Ministers refuse to backdown on benefits cut for poor families despite Brexit price rises

Food companies have announced higher prices just as a new lower cap on benefits comes into force 

Joe Watts
Political Editor
Monday 07 November 2016 10:11
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Work and Pensions Secretary Damian Green
Work and Pensions Secretary Damian Green

The Government is refusing to review a new cap on people’s benefits despite the soaring costs of goods in the wake of Brexit, a cabinet minister has confirmed.

Damian Green said he would not take into account rising prices in setting the level of the cap, which drops today from £26,000 to £23,000 in London and to £20,000 outside the capital.

The Work and Pensions Secretary’s admission came as major food producers confirmed struggling families could be hit by price rises due to the falling strength of the pound – it has plummeted 18 per cent against the US dollar since June's Brexit vote.

Asked whether the cap could be adjusted if inflation jumped above two and a half per cent, for example, Mr Green said: "There’s no intention to reconsider the cap".

He argued that the new cap is necessary to ensure that households on benefits do not earn more than those with individuals in work.

The new drop in annual limits on welfare payments to unemployed households was announced by George Osborne before he left the Treasury. It could lead to some families losing more than £100 a week.

Around 20,000 families are currently capped by an annual limit of £26,000, or £500 a week, on total household benefits, which was introduced in 2013.

The new lower cap is set to bring an explosion in the numbers affected to around 64,000 households.

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Nearly two thirds of those hit are single mothers, according to the GMB union.

For single people without children the cap will fall to £15,410 in Greater London and £13,400 across the rest of the UK.

According to the Department for Work and Pensions, the 23,500 households who previously had their benefits capped have moved into work since 2013.

But analysis by the Institute for Fiscal Studies suggests that "the majority of those affected will not respond" to the tougher cap by moving into work or moving house.

"For that majority it is an open question how they will adjust to the loss of income," it said in a report.

Walkers, owned by US giant PepsiCo, has said that "the weakened value of the pound" is affecting the import cost of some of its materials.

Birds Eye, owned by New York-listed Nomad Foods, says its products are priced in dollars, so the pound's fall means sterling costs have risen.

Walkers and Birds Eye want to increase the price they charge retailers for their products, but it will be up to the supermarkets whether or not to pass these onto consumers.

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