Posted: 21 March 2012

This budget changes little for disadvantaged children

This lunchtime the chancellor had the opportunity to deliver a budget that put vital money back into the pockets of the UK's poorest families. However, instead of producing a roadmap to meet its commitment to end child poverty by 2020, the government did little to support the most disadvantaged children.

This budget didn’t include much for children. In fact the word ‘children’ was only used twice in the chancellor’s statement. The term ‘poverty’ didn’t appear once.

In some respects this budget didn’t change much at all. The coalition’s objective of eliminating the deficit over the next five years remains in place, meaning that for every tax cut or spending increase announced, there was a tax rise or spending cut somewhere else to balance this out.

A lot had also been spoken about proposals to remove child benefit from higher earners. Previous proposals would have created a ‘cliff-edge’ where earning more would mean you actually take home less, and would also have penalised single earner households. The revised measures announced today (for child benefit to be removed partially from £50,000 to £60,000, and in full above that) reduced the ‘cliff-edge’ effect but retained the impact on single earner households.

Why tax allowances will provide little support for the lowest paid

Personal allowances for income tax are to be increased in 2013 from £8105 to £9205. For many families this will increase the money in their pockets by £220 per year.

But many of the most vulnerable families will see very little benefit from this change.  As shown in the table below, families earning under their current personal allowance will get nothing from this proposal. Families earning above their personal allowance rate who receive housing benefit and council tax benefit will keep as little as £33 per year (64p per week) from the change.

Household type

Overall benefit (pa)

Reason

Family earning below £8105

£0

No benefit when earning below 2012-13 personal allowance level

 

Family earning £10,000 and in receipt of housing benefit (HB)/council tax benefit (CTB)

£33

Keep only 15% of the £220 gain as a result of increase in personal allowance

 

Family earning £35,000 and income too high for HB/CTB

£220

Receive full value of the personal allowance increase (worth 20% of personal allowance increase)

Previous announcements that changed a lot

So this year’s budget didn’t change the situation for children and families a great deal, particularly for those on low incomes. But previous budgets and the comprehensive spending review in 2010 have had a big impact, much of which will only start to be felt over the coming years.

This year low-income working families will be affected by a cancelled above-inflation increase in child tax credit, and a freeze in the rates of working tax credit and child benefit.

This comes at a time when hundreds of thousands of families are starting to be hit by reductions in support with housing costs through changes to how local housing allowance rates are calculated, and caps on the maximum support that families can receive.

'This could be simply devastating for the nation’s poorest children'

Over the coming years, welfare measures that have already been announced will increasingly eat into the incomes of the most vulnerable families. Worse still, there could be more to come.

The chancellor announced today that he is considering cutting a further £10 billion from the welfare budget in the next spending review period. Were this to be realised on top of the billions of pounds of support already scrapped, this could be simply devastating for the nation’s poorest children.

The basic essentials are slipping further out of reach of more and more people. The government has missed an opportunity to help reverse this slide.

By Sam Royston, Policy Adviser 

By Sam Royston - Policy team

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