Is the UK Government’s cost of living support enough? New analysis from Professor Donald Hirsch.
Whilst we’re all being hit by rising energy costs and household bills, the impact on low income households is particularly marked. Right now there’s a staggering seven million people without enough money to afford basics and 4.6 million people in arrears with bill payments. To quote former Prime Minister Gordon Brown, an endorser of Professor Hirsch’s research, ‘we are facing a humanitarian crisis that Britain hasn’t seen in decades.’
By October 2022, low income households in receipt of Universal Credit will be dealing with three key body blows to their income in the space of only one year:
The loss of the £20 uplift and the full benefits uprating, on top of the October 2021 price cap increase, has already equated to an annual loss of between £665 — £1493 for low income households. Households will face further financial losses following the impending price cap increases in October and January, and ongoing surges in the cost of food, fuel and other consumer goods.
In response to the cost of living crisis, the UK Government has announced plans to assist low income households with up to £1,200 over the course of 2022. This blog draws on Professor Donald Hirsch’s new report, exploring whether this support is enough to bridge the shortfall and ensure that families receiving Universal Credit have enough money to live on.
What does the report find?
Professor Hirsch’s report presents a comparison between:
- The actual income people will receive from social security in 2022/23 (specifically basic out of work benefits).
2. The incomes that people on benefits would have received if payments had been fully uprated by 9% in line with April’s inflation, and if they had received support to fully cover the October 2021 energy price cap increase.
The results show that households of different types are around £700-£1,500 worse off (at a minimum) than they would have been if they had received an uprating to cover higher costs.* Larger families are most impacted by financial losses, with couples with three children experiencing a predicted loss of £1493 and single person households experiencing a loss of £665.
These findings point to the inadequacy of the Government’s support measures in assisting households in receipt of Universal Credit, especially households that face additional costs compared to the average household.
Flat rate payments mean that Government support is currently not equitable across different household compositions. The £650 Cost of Living Payments, for example, equate to £13 a week for a single person household, but only around £3 a week for each member of a family of four. In contrast, the full uprating of Universal Credit would have created a more equitable outcome, with entitlements being based on family composition.
CAP clients’ experiences
With around 89% of CAP clients receiving some form of income from social security, almost all of our clients find themselves worse off than they would have been if benefits had been uprated in line with inflation. This is leaving people without enough income to meet their basic costs, with 47% of clients sacrificing meals due to low finances.
Many CAP clients face additional financial pressures which mean that the cost of living support is insufficient to meet their needs. These pressures include benefit deductions to repay debt, higher costs due to living with a disability or long-term health condition, living in a high rent area and having a large family.
For instance, CAP client Lindsey* is a single mother of four who is on maternity leave after giving birth to her youngest child. Lindsey is facing immense financial pressure, as the Government benefit cap is leaving her with a weekly income of only £387 per week to pay for rent, utilities, food and other essentials for a family of five. With the rising cost of bills on top of this, she is simply unable to afford her family’s living costs and now has a deficit budget of over £1,500 per month.
Lindsey worries about the impact of her financial situation on her children, with only £1 a month in her budget allocated to school uniform, hobbies, sports clubs, clothing and shoes. The impending energy price cap increase is almost unthinkable for Lindsey, as it’s hard to imagine that her financial situation could get any worse.
For households like Lindsey’s, the Government’s flat rate payments are not sufficient to bridge the shortfall in income arising from soaring inflation rates. For families of five, the £650 Cost of Living Payments are equivalent to only £2.50 per person, per week. For Lindsey’s family, this barely makes a dent in the deficit she is experiencing. This leaves her and her children vulnerable to deepening destitution and problem debt over the coming year.
What needs to happen?
The situation for low income households looks incredibly dire over the coming months, but there are a number of ways in which organisations and individuals can help to influence change. One of the best ways is to call on the UK Government to provide better support to vulnerable households.
To find out more about the challenges facing low income households during the cost of living crisis, and what can be done about it, join an event co-hosted by CAP and the Joint Public Issues Team (JPIT) on Wednesday 10 August. Sign up here.
The event will provide you with the opportunity to hear from people with experience of poverty, explore how community organisations like churches are offering emergency provision and discuss the next steps for the UK Government.
Sign up to the event here. We’d love to have you there!
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*This amount can be seen as a minimum, as calculations are based only on what is happening in the current financial year, and other factors likely mean that the situation is a lot worse for some families.
**Client name has been changed to protect client confidentiality.
