Posted: 11 March 2016

The Chancellor must deliver a Budget for low income families

There have been recent reports that, with global economic turmoil, there may need to be further cuts in the Budget that the Chancellor delivers on Wednesday.

But cuts to support are already hitting families hard, and are likely to continue to do so in coming years.

This is the result of a number of recent and upcoming changes, including:

  • The introduction of a 4 year freeze on entitlements to most benefits and tax credits
  • A limitation on the receipt of the child element of Child Tax Credit and Universal Credit to the first two children in the household
  • The loss of the family element of child tax credit (and equivalent higher rate of first child addition in Universal Credit)
  • Reductions in work allowances/ income thresholds in Universal Credit
  • A cut to the disabled child addition within Universal Credit compared to equivalent support available through the Tax Credits system
  • A reduced standard allowance for parents aged under 25 within the Universal Credit system.

4 million families, with 7.5 million children, will be affected by the benefit freeze 

Based on the most recent data on Tax Credit claimants, we estimate that around four million families, with 7.5million children, will be affected by the four year benefit freeze alone (excluding those affected by a freeze on Child Benefit entitlement only). Nearly two thirds of these families - 2.6 million families with 4.9 million children - will be in work. Those affected would be expected lose up to around 12% of the value of their current means tested benefit receipt.

As we showed in our report on The Future of Family Incomes (interactive version, PDF), in some cases low to middle income working families could be many thousands of pounds worse off if they made a new claim for benefits in 2020, compared to today – even once measures to increase family incomes (such as an increased personal tax allowance) have been taken into account.

Meanwhile new IFS figures forecast a shocking scale of child poverty in the coming years – to levels that have not been seen this century. Any further cuts to support would push still more children into poverty and risk undermining incentives for families to move into work or earn more.

That’s why we are asking the Chancellor to carefully consider the impact of current plans to reduce support for low income families, and to guarantee there will be no further cuts to support in the Budget this month.

By Sam Royston - Policy team

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