Freeze on benefits to end in April 2020.

The freeze on local housing allowance (LHA) rates is to end in April 2020. The government announced the changes in its recent election manifesto.  The freeze was put in place in 2016 by the then chancellor, George Osborne.  It was due to end this April anyway. This means that, from 1 April, payments will rise in line with inflation.

Last November, ministers also announced that they would lift the general freeze on working-age benefits this year.

Freeze on benefits was really a cut.

The benefits freeze and preceding 1 per cent benefit cap, was really a cut, of course.

According to the Joseph Rowntree Foundation’s (JRF) figures it prevented vital income support from keeping up with the cost of living for some 27 million people. And 400,000 people have been pushed into poverty as a result.

Citizens Advice have said that more than a third of people affected by the freeze has less than £100 left over a month after rent, food and bills.

The Freeze has been described as “austerity’s harshest blow.”

The sheer amount of people who have been affected by the benefits freeze has seen experts describe it as “austerity’s harshest blow.”  However, even with forceful critics, social thinktanks and charities warning of its impact it hasn’t been high on any political agenda in recent years.  Labour failed to pledge to lift the freeze in its 2017 manifesto, and successive Conservative chancellors maintaining it in every budget.

Ending the freeze means “Extra money for people’s pockets,” say the government – This is not the reality.

The government will use its reversal to champion the “extra” money it is putting in people’s pockets (£10 extra a month: is the boast for the housing benefit lift). But that’s not the reality.

Firstly, the government isn’t exactly being generous or progressive by lifting the freeze. It was always scheduled to come to an end in 2020. Osborne’s original timescale was 2016-2020.

If Chancellor Sajid Javid or his predecessor, Philip Hammond, wanted to lift the cap earlier, they could have done. They chose not to, and simply let it run its course.

Secondly, if you take Local Housing Allowance rates as an example, this isn’t giving people extra money, it’s just cutting slightly less. It’s simply a flat rate increase to around 1.5 per cent: the current consumer price index (CPI) inflation rate. While charities and other interest groups have welcomed the unfreezing of housing benefit, they still point out how little of the damage it reverses.

What the experts say.

John Stewart, policy manager for the Residential Landlords Association, said: –

“Given rents have risen by an average of 5 per cent, and in some areas more than that over the last 4 years, a rise of 1.5 per cent in the benefit level is not going to be much help to a tenant struggling to afford the rent in those areas and many others.”

Chief executive of youth homelessness charity Centrepoint, Seyi Obakin, said: –

“There will still be a big gap between benefits and rents in most areas of the country,”

What the Joseph Rowntree Foundation said about the freeze.

“The freeze on most working age benefits and tax credits has led to vital support falling further behind the rising cost of living. It is unacceptable that the incomes of millions are being squeezed, and the system that should help them stay afloat is pulling them into poverty.

What you need to know:

Between 2016 and 2020, the benefit freeze will have affected more than 27 million people and swept 400,000 into poverty.

How has the freeze affected families?

The 2015 Budget introduced a four-year freeze on most working-age benefits and tax credits. This meant that in 2016 and onwards their value remained as it had been in 2015 rather than rising with inflation.

In real terms, the support that people receive in 2019 will be worth 6.5% less than it would have been if it had risen with inflation, as is usually the case.

After three years of the freeze, people in poverty are on average £340 a year worse off than they would have been had this support not been eroded by the freeze. That’s equivalent to the average cost of food shopping for a low-income family for around eight weeks.

Families on low incomes disproportionately spend their incomes on essentials – especially food, electricity and transport. This means that when prices rise and incomes don’t keep pace they are left cutting back on essentials and facing increasing hardship.

Around 200,000 people have been pulled into poverty by the first three years of the freeze, around half of them children.

What should happen?

Because the allowance was frozen at a time of rapidly rising rents, it should really increase to reflect this change in order to meaningfully reimburse tenants. In fact, when it was first introduced in 2008, it covered the cheapest half of local market rents – brought down to the lowest third of market rents in 2010 under the coalition government. It has not been restored to cover a proportion of local rates.

There is a similar problem with the working-age benefits that are about to be unfrozen. The freeze cut claimants’ income in real terms during a period of wage stagnation and rising prices. Simply bringing them back in line with inflation will not reverse the damage done.

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