Posted: 23 November 2015

Warming up to the Autumn Statement

This Wednesday will see Chancellor George Osborne give a joint Spending Review and Autumn Statement that set out the spending priorities for the next five years.

As part of this process, we believe that there are three crucial considerations that the Chancellor could make that would make a difference to the lives of children and families.

Tax Credits

The Autumn Statement provides an opportunity for the Chancellor to rethink his proposals to cut tax credits for the lowest income working families.  The regulations if introduced as planned would do three things:

  • reduce the income thresholds in tax credits
  • increases the tax credit taper rate from 41% to 48%
  • reduce the income rise disregard in tax credits.

This would affect around 2.4 million working families with 4.5 million children. 

There are, however, a number of measures the Chancellor could put in place that would soften the impact of the changes. One would be to reduce work allowances over time, rather than as they are set out in the current proposals, which would reduce the Tax Credit income threshold overnight from £6420 in 2015-16 to £3850 in 2016-17.

This would mean that the reduction in a family’s income could be spread over time rather than a family facing a reduction of over £1000 in their tax credit entitlement in April next year.

The Chancellor could look to further soften the impact of the tax credit changes by providing protection for current claimant households. This would mean that the savings would build up over time as new claimants entered the tax credits system, and remove the possibility that families suffer sudden changes in what they are entitled to. 

Warm Home Discount

The Warm Home Discount provides a discount of £140 towards energy bills for low income, vulnerable households.  This discount can either be received through a discounted bill, or by applying to the supplier for support.

At the start of this year, the Government made the welcome decision to standardise eligibility criteria for the discount across suppliers, to reduce the confusion experienced by many families. This confusion arose from different companies having different criteria for who could receive this discount, meaning you could be entitled to the discount from one energy company but not another.

However, many families still miss out simply because they are unaware that the scheme exists, or are with a smaller supplier that isn’t required to provide the discount. Where our practitioners had worked with families in a local area to increase the take up of the discount, one family told us that:

‘The Warm Home Discount was a lifeline for me and my family. It meant my quarterly winter bill was under £300, instead of over £400.

There are currently around 3.7 million children living in poverty in the UK, and around 1.9 million of these children live in families that missed out on this extra support last year. As a result, we would urge the Government to move low income families into the Core Group so they can receive the discount automatically, to make sure that nobody who is eligible misses out.

Local Welfare Assistance

Local Welfare Assistance schemes were introduced two years ago in order to provide a safety net for vulnerable families that face an emergency.

However, the future of this vital funding is far from certain. For the first two years of the new scheme, programme funding of £144m was made available to local authorities across England to fund local schemes, but it was only after an extensive campaign by us and other organisations this funding allocation was retained at £130m for 2015/16, having initially been cut.

Unless the Government commits to continuing to fund these schemes in local areas, there is a real chance they will be under threat, with a Local Government Association survey showing almost three quarters of local authorities (73%) would either end completely or scale back their scheme if the Government no longer allocated this funding. The Comprehensive Spending Review provides an opportunity to place the funding for Local Welfare Assistance Schemes on a sustainable footing and make sure that local authorities are able to provide this crucial support to those who have nowhere else to turn.

By David Ayre - Policy team

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