UK (Parliament Politics Magazine) – The Joseph Rowntree Foundation warns that UK low-income families face a decade of falling incomes, calling on the government to lift the two-child benefit cap.
As reported by The Independent, a foundation warned that low-income families will struggle to afford food, heating, and bills amid a decade of falling incomes.
What did JRF report about falling UK incomes and struggling families?
A new report from the Joseph Rowntree Foundation warns that by the end of this parliament, the average household will see disposable incomes fall by £550 compared with September 2024. This represents a 1.3% decline, leaving families £570 worse off than at present.
The charity said this would be the largest decline in living standards since 1961, warning that Labour may face electoral backlash.
In response to its findings, the JRF has recommended ending the two-child benefit cap and introducing a “minimum floor” in Universal Credit, ensuring no one’s payment falls below a set level.
The foundation called on the government to lift the freeze on Local Housing Allowance. It also urged increased targeted support for low-income households facing rising energy costs.
The charity estimated that disposable incomes fell by 0.5% during the early 2020s. It warned that families may face a decade of declining earnings and living standards.
The report shows that the gap between low- and high-income households is getting bigger. Families in the lowest third of earners could see their disposable income drop by £1,110 a year, a fall of 6.2%, between September 2019 and September 2029.
The analysis showed that middle-income households are expected to see their incomes fall by £380 per year (1.1%), while high-income families could face a £970 drop (1.3%).
The report warns,
“Without savings to cushion the impact of having less income, low-income families will find it nearly impossible to afford food in their fridge, to keep their home warm, or to keep on top of their bills.”
The foundation said lone parents will see the largest fall in living standards over the next decade, with families and single working-age adults also affected.
The report finds that over the decade from 2019 to 2029, working-age households will lose nearly £900 per year, while pensioner households face a much smaller drop of £170.
The findings come as Labour promised to protect workers’ earnings and improve their financial position.
Families with children could lose £1,580 a year (2.8%), and lone parents £1,510 (5.6%). Couples without children may see a smaller drop of £180 (0.3%).
What did Chris Belfield say about families and living standards?
Chris Belfield, chief economist at JRF, stated, “Families need to see their living standards improve. They will likely vote for a government that makes this happen and punish one that fails to deliver.”
He stated,
“The last Labour government knew this and in their first term they pulled 300,000 children out of poverty alongside rising living standards overall, winning a further two terms.”
Mr Belfield added,
“A decade that leaves families worse off isn’t inevitable. The government has recognised the gravity of the situation by committing to delivering higher living standards.”
What plans are Labour MPs proposing to end the benefit cap?
More than 100 Labour MPs have urged Chancellor Rachel Reeves to lift the benefit cap, with new findings putting pressure on the government to act ahead of the autumn Budget.
MPs proposed funding the initiative through a “targeted levy on harmful online gambling,” which would help support the government’s pledge to reduce gambling-related harm and tackle child poverty.
The parliamentarians cited a report from the Institute for Public Policy Research, backed by former Prime Minister Gordon Brown, which argued that reforms to gambling levies could generate £3.2bn needed to lift the two-child limit and benefit cap.
The unpopular two-child benefit cap remains in place more than a year after Labour took office, making it a key issue ahead of the party conference.
In the race to replace Angela Rayner as deputy leader, both candidates, Bridget Phillipson and Lucy Powell, have called for the two-child benefit cap to be scrapped.
The comment by Ms Phillipson, describing the cap as “spiteful” and saying its removal is “on the table,” suggests ministers may be considering the option.
Ms Reeves also said the changes were “on the table.”
What is the Child Poverty Task Force recommending about the benefit cap?
According to The Times, the government set up a child poverty task force to explore solutions, and it is also preparing to recommend lifting the cap as the best approach to reduce child poverty.
The suggestion could place the government in a tough spot, as it is already facing a £20-30bn shortfall in the next budget, with the £3bn annual cost of lifting the cap adding further pressure.
Key facts about the two-child benefit cap
The two-child benefit cap means benefits are paid only for the first two children. It was introduced in April 2017 for new claims and applies to children born after that date for existing claimants.
Its purpose is to reduce welfare spending and encourage parents to consider financial limits. The rule mirrors the choices of families not receiving benefits.
