Retail Price Index is used to uprate benefits in line with inflation; next year the government plans to switch to the Consumer Prices Index.

The JRF researchers found that, over the past decade, the prices of food, public transport and other essentials had risen faster than other goods and services. This meant that the cost of a minimum budget had risen by 38% during a period when the RPI rose by 31%. Current uprating policy has meant that people whose benefits are already too low fall further and further behind an adequate income level with each passing year.

The Coalition’s new policy on uprating will make things even worse. Nigel and I have blogged about how the change to CPI for uprating benefits will lead to lower benefits, more poverty and increased inequality. (Bryn Davies’s explanation of the technical differences between CPI and RPI is important for this debate.) The JRF research confirms this: the difference between the increase in the cost of a minimum income standard and RPI is bad enough, but the increase in the CPI over the past ten years is even lower: 23%.

Someone who, ten years ago had an income that was exactly enough to meet their minimum income standard, but which was only uprated in line with the CPI would now have an income that was more than 10% short of the minimum income standard.

There is a real risk that the switch to CPI uprating is going to pass because no-one understands how significant it is: it is important, and it will make thousands of people poorer.

6 Responses to Benefits leave people in poverty and government policy will make this worse

  1. Tweets that mention Benefits leave people in poverty and government policy will make this worse | ToUChstone blog: A public policy blog from the TUC — Topsy.com
    Jul 7th 2010, 7:05 pm

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  2. debbie
    Jul 8th 2010, 9:25 am

    the first thing this goverment needs to do is to stop pulic sector workers recieving, sick pay for 6 mths on full pay, i know of 2 people …1 in the NHS & 1 in the tax office that have know intentions of goin back to work untill there 6 mtha is up, most working in the private sector , if they dont go to work they dont get payed

  3. Margaret Dickson
    Jul 8th 2010, 12:21 pm

    Re SERPS additional pension now being linked to CPI instead of RPI: SERPS was a contract – you contracted in or out – and contracted out “protected rights ” private pensions had to be linked to the RPI because Serps was. Can the terms of this contract now be changed unilaterally by the government?!

  4. Nigel Stanley

    Nigel Stanley
    Jul 8th 2010, 2:34 pm

    Margaret
    The short answer is that we do not yet know what the government plans to do in detail so it is impossible to answer your question.

    Undoubtedly lawyers will be asking hard questions aboput all of this (and this may explain some of the delay in getting anything other than the ‘in principle’ announvcement in the budget.)

  5. Tokyo Gaijin
    Jul 9th 2010, 5:15 am

    For those of working age, especially single people, benefits absolutely should be less than any minimum income standard (it’s questionable whether what this report considers minimum is correct). There has to be an incentive to work.

  6. Carer Watch.com / Emergency Budget 2010
    Jul 21st 2010, 11:14 pm

    […] Richard Exell Senior Policy Officer                                           Trades Union Congress […]

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