Learn more about The Debt Trap, our campaign to end debt's damaging effects on children.
The autumn statement - what it means for children
Today the chancellor will deliver the government's autumn statement, which will set out changes to its budgeting plans for the rest of this parliament.
There are 3.6 million children living in poverty in the UK. Most (60%) are in low-income working households. The decisions the government takes in its autumn statement will have a significant effect on their immediate and long-term well-being.
The government has an opportunity to improve these children's lives, to move them out of poverty and get closer to achieve its target of ending child poverty by 2020. But cutting support will leave many disadvantaged children and their families worse off, creating greater problems for them and society in the future.
To calculate the poverty line for a family not in work and what they need to move out of poverty, please use our poverty calculator.
Welfare reforms that could leave the most vulnerable families worse off are our key concern. Children must not be made to pay the price for government cuts.
Changes to the welfare system being introduced next year
We are concerned about a number of changes to the welfare system, which have already been announced and are due to be introduced from 2013.
- the continued freeze in the basic and 30-hour elements of working tax credit
- freeze in child benefit
- localisation of council tax benefit – including a 10% reduction in expenditure
- introduction of the household benefit cap
- localisation of key parts of the discretionary social fund
- reduction in in-year tax credit disregards to £5000 and
- the uprating of housing benefit rates for people in private rental housing with consumer price index rather than local rents.
All this will leave disadvantaged families worse off.
The autumn statement, along with further announcements next week, will set in place the core framework for the introduction of Universal Credit, which will begin to be implemented from April next year.
While many families will benefit from the introduction of Universal Credit and it can help make work pay, we have a number of concerns:
I. The abolition of the severe disability premium
More than 230,000 severely disabled adults - 25,000 of whom are lone parents - who do not live with an adult who can care for them, depend on the severe disability premium to help cover the cost of support they need. Despite the premium’s importance, it will not be provided under Universal Credit. As a result, this group will be £28-£58 a week worse off once Universal Credit is fully implemented.
Many families depend on young carers to provide the care they need. The majority receive no support from local authorities or from outside agencies. It is of serious concern that reducing these families' household budgets further will mean children are likely to have to do even more caring, putting them at risk of even greater social exclusion.
II. Support for disabled children
Families with a disabled child, for whom they receive some level of disability living allowance, may be entitled to receive support through the disability element of child tax credit, currently worth £57 a week. Under Universal Credit, this support is to be provided through disability additions within the household's benefit entitlements. But the government is proposing to cut this support in half to just £28 a week.
This will affect many families with a disabled child, unless the child is receiving the high rate care component under the disability living allowance or is registered blind. As a result, families that are already struggling may have to cut back on food or heating, and face the possibility of getting into (or further into) debt.
III. Support with childcare costs for the poorest families
Under planned changes, 100,000 of the country’s poorest working families will be hit hardest when new childcare measures come into effect under Universal Credit.
Currently, up to 70% of childcare costs for children in working families can be covered through tax credits and benefits. And many low-income working families can get a further 26% of their childcare costs covered through housing benefit and council tax benefit. These will be lost under the planned changes. This support is crucial for these families, many of whom are already struggling to afford such basics as food, clothing and heating.
Increasing the level of support provided through the childcare element of Universal Credit to cover up to 80% of childcare costs could help make sure work always pays and that people can afford to stay in work.
IV. Free school meals
Currently, 1.2 million children living in poverty in England miss out on free school meals – 700,000 of these children aren't entitled to them. The rules that determine which families are entitled to free school meals need to be revised when Universal Credit is introduced next year. The government is expected to propose that families will only be entitled to free school meals if they earn less than a given amount.
This would cause many low-income families to be considerably worse off if they got a pay rise or worked more hours, as they would lose their entitlement to free school meals, despite still being in need. As many as 120,000 low-income working families – and their 350,000 children – could be in a position where they would be better off asking for a pay cut.
All children in families receiving Universal Credit should be entitled to free school meals.
Suggestions that benefit rates will be uprated by less than inflation
Families already living in poverty are struggling with recent benefit freezes. Next year, two key benefits - child benefit and some aspects of working tax credit (the basic and 30-hour elements) - will be frozen as part of an ongoing three-year freeze that began in 2011.
Their hardship is being compounded by the government's changes to the way that benefits are uprated in line with the retail price index rather than the (typically lower) consumer price index. For the first time this includes help with rent, which until now was uprated in line with local rents. Under the change it will be uprated by inflation, which could have severe consequences for the ability of families to afford their homes.