A lower-income couple with two young children where one adult is
working full-time is going to need to find an additional
£31-a-week to cover the cost of living and falling benefit rates
from October, according to new analysis by the Joseph Rowntree
Foundation.
In an interview today, the Business Secretary warned “it could be
a very difficult winter”. This comes amid growing concern across
the political spectrum that the rising cost of living is about to
put immense strain of low-income families.
If the Government proceeds with cut to Universal Credit as
planned, changes to the energy price caps, and inflation means
that at the same time this couple family are trying to compensate
for the £20-a-week they had before the cut, they will soon need
to find an additional:
- £3 for energy (assuming pre-payment meter)
- £8 for other living costs
= an additional £11 per week from October.
On top of this, the same family would need to find an extra £2.50
to cover the increase in National Insurance Contributions from
April 2022 because of the Health and Social Care levy. This would
mean in total this family may need to find an additional £13.50
per week or £710 per year (around the entire clothing and
footwear annual budget for this kind of family) as well as losing
£20 a week from Universal Credit. For this family, the extra
costs alone equate to around 3.5% of their weekly disposable
income.
Peter Matejic, Deputy Director of Evidence & Impact
at the Joseph Rowntree Foundation, said:
“Millions of low-income families are incredibly anxious about how
on earth they are supposed to make ends meet from next month.
Ministers rightly recognise this is shaping up to be a very
difficult winter, yet there is little sign of them taking the
decisive steps that are necessary to avoid real hardship for
low-income families.
“The growing concern about the cost of living reinforces why
cutting Universal Credit makes absolutely no sense. Social
security is a key defence in protecting families from precisely
these sorts of economic shocks, but the Government is on course
to impose the biggest ever overnight cut to the system and leave
families with an inadequate lifeline.
“The Prime Minister urgently needs to keep the £20-a-week
increase to Universal Credit in place. Rising child poverty,
soaring demand for food banks, people worrying about keeping
their homes and covering the cost of bills, flies in the face of
uniting and levelling up our country.”
ENDS
Notes to editors:
- Ofgem have said that the prepayment meter (PPM) cap level
will increase by £153 from 1stOctober. This equates to
around £3 per week. Seehttps://www.ofgem.gov.uk/sites/default/files/2021-08/Default%20tariff%20cap%20letter%20for%201%20October%202021.pdf.
- For the whole of financial year 2020/21, quarterly CPI
inflation was between 0.5% and 0.6%. In the latest data for
August 2021, it stands at 3.2%, a rise of over 2 percentage
points compared to then. The £8 per week increase in the cost of
living is the impact of a conservative 2 percentage point
increase in inflation for the costs of a family in the third
decile of the income distribution according to the Office for
National Statistics’ Family Spending publication.
- We have assumed that the sole earner has gross earnings of
£20,000 (which would mean they are earning slightly above the
National Living Wage per hour). This means they will pay around
an extra £130 a year because of the Health and Social Care Levy
in National Insurance, equating to around £2.50 per week.
