Welfare reforms spectacularly fail the Prime Minister’s new family test, says TUC

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The majority of social security cuts announced by the government will fall on working families, who will suffer twice the level of benefit losses as out of work families, according to a new report published today (Friday) by the TUC.

The TUC-commissioned analysis of those affected by cuts in social security support – undertaken by Howard Reed of Landman Economics – looks at all the welfare changes announced during this Parliament. It finds that annual cuts to key benefits will reach £30.5bn by 2016/2017.

Ministers frequently talk about how their welfare reforms target workless households. But the TUC analysis finds that most of the cuts will fall on working families, with working parents and their children facing the biggest cuts of all.

Working families will suffer a loss of social security support worth £17.9bn a year by 2016/17, twice the level (£6.2bn a year) experienced by out of work families.

Working families with children stand to lose the most – £11.7bn a year. With out of work families with children losing a further £2.3bn a year, the total cost of welfare cuts to families with children will be £14.1bn a year by 2016/17.

The TUC analysis shows that three-quarters of all welfare cuts to people of working age will be on working families, with almost half hitting working families with children.

The government’s welfare reforms have already failed the Prime Minister’s new ‘family test’ in spectacular fashion, says the TUC, with working parents and their children billions of pounds worse off as a result.

The analysis also shows that the Prime Minister’s pre-election pledge to protect pensioner benefits has been broken, with pensioner families suffering a loss of benefit support worth £6.4bn a year by 2016/17.

The government’s most-mentioned welfare policy is the benefits cap – a policy that targets around 65,000 mainly workless households and is projected to save £500m a year, says the TUC. But the impact of the benefits cap is dwarfed by cuts in support to working families and pensioners that the government has been largely silent about.

The biggest single area of welfare cuts announced has been the £13.8bn worth of annual cuts to tax credits – over ninety per cent of which will hit working families. Those in work will also bear over 90 per cent of the cuts in child benefit, losing £3.4bn a year by 2016/17.

The next biggest single welfare cut (at over £4bn a year) is the reduction in the value of Pension Credit, which will be borne almost entirely by pensioner families.

Many of the reductions in social security support are down to the Chancellor’s stealth cut to benefits, announced in June 2010, where the measure used to increase benefits every year was changed from RPI to the lower CPI measure. The move, combined with an unprecedented drop in earnings growth, is likely to reduce the value of the state pension for pensioner families by £1bn a year by 2016/17, according to the analysis, in spite of the government’s triple lock guarantee.

The government says its biggest welfare reform of all – Universal Credit (UC) – will make work pay. But the analysis shows that once UC is finally rolled out it will lead to a further £5bn of annual cuts – almost half of which will fall on pensioner families.

Universal Credit will be particularly harsh on unemployed men and women in their mid-60s, warns the TUC. New UC claimants of this age will no longer get Pension Credit and instead will receive less generous support, as well as being subject to the government’s new sanctions regime.

The TUC wants to see the government come clean on the full impact of its welfare reforms and to admit that working families are bearing the brunt of the cuts. It also wants the Chancellor to reverse his stealth cut to benefits uprating, which is reducing the value of support on which millions of families rely.

TUC General Secretary Frances O’Grady said: “Ministers like to say that their welfare reforms target workshy scroungers and will get them back to work. But the fact is that the bulk of the cuts hit low-paid families already in work, as well as pensioners who have no way to make up the money lost as a result of the Chancellor’s social security axe.

“With nearly half the total cost of welfare changes falling on working families with children, the Prime Minister has already failed his own new family test, announced just this week.

“The government has been steadily chipping away at the social security safety net we all pay into and expect will support us when we need help.

“While many people may think that the recovery means the end of the squeeze on their social security support, the worse cuts are still to come. Under Universal Credit, out of work men and women in their mid-60s will be deemed workshy scroungers – unable to claim Pension Credit and facing sanctions for not taking up work they’re ill-equipped to do.

“This new nastier social security system is a world away from the support people expect having paid their national insurance contributions.”

NOTES TO EDITORS:

Annual impact of cuts by household type by 2016-17 (February 2014 prices)

Group

Total cuts

Proportion of cuts

Proportion of cuts (working age only)

Out of work families, no children

£3.88bn

12.7%

16.1%

Out of work families, with children

£2.34bn

7.7%

9.7%

In-work families, no children

£6.20bn

20.3%

25.7%

In-work families, with children

£11.7bn

38.4%

48.5%

Pensioner families

£6.38bn

20.9%

Annual cash losses by benefit and proportion of losses borne by family type (by 2016/17, February 2014 prices)

Benefits

In-work families

Out of work families

Pensioner families

Tax credits

£12.61bn (91.6%)

£0.22bn (1.6%)

£0.94bn (6.8%)

Child benefit

£3.41bn (90.2%)

£0.35bn (9.4%)

£0.02bn (0.4%)

Housing benefit

£0.75bn (32.6%)

£1.32bn (57.4%)

£0.23bn (10%)

Disability benefits

£0.66bn (23.4%)

£1.84bn (64.7%)

£0.34bn (11.92%)

Out of work benefits

£0.19bn (10.5%)

£1.58bn (89.4%)

£0.002bn (0.1%)

Pension Credit

£0.05bn (1.1%)

£0.14bn (3.4%)

£3.85bn (95.5%)

Universal Credit

£0.24bn (4.6%)

£2.56bn (49.5%)

£2.37bn (45.8%)

- Benefit cuts by household type is available at www.tuc.org.uk/sites/default/files/BenefitCutsHouseholdType.pdf

- The analysis has been undertaken for the TUC by Landman Economics whose tax/benefit model uses the Family Resources Survey (FRS) to consider how families across the UK will be affected by social security changes. It looks at all the tax and social security changes using data from the FRS to model the impact on different types of families. Where the FRS does not contain adequate information to model the impact of the cuts (for example in relation to some disability benefits and housing benefit), estimates of the cumulative costs of the cuts have been taken from Treasury Budget documentation. The families grouped in the analysis are:

-Working age families with no one in paid work. Couple or single adult families where no adult is in paid work.

-Working age families in paid employment. Couple or single adult families where at least one adult is in paid work.

-Pensioner families. Single or couple pensioner families where at least one adult is above state pension age (but where one adult may be workless and below state pension age).

Families are considered in the same way as would be the case under current benefit rules.

- The analysis does not include transitional protection as this will not be available for new claimants and will not be uprated in line with inflation.

- This Monday (18 August) the Prime Minister announced that a ‘family test’ on all government policies will be formally introduced this autumn. It will mean every single piece of domestic policy is examined for its impact on the family, with policies that fail to support family life unable to proceed. https://www.gov.uk/government/news/government-will-do-more-to-support-families-to-stay-together   

- All TUC press releases can be found at www.tuc.org.uk

- Follow the TUC on Twitter: @tucnews

- Congress 2014 will be held in the BT Convention Centre, Liverpool, from Sunday 7 September to Wednesday 10 September. Free media passes can be obtained by visiting www.tuc.org.uk/media-credentials and completing an online form. Applications must be in by noon on Wednesday 27 August. Any received later than that will be processed in Liverpool and will cost £75.

Contacts:

Media enquiries:
Liz Chinchen   T: 020 7467 1248    M: 07778 158175    E: [email protected]
Rob Holdsworth    T: 020 7467 1372    M: 07717 531150     E: [email protected]
Tim Nichols   T: 020 7467 1337   M: 07876 452902   E: [email protected]

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