Benefit cuts will see child poverty rate rise to 5 million

Benefit cuts are pushing an extra 400,000 children into absolute poverty, the Institute for Fiscal Studies (IFS) has said.

The biggest rises are hitting Wales, the North East, East Midlands, and Northern Ireland, with child poverty levels predicted to increase by 4% nationally between 2015/16 to 2021/22, the report states.

Benefit changes, including the roll-out of universal credit, will account for three-quarters of the total 530,000 surge in child poverty levels over the period, research by the IFS, with funding from the Joseph Rowntree Foundation, said.

The study found that the freeze on most working-age benefits will see around 7.5 million low income households have their benefit entitlements cut by more than £500 per year in real terms.

The limiting of tax credits and universal credit to two children will leave some low income families with £2,500 less in benefits than they otherwise would have received, the report says.

The study also predicted median income will grow by just 4% over the next four years, which the IFS said was slow by historic standards.

And the figure could be reduced if the Office for Budget Responsibility (OBR) downgrades its forecasts for productivity growth.

Across the UK, absolute poverty, calculated on the Government’s official measure where housing costs have been deducted from income, will remain roughly unchanged between 2015/16 to 2021/22.

The IFS said that without the benefit reforms, absolute poverty rates would have declined slightly.

If the benefit reforms and freezes continue as planned, another 700,000 people will be in absolute poverty, the study said.

Tom Waters of the IFS said: “If the Government sticks to planned benefit cuts, it should not be surprised if, according to the official measure, absolute child poverty rises.

“Every region and nation is projected to see an increase in child poverty, with the largest increases in the North East, East Midlands, Wales, and Northern Ireland, and the smallest in London, the South East, and South West.

“The larger projected rises occur in areas where families with children are more reliant on benefits than earnings for their income, and where more families are likely to be adversely affected by the new two child limit on means-tested benefits.”

Fellow IFS researcher Andrew Hood said: “Growth in average household incomes over the next few years is likely to be sluggish at best.

“If workers’ earnings grow as the OBR expected back at the March Budget, median income is projected to rise by just 4% over the next four years, about half as fast as was normal before the financial crisis.

“But given that the OBR have already indicated they now think that forecast was too optimistic, the true picture could be even worse.”

Liberal Democrat work and pensions spokesman Stephen Lloyd said: “These figures from the respected IFS hammer home just how damaging this Government’s welfare policies will be for millions of families.

“It is particularly heartbreaking to learn that child poverty will increase in every single part of the country.

“Cruel and senseless Conservative policies, such as freezing working-age benefits while prices soar and slashing funding for universal credit just as it rolls out across the country, will worsen inequality by harming the living standards of the most vulnerable and reducing incentives to work.”