Chancellor George Osborne has today unveiled his summer budget which includes sweeping cuts to welfare and in-work benefits.
Here we look at some of the main announcements affecting those in receipt of state benefits and pensions:
1. Household benefit cap to be reduced from £26,000 to £23,000 a year in London and £20,000 a year outside of the capital.
2. Working-age benefits will be frozen for four years, including tax credits and local housing allowance. This does not include Disability Living Allowance, Personal Independence Payment, Employment and Support Allowance support group payments, Maternity Allowance, Maternity Pay, Paternity Pay and Sick Pay.
3. Responsibility for funding free TV licenses for the over-75s will be transferred from the government to the BBC between 2018 and 2021.
4. Social housing rents are to be reduced by 1% a year for four years.
5. Social housing tenants earning £40,000 a year inside London or £30,000 outside will be required to pay rents at local market rate.
6. Tax credits and Universal Credit will be restricted to no more than two children – policy affects children born after April 2017.
7. The earning level for tax credits is to be reduced from £6,420 to £3,850. Universal Credit work allowances will be reduced to £4,764 for those without housing costs, £2,304 for those with housing costs.
8. Young people between the ages of 18-21 will no longer automatically be entitled to claim housing benefit, with a new “earn to learn” obligation. Those claiming Universal Credit will have to apply for an apprenticeship or traineeship, gain work-based skills, or go on a work placement 6 months after the start of their claim.
9. Employment and Support Allowance (ESA) ‘Work Related Activity Group’ (WRAG) to be “aligned” with Jobseeker’s Allowance (JSA) for new claimants. From 2017, claimants in the WRAG will receive the same rate as JSA.
10. The government will publish a ‘green paper’ with plans for a “radical change” to the pension savings system.
11. Tax relief on pension contributions limited to no more than £10,000 a year.
12. Victoria Cross and George Cross recipients will see pension annuities rise from £2,129 to £10,000.
13: Triple lock on pensions to be protected.
14: No means-testing on disability benefits.
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David Holmes CBE, Chair 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?
“Today’s Budget means that over the next five years an extra £46 billion will be taken from social security spending. This is a huge cut and much of it from working families. The biggest cuts are to in-work benefits and tax credits: some £20 billion is being saved by lowering the amount people can earn before benefits start to be withdrawn and by increasing the rate at which in work tax credits are withdrawn as they earn more.”
Julia Unwin, Chief Executive of the Joseph Rowntree Foundation, said:
“The Chancellor is right to focus on building a prosperous UK with higher pay and lower welfare and the role of raising pay and productivity to achieve this. The move to create a national wage which reflects living costs is an important and welcome recognition that the minimum wage falls well short of achieving an adequate standard of living.
“The £12 billion cuts to welfare have however been targeted at low-income working families, most of whom rely on tax credits to make work pay. Higher income from increasing the national minimum wage and the personal tax allowance will go some way towards closing the gap, but cutting support before the jobs market has had the chance to respond is a dangerous gamble. The cuts in tax credits and the reduction of the work allowance in Universal Credit, means that working families on low incomes will find it even harder to make ends meets.
“We need a credible long-term plan to make work more secure, build more affordable homes and lower essential bills, or times will simply get tougher for those on low incomes.”
Nick Bryer, Oxfam’s Head of UK Policy and Campaigns, said:
“Increasing the legal minimum wage is a big step towards making work pay for those on low incomes. While the planned increases announced by George Osborne are both welcome and significant, they won’t take us all the way to a true living wage that will allow people on the breadline to make ends meet. We hope he will complete that journey in future Budgets.
“The Government is right – the taxpayer should not subsidise poverty pay. Ministers now need to ensure that poor and vulnerable people do not lose more from tax credit cuts than they gain as a result of larger pay packets – particularly young people who are excluded from the minimum wage increase.”
CAS Head of Policy Susan McPhee says:
“We are very concerned about the impact these cuts will have on the poorest and most vulnerable Scots – many of whom have already been hit hard by the previous welfare reforms. Once again it looks like the burden is falling on those who are least able to cope.
“Last year Scottish CAB advisers saw a 71% increase in the number of people who needed to be referred to foodbanks. Our concern today is that these cuts will drive that trend to increase even more.
“We of course welcome the move to a living wage economy, but it looks like for most people this will not be enough to off-set the impact of the wider cuts. We note too that the projected minimum wage rise to £7.20 next year still falls short of the Scottish living wage which is currently £7.85.
“The freezing of working age benefits for four years is a cut in real terms. And some of the welfare cuts appear to have been focussed sharpest at young people in society – many of whom will be left without adequate support, particularly those who have no families to support them.”
Natalie Bennett, Green Party Leader, said: “This is a budget that profoundly fails the British people.
“We need to build a caring Britain, that provides for the needs of the young and the vulnerable, with a secure economic base that can be the foundation for the future in an economically volatile world. This budget does neither.
“The move towards a living wage standard as a minimum wage is welcome – and reflects a long-term Green Party campaign – but the tax credit and other benefit cuts are going to leave many struggling families close to or over the edge of financial disaster. And the living wage not applying to the under 25s, many of whom also won’t be eligible for housing benefit, will leave many in impossible situations.
“The dropping of the level of Employment Support Allowance is a direct attack on the ill and disabled. And the drop in the benefits cap comes in the light of a legal ruling that the existing inadequate level puts Britain in breach of its obligations under the UN Convention on the Rights of the Child. This in one of the world’s richest economies is simply a disgrace.”
SNP Depute Leader and Treasury spokesperson Stewart Hosie said:
“George Osborne’s Tory budget will hit hard working families, the poorest and young people the hardest. He has continued with his harsh austerity agenda – particularly the savage cuts in tax credits. Any increase in the minimum wage is of course welcome, but the reality is that the good will be undone by the Tory cuts to the incomes of people who can least afford it. And the living wage in Scotland is currently £7.85 – George Osborne is proposing to see it effectively lowered to £7.20.
“This Budget was a sermon from the high priest of an austerity cult – taking from the poor and hard working people and giving to the richest. The Tories’ cuts in the living standards of young people are particularly severe, including scrapping student grants. The SNP Government will continue to deliver grants for the poorest students in Scotland, demonstrating the benefits of having these powers in the Scottish Parliament, rather than in Tory hands at Westminster.
“There were measures which we welcome such as the freeze in fuel duty, but there was nothing in the Budget to encourage innovation or exports.
“The UK Government are imposing this austerity Budget on Scotland on the basis of having a single Tory MP north of the border – the electorate in Scotland overwhelmingly rejected austerity at the election by returning 56 SNP MPs, and the Tories secured their lowest share of the vote in Scotland since 1865.
“This Budget underlines the need to have economic and welfare powers in Scotland, so that we can build a more dynamic economy to boost tax revenues, and a fairer society where policies benefit the many, not deliver tax cuts for millionaires.”
Plaid Cymru‘s Treasury spokesperson, Jonathan Edwards MP, said:
“This Budget signals the latest chapter in the Tory party’s efforts to rewrite the role of the State. The Chancellor announced £37bn worth of cuts but only outlined £17bn.
“The £12bn of cuts announced to social protection will cost the Welsh economy over £500m a year, with cuts to tax credits likely to punish thousands of working families.
“The only way to rectify this is to end the subsidising of low pay and legislate to ensure workers receive a genuine living wage – a key Plaid Cymru commitment.
“People will not be fooled by the spin – the new National Living Wage is only a higher minimum wage. It is a long way off a genuine living wage and does not offset the damage done by cuts to tax credits.
“The regional benefits cap also threatens a dangerous precedent which may lead to geographical benefits. This would see people in Wales paying in the same as everyone else but receiving less, creating ghettos of low pay, low employment and low opportunity.
“It’s time for the Labour Welsh Government to stop sitting on its hands and wrest job-creating powers from the grip of the Tories in Westminster.
“Only then can we create a Wales in which social justice and economic prosperity can be enjoyed by all.”
TUC General Secretary Frances O’Grady said:
“The Chancellor is giving with one hand and taking away with the other. Massive cuts in support for working people will hit families with children hardest.
“The Chancellor has finally woken up to the fact that Britain needs a pay rise. The TUC has long campaigned for the minimum wage to rise faster and the Chancellor has listened to us at last.
“For young people, it was all bad news as they will not get the minimum wage boost and will suffer from cuts to higher education grants and housing benefit. And it was not a one-nation budget for public sector workers who will face years more of cuts to real wages.
”Massive tax cuts for the wealthiest show the Conservatives are still the party of the inheritors, rather than the workers.”
Unite general secretary Len McCluskey said:
“The fear is that the promise of a national living wage does not go far enough or fast enough to plug the hole that many families face in their finances because of this budget.
“Cutting help with low incomes and high housing costs will punish millions of households who have already seen their incomes fall by £40 per week since the financial crash. While the exclusion of younger workers from the national living wage is another reminder that this government has little else to offer them but workfare exploitation or poverty pay.
“Having faced almost a decade of collapsing wages, the millions across the public sector who keep our country running will be furious that they face a further four years of pay pain.
“The slower pace to the pain of austerity will be no comfort to people just about surviving. The last Tory government left us a less equal, divided country. I fear once again we have a Tory party ready to take this nation backwards.”
Jon Sparkes, Chief Executive of the homeless charity Crisis, said:
“These short-sighted cuts to housing benefit are likely to push more and more people into homelessness and could end up costing the taxpayer even more than they save.
“We are particularly worried about cuts to housing benefit for 18-21s. Under-25s already make up a third of homeless people and there is a real danger these changes could make things even worse. For many young people, living with their parents simply isn’t an option. Housing benefit can mean keeping a roof over their heads while they look for work and get their lives back on track. While we welcome the proposed exemptions to protect the most vulnerable, the Government must make sure that those at risk of homelessness don’t slip through the net.
“Homelessness has a terrible human cost, but it’s also incredibly expensive for the public purse. Our research shows that failing to prevent someone from becoming homeless can cost between £3,000 and £18,000 per person per year. We need housing benefit that genuinely protects tenants struggling to make ends meet. At the same time, the Government must make sure that young people who can’t live with their parents and are at risk of homelessness are genuinely protected, and we’ll be working with ministers to make sure this happens.”
Labour‘s response to the budget can be found here.