Around 400,000 people could be pulled into poverty because of benefit cuts in April, according to a new report by the Joseph Rowntree Foundation (JRF).
The charity said its research shows the "stark consequences" of the UK Government's decision to uprate benefits by 3.1 per cent in April, when inflation is forecast to hit seven per cent.
It said:”Around nine million households on means-tested benefits due to low incomes, both in and out of work, will experience an average real-terms cut of £500 per year. Couple families with children in receipt of benefits due to low income will experience a real-terms cut of £720 per year, while the figure across all pensioner couples is £540 per year.”
The report said too many families are already going without essentials, so a reduction in the value of benefit levels "could not come at a worse time".
JRF is calling on the UK Government to uprate benefits in line with the Bank of England's February Monetary Policy Report forecast of seven per cent inflation by April as an immediate first step to help keep up with the rising cost of living.
Peter Matejic, deputy director of evidence and impact at JRF, said: "At a time when the case for support could not be clearer, the [UK] Government is choosing to further erode the value of benefits that are already wholly inadequate.
"People on the lowest incomes have already experienced a decade of cuts and freezes, followed by an overnight cut of £1,000 last autumn.”
He continued: "The decision not to uprate benefits in line with inflation represents another cut for millions of people whose incomes will now fall even further behind the cost of living.
"There can be no justification for this. Our social security system should protect people from harm, not put them in danger.
"The UK Government must change course and ensure that benefit levels reflect the higher rate of inflation we are all now experiencing. There is no doubt that a failure to do so will leave more people in our society unable to meet their most basic needs."
Energy bills for millions of households across the UK are set to rise by 54 per cent from April 1, with the average standard user facing a hike of nearly £700 a year.
The JRF calculated that families on a low income will spend on average 16 per cent of their incomes after housing costs on energy bills.
The charity also said the mitigations consisting of the £150 Council Tax rebate and bill credit - the clawback £200 ‘loan-not-loan’ - will cover only 60 per cent of the increase for the average low-income family, highlighting the “risk of widespread hardship if further action is not taken”.
What are means-tested benefits?
Some benefits delivered by the Department for Work and Pensions (DWP) and HM Revenue and Customs (HMRC) are means-tested which means the amount of income and capital you have can affect your eligibility.
Means-tested benefits are available to people who can demonstrate that their income and capital are below a certain level.
Means-tested benefits include:
- Universal Credit
- Income-based Jobseeker’s Allowance (JSA)
- Income-related Employment and Support Allowance (ESA)
- Working Tax Credits
- Child Tax Credits
- Income Support
- Pension Credit
- Housing Benefit
- Council Tax Support
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