Osborne steals £760 from you

Submitted by Matthew on 9 January, 2013 - 11:56

The coalition government says it will have cut nineteen billion pounds per year, or an average of £760 per year per household, from welfare benefits by 2014-5.

It’s only as much as would be got by a 4.5% supertax on the incomes of the top 10% (not touching their wealth), or a 0.4% tax on their wealth (not touching their income).

For the worse-off, whom it mainly hits, the £760 a year cut is a lot. £760 is an average; many households are losing much more.

A lot of those losses will come in 2013. The Government’s Mid-Term Review, which gives the £19 billion figure, promises in general terms “more help with the costs of long-term care” for the elderly and “support” for “working families with their childcare costs”; but the Government has no exact plans on those points, and even when it announces exact plans they will probably be promises of measures after 2015.

In April 2013, four cuts kick in:

• Most unemployed and low-waged people who currently get full council tax benefit will have to pay some council tax, probably about £5 a week. The Government has abolished council tax benefit, replaced it by “council tax support” to be administered by local councils, and cut the money available to councils for it to 10% less than they currently pay in council tax benefit. So far 110 out of 326 councils in England have decided how to respond; the big majority will demand a payment even from the unemployed.

• The Government’s cap on each household’s total benefits kicks in. This will especially hit large households living in areas of high housing costs. Like the child benefit cut-off, the cap threatens to cut deeper and deeper as inflation progresses.

• Disability Living Allowance for working-age people will be replaced by Personal Independence Payments. The Government’s own estimate is that harsher criteria will throw 500,000 people off benefit by 2015-6. This will happen in phases. New claimants for DLA will be switched to PIP instead from April this year in some areas, and June in others. People already claiming DLA who report a change in circumstances will be switched to PIP from October 2013. The rest will be switched from 2015.

• The regular annual increase in benefits which comes every April will raise them by much less than inflation. The Government is imposing a cap of one per cent on increases in most working-age benefits and tax credits for three years from 2013-14. If inflation continues at its current rate of about 3% a year, that will mean a real-terms cut of 6% for all claimants by 2016-7.

Immediately, this cap hits seven million households with members in work, half of all working households in the country, by an average of £165 a year.

Already, from January 2013, the Government is cutting child benefit for households where someone has an income over £50,000. The measure incorporates no schedule to increase the £50,000 threshold (or the £60,000 threshold for complete cut-off of child benefit); so in ten years’ time, this cut could affect households where someone has only the average pay rate for workers with over ten years’ experience in their job.

The extension of means-testing to more and more benefits makes the system more complicated, and undermines political support for benefits from middle-class and better-off working-class people. If it’s considered a problem that wealthy households get benefits, then the answer is to tax them more, not to introduce more means tests.

We also face the rolling-on of the cut in contributory Employment and Support Allowance (what used to be Incapacity Benefit) which results from that allowance being automatically stopped after a year for disabled people who are told that “their condition means they should be preparing for work”.

The final transitional protection for housing benefit claimants, against cuts which started in April 2011, expired at the end of 2012.

In October 2013 comes the start of Universal Credit, a compendium replacement for Jobseekers’ Allowance, housing benefits, council tax support, child tax credit, and working tax credit. It will be introduced for new out-of-work claimants from October; for new in-work claimants from April 2014.

All claimants who report a change in circumstances after October 2013 will be moved onto it, and all working-age claimants will be moved over to Universal Credit by 2017.

Households will get some transitional protection from cash losses as long as their circumstances do not change.

Universal Credit will be paid monthly and will be based on monthly assessments of income.

In theory, the idea of simplifying benefits and reducing perverse cut-offs (where a wage rise can leave you worse off, or no better off, because you lose benefits) has merit. But Universal Credit is being introduced by a cuts-crazy government. On the Government’s own latest figures, 2.8 million households will lose out from the change. 300,000 households will lose out by £300 a month or more.

After much hedging, Labour has come out against the one per cent cap and the child
benefit cut. Doing something to campaign against those cuts is another question again. It is another question even for trade unions which have consistently opposed all the benefit cuts.

The labour movement should be calling mass demonstrations against these cuts — but none of the leaderships, Labour or trade union, is doing that.

In making their welfare cuts, the Tories and Lib Dems have mostly exempted the elderly. They are increasing the state pension age, but existing pensioners are, on the whole, losing less through the cuts than younger people.

Pensioners will continue to get council tax benefit. The state pension will be increased to keep up with prices while working-age benefits won’t. The Government talks of increasing the basic state pension substantially by merging the current means-tested Pension Credit into it. The DLA cuts do not affect those of pension age. The Government promises extra public money towards long-term care for the elderly.

The elderly are coming out better for a good reason: they are numerous, they are often willing to organise and campaign, and they turn out to vote.

Successive setbacks for the labour movement have left younger people less willing to do that. That is a matter of the balance of political influence and will. We need to change it.

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