Social Justice

DWP benefits 'too low' to cover basic living costs, government warned: 'Completely unacceptable'

The work and pensions committee recommends that benefits are increased each year according to a new benchmark which takes living costs into account

benefits/ money

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Benefit payments are “too low” to cover daily living costs and the government must act to increase financial support, a cross-party group of MPs has found.

The Work and Pensions Committee has called on the government to reform the social security system with a new “benchmark” for benefit levels which takes into account living costs.

It also recommends an “uprating guarantee” which would give claimants the assurance that working-age benefits and local housing allowance will be increased each year.

Sir Stephen Timms MP, chair of the Work and Pensions Committee, said: “It is right that our benefit system incentivises work, but it should also provide an effective safety net for jobseekers, people on low incomes, carers and those with disabilities.

“We have heard plenty of evidence that benefits are currently at a level that leaves many unable to afford daily essentials or meet the unavoidable extra costs associated with having a health impairment or disability.

“The government has previously said that it is not possible to come up with an objective way of deciding what benefits should be. Our recommendations are a response to that challenge, and the ball is now back in the government’s court.”

The Work and Pensions Committee’s new report ‘Benefit Levels in the UK’ sets out a “wide range of evidence which suggests that benefit levels are too low, and that claimants are often not able to afford daily living costs”.

The committee recommends that the Department for Work and Pensions (DWP) sets out a new benchmark for benefits considering living costs.

It suggests, for example, using the methodology in the Joseph Rowntree Foundation (JRF) and Trussell Trust’s essentials guarantee. The charities estimate that universal credit will fall short by £30 each week of the money needed to survive even after benefits are increased in April.

Responding to the report, Iain Porter, senior policy advisor for the Joseph Rowntree Foundation, said: “The case for an essentials guarantee is clear. Never in the history of the welfare state in the UK has the support people receive been based on actual living costs.

“It’s completely unacceptable that politicians have even considered abandoning uprating benefits by inflation in recent years when so many people haven’t been able to put food on their table or keep their home warm, so an independent process is much-needed.

“Now that a respected cross-party group of MPs have looked at the evidence and accepted the principle that everyone deserves a minimum level of support that reflects the actual cost of everyday essentials, the government must act urgently.”



Tom Pollard, head of social policy at the New Economics Foundation, who gave evidence to the committee’s inquiry in September, agreed. He said: “It is hugely welcome to see a cross-party committee of MPs call for benefit rates to be benchmarked against a proper assessment of what people need to meet their basic costs.

“For far too long, benefit rates have been completely divorced from the reality of the day-to-day costs people face, contributing to growing rates of poverty and poor health. Rather than incentivising people into work, current benefit rates leave many unable to look beyond a daily struggle to make ends meet. 

“We would like to see the government go further and institute a guarantee that every household has sufficient income to at least meet its essential costs. As well as dramatically reducing poverty and helping to improve people’s health and wellbeing, this would provide everyone with the foundational security to work towards a better future for them and their families.”

In its report, the Work and Pensions Committee also recommends that the household support fund is made permanent. This is cash given to councils, which they then use to support people facing financial hardship. It was recently extended by Jeremy Hunt in his Spring Statement but only by six months.

Councillor Pete Marland, chair of the Local Government Association’s economy and resources board, said: “While it’s good that the household support fund was recently extended, councils now want to work with the government to deliver a sustainable, long-term solution to support households out of poverty and improve residents’ financial resilience and wellbeing.”

He added: “A sufficient social security system is vital to protect people on low-incomes, job seekers and those who cannot work. We have long called for local housing allowance to be increased annually in line with rents and for the national benefits system to cover households’ essential living costs. This would allow councils to target local welfare support to households with the most complex needs.”

The Work and Pensions Committee also points out that young people face particularly low benefit levels – universal credit, for example, is lower if you’re under the age of 25. 

Balbir Kaur Chatrik, youth homelessness charity Centrepoint’s director of policy and communications, said: “The failure to keep benefits in line with inflation at a time of soaring costs has been a repeated and avoidable one that has no doubt entrenched both homelessness and poverty.  

“And, as the committee notes, this has been particularly difficult for young people on low incomes and reliant on benefits to cover their essentials, with some of the most vulnerable forced to live on less simply because they are under 25.   

“That said, increasing the rate of benefits alone is only part of the picture, especially when it comes to ensuring housing is affordable and tenancies can be maintained. A regularly uprated local housing allowance is an important safety valve in the context of soaring rents – but benefits alone cannot tackle the structural problem of unaffordable housing.

“To tackle that issue we need a cross-governmental approach to homelessness and poverty that reckons with the scale of the task at hand and responds with investment and a vision to help people escape their grip.”

The report also briefly refers to benefit overpayments, the impact of which has been covered by the Big Issue – when people are overpaid benefits even by mistake, they are left with debt sometimes worth thousands of pounds and money is deducted each month.

In some months, the committee highlighted, universal credit claimants received lower payments than they were expecting which could make it even more difficult to cover basic costs.

StepChange’s head of policy Peter Tutton said: “People like our clients receiving universal credit too often just don’t have enough money to cover the essentials, putting them into a negative budget and often having no choice but to borrow to keep up and risk debt problems, when they have turned to the social safety net to cope with challenging life events.  

“We welcome the calls to make the household support fund permanent, create a proper framework for benefits linked to living costs, and provide an uprating guarantee. We’d also highlight the need to make sure that deductions from benefits are only ever made if they are affordable and consistent with responsible practice in debt collection.

“Among our clients, a survey showed that 98% of those who had deductions made from their universal credit payment for benefit overpayments were not left with enough to cover their essential needs. Together, these steps would go a long way to reduce the number of benefit claimants who experience hardship and problem debt.”

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