Methods briefing: removing the benefits freeze a year early

Becky Holloway

This briefing explains the methods used by Joseph Rowntree Foundation to calculate the impact of removing the benefits freeze a year early.

Key points

  1. The increases to Work Allowances within Universal Credit announced in the 2018 Budget are expected to reduce poverty by 200,000 people. Ending the benefit freeze a year early would cost an additional £1.4 billion and reduce poverty by a further 200,000 people. Together, the measures would bring poverty in 2020/21 down by 400,000.
  2. As well as lifting a further 200,000 people out of poverty, ending the benefit freeze a year early would increase the incomes of 13.7 million benefit recipients by an average of £270 in 2020/21.
  3. Including recipients of Child Benefit would increase the number of gainers to 25.7 million, who would gain an average of £90 in 2020/21.

Findings

Impact of removing the benefits freeze a year early
Question Answer

What will removing the freeze a year early do to the number of people in poverty?

A reduction of 200,000 * people at a cost of £1.4 billion **

What is the combined impact of lifting the freeze and the increased Work Allowances within Universal Credit announced in the Budget?

A total reduction of 400,000 * people at a cost of £3.0 billion **

How many people would gain in 2020/ 21 if the benefit freeze ended a year early?

25.7 million* people in total

13.7 million* people who claim a benefit other than Child Benefit

How much on average would a family receiving benefits gain in 2020/21 if the benefit freeze was ended a year early?

Among all gainers: £90***

Among gainers who claim a benefit other than Child Benefit: £270 ***

Modelled using the IPPR Tax-Benefit Model for 2020/21, assuming full roll-out of Universal Credit

* Rounded to nearest 100 thousand

** Rounded to nearest 100 million

*** Median, rounded to nearest £10

Methods

1. ‘Gainers’ from lifting the final year of the benefit freeze

For each family (benefit unit), a comparison is made between family income in 2020/21 if the benefit freeze remains in place in 2019/20, and family income in 2020/21 if the benefit freeze was lifted in 2019/20. A ‘gainer’ is considered as anyone living in a family where income increases by at least £1. The measure for income used is disposable income (after tax and housing costs). This figure is not adjusted (equivalised) for family size. The average gain reported is the median change in family income amongst gainers and is reported to the nearest £10.

2. Take-up of benefits

All analysis of income and poverty rates assumes full roll-out of Universal Credit where take-up is set at the highest take-up rate of the six legacy benefits it replaces.

3. Data and modelling

Analysis was completed using version v01_60 of the IPPR Tax-Benefit Microsimulation Model which takes a sample of ~19,000 households (Family Resources Survey, 2016/17) and measures the impact of specific policy changes on family and household income in 2020/21.

 

Notes

Department of Work and Pensions (2016/17). Family Resources Survey (2016/17). [Online] Available at: https://www.gov.uk/government/collections/family-resources-survey--2 [Accessed: 19 November 2018].

Joseph Rowntree Foundation. In-work poverty content. [Online] Available at: https://www.jrf.org.uk/work/in-work-poverty [Accessed: 19 November 2018]

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