The DWP is set to essentially cut £10bn from people’s benefits

The DWP logo and hands begging

A think tank has warned that the extent of the cost of living crisis is going to become so bad that it will hit people like a recession. Nearly every part of society is going to see a fall in their living standards. Most notably, the Department for Work and Pensions (DWP) will shave £10bn in real terms off people’s social security. Plus, child poverty rates for some groups could hit nearly 80%.

But the think tank has also issued an even starker warning. Because much of this analysis doesn’t factor in Russia’s invasion of Ukraine. And where it has forecast this in, the collapse in people’s incomes could be worse than the 2007/08 financial crash; a level not seen since the late 1970s.

Cost of living: bleak headlines

The Resolution Foundation has produced its fourth annual Living Standards Outlook report. It says the research looks at:

how household incomes and inequalities may change over the next five years

The report uses government, Bank of England, and Office for Budget Responsibility data. The Resolution Foundation then uses its own modelling to work out what will happen to living standards. Overall, It paints a grim picture. The report’s key takeaways are:

  • “High inflation will squeeze incomes in 2022”.
  • DWP social security rises “will not keep up with price rises”.
  • “Tax rises and increasing housing costs” are going to hit people’s pockets.
  • “Real incomes will take a huge hit in 2022-23, and potentially fall again in 2023-24”.
  • “A drop in poverty in 2020-21 has probably already been undone”.

The full report makes for even worse reading – especially for people reliant on the DWP.

Everyone will be worse off

Overall, the report says everyone will be on average £1,000 worse off (excluding retired people) in 2022/23 than in 2021/22. It states that even without the impact of Russia’s invasion of Ukraine:

Read on...

real incomes are currently projected to be lower in 2026-27 than in 2021-22, and the period from 2019-20 to 2024-25 is currently on track to be the worst parliament on record for income growth

The report says the collapse in living standards will be worse for people reliant on the DWP.

The poorest: hit the hardest

The report says that inflation means the DWP will effectively cut social security by £10bn in 2022/23. This will take its value to the lowest levels since the mid-1980s. But moreover, as a proportion of everyone else’s average weekly earning, DWP social security will be at its lowest on record:

A graph showing the real terms value of social security

Social security rates will recover in the years after this, but only to the levels the DWP set in April 2021. Plus as the report states, the benefit cap isn’t changing. This will mean many families won’t see the full impact of the social security rises after 2022/23 anyway. People affected by the Local Housing Allowance (LHA) and the two-child limit will see a similar impact.

Meanwhile, rent prices for social housing are set to increase proportionally more than rents for private sector accommodation in the next three financial years:

A graph showing increases in housing costs

Back to the 1970s?

When the report does factor in Russia’s invasion of Ukraine, it says that in April 2022, inflation could hit 8.3%. If this happens, it would mean the collapse in real income would be the most drastic since the late 70s/early 1980s:

A graph showing the projected fall in real income

From 2020/21 to 2026/27, the poorest people are predicted to see repeated falls in their overall income – whereas the richest will eventually see theirs rise:

A graph showing real income growth for the richest and poorest people

All this will lead, as the Resolution Foundation says, to poverty increasing again, and the:

prevalence of absolute child poverty is projected to be higher in 2026-27 than in 2019-20, with a large rise between 2020-21 and 2022-23 even before we consider the impact of the war in Ukraine

A graph showing poverty rates

It will be worse for children in larger families with those in four-child and more families seeing their poverty rate hit nearly 80%:

A graph showing child poverty rates depending on the size of the family

An ongoing disaster

The poorest people in the UK are facing a disaster on top of the cost of living crisis that has already begun. Those reliant on the DWP are facing a collapse in income not seen in decades. It will come after years of cuts and freezes. And with the effect of the Russian invasion of Ukraine still not clear, the 2020s could be another lost decade for countless people. Moreover, as the Resolution Foundation’s analysis shows, the fact living standards can fall so low without us being technically in a recession shows that the way we measure the economy is weighted towards measuring the situation of the rich rather than society at large.

The poorest people cannot be punished while the government allows the richest to prosper. So, protest and community organising in the face of this crisis is more important than ever.

Featured image via StockSnap – Pixabay and UK government – Wikimedia 

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  • Show Comments
    1. Well voter I have just posted a big rant about D.W.P.
      LINK to post 8.3.2022
      Sorry for the LONG RANT- U.K. voter!
      This above was start of my post on D.W.P. increase in April.
      The DWP is set to essentially cut £10bn from people’s benefits
      But this post is very important voter plus benefit claimants Possibly screwing all claimants again over the Bribe offer made by Tory Govt to benefit claimant. On U-Credit payments only them on E.S.A. do not get this new increase in April 2022 why?
      So, it look like what I predicted is going to unfold in time under lying Boris rule even before you get the cash payments benefit help for Tory Govt they are setting planes in place to clew it back with interest add No doubt by D.E.P. Minister.
      Have grave concerns now this sudden clew back of funding is for a reason claimant my concern is what is the reason???
      Could it be any of the following reasons voters?
      To prop up Tory party funding now Putin’s illegal cash is being stop by H.O. Com parties so Tory pocket will suffer loss of funding
      If they let in Mass amount of refugees from Putin’s Ukraine war this cut to benefit may be used to fund them???
      The clew back from poor U-Credit uses that are in low paid jobs is unfair voters considering Govt member have just been given a £200.00 payrise from April 2022 and also considering they is another increase planned for Now 2022 in Govt salaries.
      Voters Boris + Sunak never said anything about in H.O. Com.
      Also, as cost of living go up to us voter to us all the Govt member will be putting bigger & bigger claim for exspeneccs on us U.K. taxpayer what will we get voters apart from nothing off Tories?
      Voter could not ever Govt M.P.+ Ministers. give their increased wages to fund Ukraine refugees not just rip off us taxpayer and the benefit claimant that need the increase to pay their bills plus buy food if any is left on the supermarket shelves that is voters Tory Govt under lying Boris are on track to trash the U.K. fully now voter.

      1. UPDATE 9.3.2022
        The DWP is set to essentially cut £10bn from people’s benefits
        To British voter this picture attached to this article I wonder who hands they are asking for hand out help??
        (or scrounging) –like most of Tory party under Boris plus Tory voters call it why?
        Are they the hand of ALL refugees? or us British low paid working people? that need help because of Tory miss handling of U.K. taxpayer money other 12+year in office running our country they give us with one hand then S***w us over with the other hand.

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