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Social security cuts hit the poorest hardest

19 June 2013

The poor are getting poorer

Britain is a terribly unequal country, where millions of people face poverty. Poverty isn’t restricted to the “scroungers” and “shirkers” some journalists and politicians love to blame.

A rigorous study of living standards published earlier this year found that five and a half million adults go without essential clothing and two and a half million children live in damp homes. Altogether, the number of people falling below the standards of the day has doubled in the past thirty years.

And that picture is getting worse. The revelation in the government’s poverty statistics that the number of people in absolute poverty grew by nearly a million in just twelve months may have left people thinking that this is so terrible, surely things couldn’t get any worse? If only that were true…

In these figures, absolute poverty went up but relative poverty came down slightly. That’s because most people were becoming worse-off at much the same rate and as we all took a step down the ladder, so hundreds of thousands of families who’d been just avoiding absolute poverty went under. There’s been a particularly big increase in the numbers of people who are “working poor” – two thirds of poor children now live in families where someone has a job.

In 2011 and 2012 a whole series of cuts to tax credits were implemented, partly to save money and partly to make good on the government’s claim that Universal Credit wouldn’t reduce anyone’s entitlement when the old tax credits go. These included:

  • Uprating most elements by the Consumer Price Index instead of the Retail Price Index.
  • Increasing the withdrawal rate from 39% to 41%.
  • Cutting the disregard for in-year increases in income from £25,000 to £10,000.
  • Cutting the proportion of childcare costs covered from 80 per cent to 70 per cent.
  • Freezing the Basic and 30 hours elements for 3 years.
  • Abolishing the baby element of Tax Credits.
  • Not introducing the Tax Credit toddler element.
  • Abolishing the 50 + return to work element of Tax Credits.
  • Reducing the second income threshold (after which the family element is tapered) for Tax Credits.
  • Tapering the family element of Tax Credits immediately after the child element.
  • Increasing the Working Tax Credit hours threshold for couples to 24 hours.

Over the next couple of years, we’re likely to see an anaemic economic recovery. It won’t be brilliant for people in the middle, but there’s a chance that their incomes will stop falling in real terms. But for people in low-paid jobs or who have to rely on benefits, that won’t be true, unfortunately. The Coalition’s benefit cuts will mean that their incomes continue to fall. A trio of really horrible cuts was introduced in April:

  • The Bedroom Tax – cuts the amount of benefit that people can get if they are deemed to have a spare bedroom in their council or housing association home. It’s been estimated this will affect 660,000 working-age social tenants – 31% of existing working-age housing benefit claimants in the social sector.
  • The Benefit Cap – starting in 4 London boroughs (but gradually spreading nationwide), this measure limits the maximum benefit a family can receive to £500 a week. 50,000 families will lose an average of £93 a week, over half will lose more than £66 a week and 15% (seven and a half thousand families) will lose more than £150 a week.
  • The Welfare Benefits Uprating Act – for 3 years benefits (except pensions) will be uprated by a maximum of 1 per cent. The Government’s argument is, to quote a Tory advert, “Who do you think this government should be giving more support to? Hardworking families … or people who won’t work?” As we now know, 60% of the cuts will in fact hit working families and there are still five unemployed people for every job vacancy.

A multitude of cuts like this will push millions of people deeper into poverty (the Child Poverty Action Group reckons that, by 2014, the government will be spending £16.5 billion less a year on benefits and tax credits than when it came to office). The Institute for Fiscal Studies calculates that, by 2021, there will be 1.1 million extra children in poverty. Some of this will, it is true, be because of the Coalition’s mismanagement of the economy and it is true that Universal Credit and the increase in the income tax personal allowance will take some people out of poverty, but these policies are outweighed by the Coalition’s other tax and benefit policies – the government has admitted that the Welfare Benefits Uprating Act by itself will increase the number of children in relative poverty by 200,000.

The problems for claimants aren’t just about cuts; if you’re unemployed, there’s the creation of more and more hoops for you to jump through. This isn’t about making you more employable or deterring fraud and work avoidance – if these were the objectives there wouldn’t be targets for sanctions. Sanctions are penalties for breaking benefit rules and Jobcentre Plus simply can’t know in advance how many people are going to do this – supposing the police had targets for the number of people they arrest for burglary! But sanctions targets make much more sense if the aim is to force people off benefits, either by making the whole experience of claiming JSA so miserable or by taking them out of the equation for the duration of the sanction – up to three years without benefits under new rules introduced by the Coalition. And then, of course, if you were thinking of trying to resist this social steamroller, there’s the decision to end Legal Aid for social security appeals.

No wonder the bishops of the Church of England have complained about reforms that “hit the poor hardest” and the Baptist, Methodist and United Reform churches talk about “spending cuts that will continue to have, a dramatic effect on the living standards of the most vulnerable in our country”.

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