Two thirds of welfare cuts will fall on working families

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date: 29 October 2010

embargo: 00.01hrs Monday 1 November 2010

Nearly two thirds of the £15.9 billion of welfare and benefit cuts announced in the emergency budget and spending review will hit working families, undermining government claims that they are 'making work pay', the TUC reveals today (Monday).

TUC analysis of welfare changes for working age people shows that working households will suffer a loss of around £9.4 billion - nearly twice the level of losses for non-working households (£5.9 billion).

The analysis, which breaks down the welfare cuts (as well as welfare increases such as child tax credits and discretionary housing benefit payments) by working and non-working household, shows that 69 per cent of the policies announced in the spending review hit working households, at a cost of £4.5 billion.

The majority of the working age welfare cuts relate to benefits for children so working families will bear the brunt of the cuts, says the TUC.

This research follows a TUC study last week which found that departmental spending cuts will hit the poorest households 15 times harder than the richest 10 per cent, and analysis from the Institute for Fiscal Studies (IFS) which found that the tax and benefit changes announced in the budget and spending review were regressive.

With policies such as housing benefit cuts hitting low income households hardest and more than half of all poor children living in working households, the targeting of working households is likely to increase child poverty amongst working families, the TUC says.

Other key welfare cuts such as increasing the rate at which tax credits are withdrawn and reducing the childcare element of working tax credit will also act as a disincentive for low income households to work more hours or gain a second income, directly contradicting the government's aim of 'making work pay', the TUC believes.

TUC General Secretary Brendan Barber said: 'Ministers say that their welfare and benefit cuts are fair and justified because they will make work pay.

'Polls show that they have already lost the fairness argument. Now we show that it is working families - both the poor and the squeezed middle - who are the big losers from welfare cuts, not the alleged workshy scroungers that the government claims to target.

'These deep rapid cuts - concentrated on families with children - weren't in any election manifestos. The speed and scale of the cuts are not an economic necessity, but a political choice. No-one voted for these cuts to their living standards, more child poverty, mass job losses and a 'get out of tax free' card for the banks.

'The government needs to reconsider its spending plans before it causes any more economic damage and pain to working families.'

NOTES TO EDITORS:

Annual working age welfare budget cuts to be implemented by 2014/15 by financial impacts for working and non-working households

Welfare changes by 2014/15

Amount cut (£millions)

Non-working

Working

Total budget cuts

£9,340

£3,946

£5,394

Percentage budget cuts

42

58

Total spending review cuts

£6,549

£2,005

£4,543

Percentage spending review cuts

31

69

Total cuts

£15,889

£5,952

£9,937

Percentage cuts

37

63

- A full breakdown of the welfare cuts by working and non-working households is available at www.tuc.org.uk/extras/welfarechangesby2014-15.pdf

- The IFS spending review analysis is available at www.ifs.org.uk/projects/346

- The IFS Budget analysis, which says that those of working age without children in the upper half of the income distribution are 'the biggest beneficiaries from the increase in the personal allowance', is available at http://www.ifs.org.uk/bns/bn108.pdf. Even when the personal allowance increase is included in the analysis, working families still bear the majority of welfare cuts, says the TUC.

- The TUC is a member of the End Child Poverty coalition. The Campaign to End Child Poverty includes children's and other charities, social justice groups, faith groups, unions, businesses and many others concerned about the unacceptably high levels of child poverty in the UK. For information visit www.endchildpoverty.org.uk

- The TUC believes the government should commit to a Fairness Test on any tax rises or spending cuts they introduce. For more information please visit www.equalitytrust.org.uk/fairnesstest

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

Contacts:

Media enquiries:
Rob Holdsworth T: 020 7467 1372 M: 07717 531150 E: [email protected]
Elly Gibson T: 020 7467 1337 M: 07900 910624 E: [email protected]

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