Budget 2014: Child Poverty Action Group on the impact on families
Responding to the Chancellor’s Budget Statement today Alison Garnham, Chief Executive of Child Poverty Action Group, said:
“Today’s Budget tries to lock-in austerity for millions of low-paid families, poor children, carers and disabled people. Announcing a cap for social security spending without a plan to address the root causes of low pay, high rents and high childcare costs, simply forces the most vulnerable in society to pay the price for inaction.
“It is action on living wages, fair rents, affordable childcare and fairer taxes that will help children in low-income families and taxpayers in the long run. And what’s needed today is some restoration of the value of child benefit, more free school meals, a real terms increase in the NMW, more help with recently introduced council tax bills and funding for local welfare schemes. Apart from the welcome future increase in childcare costs under universal credit, there is nothing here to help improve living standards today.
“An increase in the personal tax allowance does little to help the lowest paid. The lowest earners don’t pay tax anyway, while others keep just 15p in every extra pound as in-work benefits, like housing benefit, are adjusted down as take-home pay rises. Sadly, the Coalition ignored positive proposals to boost earnings disregards for in-work benefits, which is a far more effective way to increase the living standards of low paid workers.
“The Chancellor published details today demonstrating that the poorest families are the worst affected by the government’s austerity measures. The Chancellor’s plan could be called the ‘Great Regression’ because it’s mainly the poorest who are hardest hit, while most in the wealthier half of the population are made better off by tax cuts. The Coalition is set to leave a legacy of higher child poverty rates and budgets that have made poor households poorer, and wealthy households richer.”
Notes to Editors
- The ‘Great Regression’: the Chancellor has today published an analysis to compare how the burden of his budgets between 2010 and 2014 is being carried across the spectrum from poorest to richest UK households. The following chart 2.D is from page 11 of the Impact on Households document published as part of today’s budget. You can see the full document here: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/293738/budget_2014_distributional_analysis.pdf
- The above chart 2.D demonstrates that:
- There is only token ‘progressive’ impact: Aside from the richest decile (top 10%), the cumulative impact of the Coalition’s budgets on the incomes of UK households is largely regressive with those at the poorest end taking the greatest hit.
- The poorest are the worst affected: While the richest 10% get the largest reduction in the proportion of their income, the second large hit is taken by the poorest 10% and the rest of the pattern across the income spectrum is almost completely regressive. While the richest may be able to afford to take a hit, for the poorest it will likely mean the choice between ‘heating or eating’.
- Wealthier households have been made better off: A majority of people in the wealthiest half of the population have been made wealthier by the government, refuting the claim that “we are all in this together”.
- Social security and tax credit cuts have been used to pay for tax giveaways: When comparing the impact of (i) cuts to social security and tax credits for the poorest (the mid-green bars farthest below the x-axis) with (ii) tax cuts that have mainly benefit the upper half of the income spectrum (the light green bars above the x-axis), it looks increasingly as if, instead of being used to reduce the deficit, cuts to social security and tax credit support for low earners have really been used to fund tax giveaways that mainly benefit wealthier households.
- There are affordable progressive alternatives to social security and tax credit cuts: Cutting social security and tax credit support for low earners is therefore not a ‘tough choice’ or a situation in which ‘there is no alternative’. The government could, and should have protected basic support for families on low incomes much better, instead of giving special treatment to make wealthier households wealthier still.
- The Chancellor’s claim in the budget statement about inequality decreasing is based on data from ONS that shows a drop in inequality between 2010/1 and 2011/12. However, it is crucial to note that low income families had above inflation increases to child tax credit in this period. In the time since 2011/12, the government have introduced many measures that reduce income for the poorest households, in particular capping the uprating of benefits at 1% for three years. The chart 2.D above is therefore a better indicator of what to expect and it suggest that inequality for households is likely to be increasing across the spectrum, with the exception of the very top decile.
- For CPAG’s comments on yesterday’s announcement on government support with childcare costs, see our media release: http://www.cpag.org.uk/content/cpag-welcome-announcement-childcare-and-early-years-pupil-premium-investment
- CPAG believe the AME cap could push up child poverty and ignores the important need to focus on pre-distribution (e.g. living wages). This is because the UK has far worse child poverty than all other EU countries except Ireland when measured before tax and income transfers. You can find new analysis demonstrating this, which we published yesterday, on our website: http://www.cpag.org.uk/content/new-analysis-highlights-child-poverty-risks-chancellor%E2%80%99s-new-spending-cap
- For full background information on child poverty to assist in reporting on the budget, see CPAG’s full media briefing for Budget 2014: http://www.cpag.org.uk/content/media-pre-briefing-budget-2014
- UK child poverty is expected by the IFS to rise by 400,000 in the current parliament as a consequence of direct effects of the Coalition’s cumulative Budget decisions since 2010 (http://www.ifs.org.uk/publications/7054) None of the decisions announced today are likely to have a direct effect in reducing child poverty.
- CPAG is the leading charity campaigning for the abolition of child poverty in the UK and for a better deal for low-income families and children.
- CPAG is the host organisation for the Campaign to End Child Poverty coalition, which has members from across civil society including children’s charities, faith groups, unions and other civic sector organisation, united in their campaigning for public and political commitment to ensure the goal of ending child poverty by 2020 is met.
For further information please contact:
CPAG Press Officer
Tel. 020 7812 5216 or 07816 909302