Charities and campaigners slam budget as disasterous for poor

By The Press Association8th July 2015News EnglandAusterity, Benefits, Child Poverty, News England, Poverty / Austerity, Welfare / Benefits, Welfare Reform

A four-year freeze for working-age benefits and restricting tax credits to two children are among key parts of a blueprint to slash at least another £12 billion-plus a year from the welfare bill.

Chancellor George Osborne said it was not fair to taxpayers that the UK was responsible for 7% of the world’s welfare spending, despite being home to 1% of its population and generating 4% of its income.

He sought to soften the blow by announcing that the cuts would not be fully in place until 2019/20, two years later than previously anticipated.

The Treasury insisted that nobody would end up better off out of work or working fewer hours.

But critics said the slowdown – a result of higher-than-expected tax receipts – did not make the reforms any less of a “disaster for low-income working families” that would worsen child poverty, hammer young people and increase homelessness.

Here are the main changes and the sums they are due be saving the taxpayer in 2019/20

:: Working age benefits frozen for four years from 2016/17 – including tax credits and local housing allowance, but excluding maternity pay and disability benefits. (£3.9 billion)

:: Support for children through tax credits and universal credits limited to two children, affecting children born after April 2017. (£1 billion)

:: Income threshold for tax credits cut from £6,420 to £3,850, with similar reductions for Universal Credit work allowances, which will no longer be awarded to non-disabled claimants without children. (£3.3 billion)

:: Family element in tax credits and Universal Credit removed, along with the family premium in Housing Benefit, for new claims. (£555 million)

:: The tax credit “taper rate” which determines reductions to household payments as earnings rise increased to 48%. (£345 million)

:: Tax credit income rise disregard reduced from £5,000 to £2,500 (£180 million)

:: Benefits cap reduced from £26,000 per household to £23,000 in London and £20,000 in the rest of the country. (£405 million)

:: Social housing tenants earning more than £40,000 in London and £30,000 elsewhere to be forced to pay rent at market rates. (£245 million)

:: Automatic entitlement to housing benefit for 18 to 21-year-olds abolished, with exemptions for vulnerable people. (£35 million)

:: New conditions on Universal Credit claimants once their youngest child turns three. (£30 million)

:: Rents in the social housing sector reduced by 1% a year for the next four years. (£1.3 million)

:: Rate of Employment and Support Allowance paid, for new claims, to disabled people deemed able to work (effectively removing the Work-Related Activity Group) reduced to match Jobseekers’ Allowance. (£445 million)

:: Support for Mortgage Interest changed from welfare payments to loans. (£255 million)

Mr Osborne said the tax credit reforms reduced spending on the benefit in real terms to the levels seen in 2007/8 and meant five in ten households – rather than six in ten at present – would now receive them.

“These changes to Tax Credits are not easy but they are fair,” he said.

Critics, he added, “will have to explain how on earth they propose to eliminate the deficit, let alone run a surplus and pay down debt”.

The changes in income thresholds would take 500,000 out of the scope of tax credits and 300,000 from Universal Credit, officials said.

At present there are 870,000 families with three or more children claiming the benefits.

Mr Osborne also pledged that the Government would not tax or means-test disability benefits.

Child Poverty Action Group’s Alison Garnham said: “Two thirds of poor children now live in working families but incredibly the Chancellor has removed tax credits targeted to help them.

“The suggestion that higher tax allowances will offset tax credit cuts is sheer fallacy: 44% of adults earn too little to pay income tax and those on slightly higher wages gain little because tax credits are withdrawn as incomes rises.

“The move to lower the benefit cap is founded on a false argument since families in work are already better off than families out of work – but the impact will be dramatic: as Supreme Court judges have noted, the current cap deprives children of the basic necessities of life, in breach of international law.”

Barnardo’s chief executive Javed Khan said: “Tax credit cuts could blow a £1,200 hole in some families budgets, leaving them struggling to cover even the cost of basics such as school uniforms for their children. Promises that this shortfall will be made up for by raising low wages are misleading, because the cuts to tax credits are so severe.

“Children who grow up poor are more likely to be ill, do worse at school and be jobless in future. The Government needs to protect vital tax credits, or else risk consigning more children to poverty.”

The removal of the higher ESA payments to those in the work-related activity group – those deemed capable of moving towards working in the future – was described as a “bitter blow” by Disability Rights UK.

Chief executive Liz Sayce said: “Becoming disabled through an accident, or getting cancer, or some other condition, can happen to anyone. Managing that kind of life changing event is hard enough; a 30% drop in income makes it much, much, harder.

“In the meantime we are unclear whether these changes include the nearly half a million people currently waiting for a Work Capability Assessment outcome.

“The Chancellor could have been much more proactive by expanding the Access to Work scheme, which helps disabled people to get and keep jobs, as well as improving the current Work Programme, which has a terrible track record in helping people into long term employment.”

Youth homelessness charity Centrepoint’s chief executive Seyi Obakin said additional pressures on local councils and the NHS would all but wipe out any savings from restricting housing benefit access for 18-21-year-olds.

“Our independent research shows that restricting access to housing benefit for 18-21-year-olds will not achieve anything close to the anticipated £40 million a year savings by 2020 as highlighted in the Budget, instead saving a maximum of £3 million a year once additional pressures onare taken into account.

“We are also concerned that the further reforms to housing benefit could lead to an increase in youth homelessness and undermine efforts to get young people into work.

“For instance, the freezing of housing benefit rates which already lag behind average rents is a major cause for concern as it could leave young people with nowhere to go when they leave our hostels.

“Whilst we understand the need for further savings it is vital that the Government remembers that for the most vulnerable young people in this country housing benefit is not a lifestyle, it’s a lifeline.”

Shelter chief executive Campbell Robb said: “Today’s cuts to housing benefit will be a huge blow to the millions of private renters who depend on it to keep a roof over their heads. Cutting housing benefit altogether for 18-21-year-olds could be nothing short of catastrophic, and lead to a rise in homelessness.”

David Holmes, chairman of the End Child Poverty coalition, said: “The good news on the minimum wage will help many but the bad news on tax credits and children’s benefits will mean families with children will be hit hard. It is difficult to see how this will not impact on levels of child poverty.

“The decision to limit tax credits to two children conflicts with the Government’s own child poverty strategy which emphasises the higher poverty risks facing large families. Families come in all shapes and sizes, and surely we owe all children the same level of support?”

Rob Holland, parliamentary lead at Mencap and co-chair of the Disability Benefits Consortium, which represents more than 50 charities, said: “We are deeply concerned at today’s announcement by George Osborne that people who are in the work related activity group (WRAG) of Employment and Support Allowance would see their support cut by more than £30 a week.”

Mark Lever, chief executive of the National Autistic Society, said: “The Government has broken its promise to protect disability benefits. We are pleased to see that the personal independence payment (PIP) is being protected, but people on the autism spectrum will have to cope with huge pressures if the Government goes ahead with a cut to the lower rate of Employment and Support Allowance (ESA), which helps cover basic costs for thousands of autistic people who are unable to work.

“Most autistic people on out-of-work benefits want to work, but struggle due to employers’ misunderstandings and a lack of support. They need ESA to pay for basics like food, heating and clothing.”

Dot Gibson, National Pensioners Convention general secretary, said: “Today, the Chancellor had an opportunity to offer a much needed injection of funds into the crumbling social care system, but instead he chose to tinker with inheritance tax.

“For the tens of thousands of families who have to sell their homes every year to pay for care, there’s no point raising inheritance tax when there’s no home left to pass on.”

Duleep Allirajah, head of policy at Macmillan Cancer Support, said: “Macmillan is deeply concerned that Employment and Support Allowance payments to those in the work-related activity group will be cut. This benefit is currently paid out to disabled or sick people, including those with cancer, who are unable to or need help getting back to work. Cutting this could leave thousands of people with cancer without a vital financial lifeline at a time when they need it most.”

Anna Feuchtwang, chief executive of the National Children’s Bureau, said: “It is particularly startling that the Government chose not to protect the nation’s children in the same way that it is protecting pensioners.

“The principal sources of support for children – child benefit and child tax credit – have not been protected with an equivalent of the ‘triple lock’ on pensions and are being reduced.”

Gillian Guy, chief executive of Citizens Advice, said: “Whilst this Budget provides help to the low paid those at the sharp end of welfare cuts will really struggle.”