Poor working families face 'double whammy' on living standards - report

Posted On: 
7th March 2017

Hard up working families face a "double whammy" of benefits freezes and rising inflation to the tune of billions of pounds, a new study has warned. 

Philip Hammond will deliver his Budget tomorrow

Analysis from thinktank the Resolution Foundation found that a total of £3.6bn will be taken from the worst off households by 2020 thanks to the freeze in tax credit and working age benefits.

Their calculations suggest a single earner family with two children could lose £680 a year once inflation is factored in. 

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The Foundation's director, Torsten Bell, warned the Office for Budget Responsibility could revise up its inflation forecast to 2.6% for both this year and 2018.

That would see real pay falling by the end of this year as prices start to outstrip only modest wage growth.

“The effect of a renewed pay squeeze would be broadly felt across the population," Mr Bell told the Guardian. 

"But in many ways the worst affected group might be those ‘ordinary working families’ on lower incomes who will face a double whammy of lower pay growth and benefit cuts."

Mr Bell, a former adviser to Ed Miliband when he was Labour leader, suggested Philip Hammond could take the strain off working families by revisiting cuts to income tax, corporation tax or inheritance tax - all measures which he said "overwhelmingly benefit better off households". 

A Treasury spokesperson pointed to measures such as the cut in the income tax threshold, an increased national living wage and the doubling of free childcare as examples of how the Government is helping working households.

“Getting people into work is the best way to sustainably raise living standards, and our welfare reforms are designed to make sure that work always pays," the spokesperson said.

"More people are employed than ever before, and living standards are forecast to rise over this parliament.”