Government support fails to offset losses for low-income households, report says

The report, commissioned by former prime minister Gordon Brown, found that the largest families would face the biggest losses.

06 August 2022

Government support for low-income households amid the cost-of-living crisis falls short of offsetting the losses they face, with some families up to £1,600 worse off a year, a report has found.

The additional £1,200 offered to the poorest in society this year will fail to compensate for three major blows to their income from October 2021 to October 2022, the analysis suggests.

The loss of the £20-a-week benefits uplift, an annual uprating out of line with inflation forecasts, and a jump in the energy cap will mean the worst-off families cannot bridge the gap, it says.

The report, commissioned by former prime minister Gordon Brown, found that the largest families would face the biggest losses.

This is because the flat-rate payments offered by the Government fail to take into account the different sizes and needs of different households, it says.

A couple with three children are losing almost as much again from rising prices as they did from last year’s cut in the Universal Credit uplift, the report says.

And the loss for an out-of-work couple with two children is nearly £1,300, or £1,600 if higher inflation for worse-off households is taken into account, according to the report.

This is based on an £800 rise in the energy price cap, and will be higher to the extent that it increases further.

An annual uprating in April 2022 of 3.1%, rather than the 9% that the Consumer Prices Index had risen over the past year, will add to the cost-of-living pressure, the analysis suggests.

In an introduction to the paper, Mr Brown called on the Government to take “immediate action” to bridge the gap.

“It is the urgent task of the next prime minister to ensure that families have enough to live, through this crisis and beyond,” he said.

“I am grateful that this paper outlines the gap the Government must urgently fill before the next wave of rising costs overwhelms people.”

He added: “We have heard from the families we’ve met and those highlighted in the report that the flat-rate payments offered by the Government won’t stretch far enough for families who each have different needs and circumstances.

“These must be the people the next prime minister prioritises as we look for solutions.”

The report, carried out by Professor Donald Hirsch at Loughborough University, has 56 signatories including charities, organisations and faith groups.

The Food Foundation, one of the organisations to endorse the findings of the report, described the conclusions as “alarming”.

Isabel Hughes, policy engagement manager at the charity, said: “There is now a very serious shortfall in support for families who are most seriously in need. Urgent action is needed.

“That is why we have repeatedly called for extended access to free school meals for the millions of children living in poverty who currently miss out on this vital safety net.

“Ensuring these children’s access to one nutritious hot meal a day is the quickest way to prevent an under-nutrition epidemic which will otherwise blight the education, health and future productivity prospects of a generation.

“We hope the incoming government will take seriously Professor Hirsch’s authoritative analysis and understand the need for immediate intervention.”

A Government spokesperson said: “We understand that people are struggling with rising prices, which is why we have acted to protect the eight million most vulnerable British families through at least £1,200 of direct payments this year, with additional support for pensioners and those claiming disability benefits.

“Through our £37 billion support package we are also saving the typical employee over £330 a year through a tax cut in July, allowing people on Universal Credit to keep £1,000 more of what they earn and cutting fuel duty by 5p, saving a typical family £100.”

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