Posted: 20 March 2014

Budget 2014: What it means for families and children living in poverty

The chancellor’s budget yesterday was a mixed bag of highs and lows for families on low incomes. 

One particularly worrying change is the government’s decision to apply a new cap on welfare spending. It’s intended to control the spending on welfare by limiting the amount spent each year on most benefits and tax credits. This cap will actually make it harder for the government to respond to changing economic circumstances and take action to end child poverty. 

Rather than helping families, the cap transfers the risks of rising living costs – such as rising childcare and rent costs – from the treasury to families on low incomes that are struggling to provide for their children. 

This is not the right approach to lower the welfare bill’s cost. Better pay and action to address rising costs of living would be much more effective.

A good move, but limited access

The announcement that the personal allowance for taxation would rise from £10,000 to £10,500 looks like a good move for working families. But many on the lowest incomes will not be helped because they earn under £10,000 a year.

But for many families this change will show little real benefit, even if they are earning more than £10,000. For the many thousands of working families that depend on housing benefit to top up their earnings, the majority of any gain will be lost to deductions from their housing benefit.

More help for childcare costs

But there was also some great news about childcare and Universal Credit. The government’s decision to provide 85% of childcare costs for everyone on Universal Credit will make a huge difference to the UK’s poorest working families.

For a long time we have called on the government to provide working families on the lowest incomes with at least 85% of their childcare costs to bring them in line with other families on Universal Credit that have already been promised this level of support. 

Making sure childcare is affordable to those who need it most is pivotal to making sure parents are not excluded from work by the prohibitive cost of childcare. 

But, it is critical this does not become an example of giving with one hand and taking with the other. When details are set out in the next autumn statement about where the extra £200 million comes from to fund this, it must not be taken from the pockets of the poorest families.

By Sam Royston - Policy team

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