The Government must look at ending its freeze on working age benefits, Iain Duncan Smith has said.
The former Work and Pensions Secretary said the freeze, implemented by the then Chancellor George Osborne, would likely be harsher than expected because of rising inflation.
He said it was important that a resulting bigger hit to the living standards on low earners “doesn’t actually happen” and said the Treasury should be reviewing the policy.
“When the original benefit freeze was set it was set against an estimate of a much lower rise in inflation,” he told an event in Westminster on Monday morning
“Therefore I’m sure the Treasury will want to look at to keep that under review because the purpose was not to have such a dramatic effect on incomes against a forecast of rising inflation.
“I’m sure the Treasury will want to look at that and keep that under review so that doesn’t actually happen and make it adverse in a way that it was not completely intended.”
The freeze came into force in April this year and was announced in the 2015 Summer budget. It sees benefits capped at their current level until 2019 rather than rise in line with wages as standard, and is expected to save £3.5bn.
The policy affects Jobseeker’s Allowance (JSA), Employment and Support Allowance (ESA), Income Support, Housing Benefit, Universal Credit, Child Tax Credits, Working Tax Credits and Child Benefit. It does not apply to some disability benefits, carer and pension benefits or statutory maternity and sickness pay.
Last week Bank of England Governor Mark Carney said that “inflation expectations have picked up notably” following the vote to leave the EU. This means the cost of living will rise faster while benefits remain static.
Mr Duncan Smith’s call came on the same day as the Government’s new £20,000 benefit cap comes into force, with fears that single mothers are likely to be hit most hard.
The former Work and Pensions Secretary also used the same event reiterate a call for the cuts to Universal Credit work allowances to be scrapped. He said money could be raised for the policies by scrapping a planned rise in the income tax personal allowance to £12,500 and the triple lock on pensions.
7 ways the Tories have ‘helped’ disabled people
7 ways the Tories have ‘helped’ disabled people
1/7 Closing Remploy factories
The Work and Pensions Secretary called time on Britain’s system of Remploy factories, which provided subsidised and sheltered employment to disabled people. People employed at the factories protested against their closure and said they provided gainful work. “Is it a kindness to stick people in some factory where they are not doing any work at all? Just making cups of coffee?” Mr Duncan Smith said at the time, defending the decision. “I promise you this is better.” The Remploy organisation was privatised and sold to American workfare provider Maximus, with the majority of the organisation’s factories closed. The future of the remaining sites is unclear
2/7 Scrapping the Independent Living Fund
The £320m Independent Living Fund was established in 1988 to give financial support to people with disabilities. It was scrapped on July 1 2015, with 18,000 often severely disabled people losing out by an average of £300 a week. The money was generally used to help pay for carers so people could live in communities rather than institutions. Councils will get a boost in funding to compensate but it will not cover the whole cost of the fund. This new cash also doesn’t have to be spent on the disabled
3/7 Cut payments for the disabled Access To Work scheme
Iain Duncan Smith is bringing forward a policy that will reduce payments to some disabled people from a scheme designed to help them into work. The £108m scheme, which helps 35,540 people, will be capped on a per-used basis, potentially hitting those with the more serious disabilities who currently receive the most help. The single biggest users of the fund are people who have difficulty seeing and hearing. The cut will come in from October 2015. The charity Disability UK says the scheme actually makes the Government money because the people who gain access to work tend pay tax that more than covers its cost. The DWP does not describe the reduction as a “cut” and says it will be able to spread the money more thinly and cover more people
4/7 Cut Employment and Support Allowance
The latest Budget included a £30 a week cut in disability benefits for some new claimants of Employment and Support Allowance (ESA). The Government says it is equalising the rate of disability benefits with Jobseekers Allowance because giving disabled people more help is a “perverse incentive”. The people affected by this cut are those assessed as having a limited capability for work but as being capable of some “work-related activity”. A group of prominent Catholics wrote to Mr Duncan Smith to say there was “no justification” for this cut. Mental health charity Mind, said the cut was “insulting and misguided”
5/7 Risk homelessness with a sharp increase disability benefit sanctions
Official figures in the first quarter of 2014 found a huge increase in sanctions against people reliant on ESA sickness benefit. The 15,955 sanctions were handed out in that period compared to 3,574 in the same period the year before, 2013 – a 4.5 times increase. The homelessness charity Crisis warned at the time that the sharp rise in temporary benefit cuts was “cruel and can leave people utterly destitute – without money even for food and at severe risk of homelessness”. “It is difficult to see how they are meant to help people prepare for work,” Matt Downie, director of policy at the charity added
6/7 Sending sick people to work because of broken fitness to work tests
In 2012 a government advisor appointed to review the Government’s Work Capability Assessment said the tests causing suffering by sending sick people back to work inappropriately. “There are certainly areas where it's still not working and I am sorry there are people going through a system which I think still needs improvement,” Professor Malcolm Harrington concluded. The tests are said to have improved since then, but as recently as this summer they are still coming in for criticism. In June the British Psychological Society said there was “now significant body of evidence that the WCA is failing to assess people’s fitness for work accurately and appropriately”. It called for a full overhaul of the way the tests are carried out. The WCA appeals system has also been fraught with controversy with a very high rate of overturns and delays lasting months and blamed for hardship
7/7 The bedroom tax
The Government’s benefit cut for people who it says are “under-occupying” their homes disproportionately affects disabled people. Statistics released last year show that around two-thirds of those affected by the under-occupancy penalty, widely known as the ‘bedroom tax’, are disabled. There have been a number of high profile cases of disabled people being moved out of specially adapted homes by the policy. In one case publicised by the Sunday People last week, a 48 year old man with cerebral palsy was forced to bathe in a paddling pool after the tax moved him out of his home with a walk-in shower. The Government says it has provided councils with a discretionary fund to help reduce the policy’s impact on disabled people, but cases continue to arise
He warned that without reversing the work allowance cuts, Universal Credit would leave people on low incomes worse off than the current benefits system. Mr Duncan Smith, the architect of the programme who resigned earlier this year over cuts, said people moving from tax credits to Universal Credit would see their incomes “go down”.
He was speaking at the launch of a study by the Resolution Foundation think tank that warned that “damaging” cuts to work allowances under the system would cut the incomes of low income families by as much as £2,800 each.
Mr Duncan Smith said that the original intention of the new system had been to boost incomes but that this objective had been eroded by Treasury cuts.
“The Chancellor decided to reduce tax credits in the Budget but then reversed that at the end of last year,” he said. “That means tax credits are back to where they were, which leaves Universal Credit very exposed because Universal Credit reductions mean that you leave tax credits you go down into Universal Credit, which simply should not happen.”
He added that Universal Credot would make it “more difficult” for people to get into work compared to the current system.
The Independent has contacted the Department for Work and Pensions for comment on this story.