Issue date
29 Jun 2015

29 June 2015

The government’s decision to freeze child benefit until 2018 will cost the UK’s 3.9 million households with two or more children who claim the benefit more than £2,000 by the next election – regardless of any further cuts still to be announced in the Budget – a TUC report reveals today (Monday).

After freezing child benefit for all families in April 2011, the government only increased it by one per cent – despite significant increases in the cost of living – in 2014/2015 and 2015/16, and has announced a further two-year freeze for 2016/17 and 2017/18.

As a result of this policy, families with two children under 16 have seen the amount they receive in child benefit for their first child stall at £20.70 per week, and the amount they receive for their second child remain set at £13.70 per week until 2018.

In Eroding Child Benefit, the TUC says that, due to this second freeze, a two-child family will suffer a real-terms cut in child benefit of £6.35 week and £330.72 over 12 months in 2016/17, rising to £9.05 a week and £470.60 over 12 months by 2020/21 – adding up to a cumulative loss of £2017.60 over the five year period.

The Prime Minster has recently said he will not ‘cut child benefit’. However, this leaves open the possibility that he may extend the freeze to the end of the parliament. This would mean two-child families will suffer a real terms annual cut of £572.00 in 2020/21 – adding up to a cumulative loss of £2,212.60 over the five-year period.

The TUC is very concerned about the impact this will have on middle-earner families who have recently experienced the longest decline in living standards since Queen Victoria was on the throne. Freezing child benefit for so long severely damages one of the most popular and successful elements of the welfare state.

It will also lead to an increase in the number of children growing up in poverty – especially as the government has hinted at cuts to tax credits in the Budget which could see working families lose as much as £1,690 annually according to the Resolution Foundation.

TUC General Secretary Frances O’Grady said: “Freezing the value of child benefit for a second time is a huge blow for millions of families who rely on this money to feed and clothe their children.

“By the time of the next election, families with two children will have lost more than £2,000. It is vital the Prime Minister keeps his promise not to cut child benefit, and neither should he extend the freeze again, or he will be hammering families who have already made tremendous sacrifices following a financial crisis they were not responsible for.

“It’s astonishing that many Conservatives are already calling for tax cuts for the wealthiest again. They really need to get their priorities in order and give all the help they can to families who have seen their living standards suffer so much. It will also strengthen the fragile economic recovery if families have more cash to spend in their local shops and services.”

NOTES TO EDITORS:

Amount lost if child benefit is frozen for two further years then updated by CPI compared with previous policy of annual RPI uprating

First child

Subsequent child

Family with two children

£ difference per week

£ difference per week

£ difference per year

2016/17

3.85

2.50

330.20

2017/18

4.35

2.85

374.40

2018/19

4.70

3.10

405.60

2019/20

5.10

3.30

436.80

2020/21

5.45

3.60

470.60

Cumulative difference 2016/2017 to 2020/21

£2017.60

Amount lost if child benefit is frozen throughout the current parliament compared with previous policy of annual RPI uprating

First child

Subsequent child

Family with two children

£ difference per week

£ difference per week

£ difference per year

2016/17

3.85

2.50

330.20

2017/18

4.35

2.85

374.40

2018/19

5.05

3.30

434.20

2019/20

5.85

3.80

501.80

2020/21

6.65

4.35

572.00

Cumulative difference 2016/2017 to 2020/21

£2212.60

- The full report Eroding Child Benefit is available at https://www.tuc.org.uk/sites/default/files/ErodingChildBenefit_0.pdf

- The most recent government statistics reveal there were there were 2,718,895 two-child families receiving child benefit in August 2014: www.gov.uk/government/statistics/child-benefit-geographical-analysis-august-2014

- More information on the Resolution Foundation calculations on the impact of further tax credit cuts can be found at http://www.resolutionfoundation.org/media/blog/assessing-the-proposal-to-cut-5-billion-from-child-tax-credit/

- All TUC press releases can be found at www.tuc.org.uk

- Follow the TUC on Twitter: @tucnews