Welfare cuts & where they may come from.Posted: June 22, 2015
In his speech on “opportunity”, Cameron will say Britain needs to move from a “low-wage, high-tax, high-welfare society to a higher wage, lower tax, lower welfare society”.
These are the proposed cuts.
- Reducing the per-child element of child tax credits, in real terms, to 2003-4 levels could save about £5bn. It would see 3.7 million families lose, on average, about £1,400 a year
- Restrict per-child element of child tax credits to families with two children could save anestimated £3.3bn
- Limiting cuts to child tax credits to non-working families by reimbursing those in work through the Universal Credit system could save an estimated £2.5bn.
- Reducing work allowances for families with children to same levels as families without children could save an estimated £3.3bn
- Cutting the Local Housing Allowance element of housing benefit for private sector tenants could save an estimated £400m
- Requiring all LHA claimants to contribute to their rent could save an estimated £900m a year
- Requiring social housing tenants to contribute to their rent, allied to further cuts in their benefit, could save £1.6bn a year
- Abolishing housing benefit for all under-25s could save £1.5bn, affecting about 300,000 people
- Taxing personal independent payments could save an estimated £900m a year. Taxing the attendance allowance could save an estimated £600m. Abolishing the carer’s allowance completely could save a reported £1bn a year
- Abolishing contributory jobseeker’s allowance (JSA) and employment and support allowance (ESA) could save £1.3bn
- Increased means-testing of Universal Credit could save an estimated £2bn
During the election campaign, Osborne and Cameron repeatedly refused to outline exactly how they would reach the £12bn figure, apart from saying they would reduce the benefit cap, freeze most working-age benefits for two years and take away housing benefit for under-21s.
David Cameron has ruled out touching benefits for elderly people & child benefit, meaning the bulk of the savings will have to come from other working-age welfare payments. The most likely cuts are restrictions on tax credits and housing benefit.
Iain Duncan Smith is said to have been concerned to make sure the changes are designed to encourage people into work and are not just “salami-slicing” the budget.
A Conservative MP has said stopping payments to benefit claimants is forcing people to food banks – contradicting a Government minister overseeing the crackdown.
Andrew Percy, who represents Brigg and Goole on Humberside, went on to criticise the “consistency” of the benefits sanctions regime and called for a review.
His comments in the House of Commons came minutes after Employment Minster Priti Patel argued there is “no robust evidence that directly links sanctions and food bank use”.
Benefit claimants can have their payments suspended or docked if they break the rules, but critics claim many of the breaches are trivial.
The Work and Pensions Committee of MPs has twice called for an independent inquiry.
So far, the Labour frontrunners have not been very specific about which of Osborne’s potential welfare cuts they would oppose. Yvette Cooper, the shadow home secretary, has backed “strong rules on contribution, expecting people to work if they can” but also defended the principle of tax credits for working-age people on low incomes. Liz Kendall, the shadow care minister, has said she wants to wait and see the details of the proposed Conservative cuts before passing judgment.
Jeremy Corbyn, the Islington North MP was the only Labour leadership candidate to attend a rally of tens of thousands of people against austerity in Parliament Square. He is against all the proposed Welfare cuts.
Green Party Work and Pensions spokesperson, Jonathan Bartley, said the Tories are threatening the future existence of the welfare state and criticised controversial benefit sanctions for making it “harder, not easier, to find a job”
Responding to David Cameron’s speech on welfare earlier today, Mr Bartley said: “The Conservative war on welfare is incoherent, misguided and based on ideology rather than reality.
“Welfare is an investment which helps people to build a decent life, not something that ‘papers over the cracks with a veneer of fairness’.
Why might tax credits be on the chopping block? Chancellor George Osborne has ring-fenced any cuts to pensions and universal pensioners’ benefits, which are worth £93 billion a year, or about 45% of the total spend of £205 billion.
Meanwhile, experts say cuts outlined in the Conservative manifesto, like freezing working-age benefits and reducing household caps to £23,000 a year, will only save £1.5 billion. Why might tax credits be on the chopping block? Chancellor George Osborne has ring-fenced any cuts to pensions and universal pensioners’ benefits, which are worth £93 billion a year, or about 45% of the total spend of £205 billion.
Total annual tax credit bill £29.3bn
Meanwhile, experts say cuts outlined in the Conservative manifesto, like freezing working-age benefits and reducing household caps to £23,000 a year, will only save £1.5 billion.
Total annual housing benefit bill £24bn
Therefore, the other £10.5 billion cuts must be found in the rest of the welfare bill. Tax credits, worth £30 billion a year, are the biggest single benefit left.
The government says the welfare bill is considerably stretched as it is, and parts like jobseekers’ allowance and child benefit would have to take far sharper cuts, proportionally.
Jobseekers’ Allowance bill £4.5bn
Ministers have refused to rule out making further cuts to disability benefits as speculation grows about exactly where the Government’s planned £12bn of welfare cuts will fall.
Asked several times by Labour MPs whether the disabled would be spared from cuts, Iain Duncan Smith said he would treat claimants with “kindness” but would not commit to protecting their benefits.
“It is out purpose to protect the most vulnerable – it has been from the beginning and will continue to be so,” the Work and Pensions Secretary said (apart from the very vulnerable).
“There is no reason why people should, in that case, be fearful, and I hope that honourable members do not try and whip that up.”
Kate Green, a shadow Labour DWP minister, appeared angry at the suggestion, however.
“Disabled people don’t want kindness – they want justice, and access to the benefits that help them to live their lives,” she said. “Will the Secretary of State give disabled people a cast iron guarantee – no cuts to their benefits not cuts to the fact credits and no cuts to the disabled premiums those tax credits can bring?
The £12bn welfare cuts outlined in the Conservative manifesto are due to be announced in full at the Budget on the 8th July.
David Cameron has also refused to rule out cutting in-work disability benefits.
“Whatever the pressures, we will stand by my promises to protect the most vulnerable – including the most disabled who cannot work because that’s the sign of the compassionate country I believe in,” the PM said.
Some disabled people have already faced cuts and lost out due to harsher conditions on claiming the Government’s new Personal Independent Payment compared to the system it replaced.
The Institute for Fiscal Studies warned in May that the planned cuts would likely either reduce work incentives of increase poverty, because of their sheer scale.
IDS on Zero Hours
Mr Duncan Smith’s claim that 25 hours a week is adequate employment is despite his new Universal Credit programme sanctioning people who work less than 35 hours a week.
He also noted that the Coalition had introduced a provision to prevent employers from including exclusivity clauses in the contracts.
“We’ve actually changed that and I think therefore this is good,” he said.
However, because of the nature of the contracts, the Coalition’s reform does not prevent employers from simply refusing to give workers any hours if they work for another employer.
The 2% figure given by Mr Duncan Smith for the contracts is for the economy as a whole; recent increases in employment have seen substantial rises in zero hour contracts as a proportion of jobs created.
Rachel Reeves, Labour’s shadow work and pensions secretary, said: “Iain Duncan Smith’s comment shows again how completely out of touch David Cameron’s Tories are with the lives of working people. We don’t need to rename exploitative zero-hours contracts, we need to ban them.”