Budget leaves poorest families abandoned on the frontline of austerity

March 20, 2013

Responding to today’s Budget Statement, Alison Garnham, Chief Executive of Child Poverty action Group, said:

“The Chancellor described it as a budget for families with children looking to work hard and aspiring to get on, but most low income families have very few reasons to be cheerful and plenty to be fearful. Child poverty is set to increase by 600,000 children during the Coalition’s time in office, and there is nothing much in the Budget that will change this course.

“Raising the personal tax allowance does little good for the lowest paid million workers. Some don’t pay tax anyway, while others keep just 15p in every extra pound because their in-work benefits like housing benefit get withdrawn. Calls by family welfare campaigners to increase the housing benefit earnings disregards, so they get the same full gain as higher earners, have yet again fallen on deaf ears in the Treasury.

“It’s a great disappointment for struggling families that the majority of extra funds for childcare will be going to the wealthiest families. The real challenge is to make childcare affordable for those at the bottom end, so that there are strong incentives for second earners and single parents. That would do much more to help reduce child poverty, and it would help economic recovery too.

“The families facing the hardest struggle remain abandoned today on the frontline of austerity, which also means they don’t have the spending power businesses need to get back to growth and create new jobs. It would be far better for family welfare, business growth and reducing the deficit if families were at the frontline of economic stimulus – countries that took this approach when the economic crisis started have recovered much more strongly that the UK.”

ENDS

Notes to Editors

  • The increase in the personal tax allowance will mean an income boost of just 32p a week for most of the lowest earning income tax payers. This is because they have 65% of the gain tapered back through the Housing Benefit (HB), and 20% tapered back through their Council Tax Benefit (CTB).

The table below shows how much is gained by different earners according to whether their earnings are low enough to claim HB and CTB. It gives figures for (1) the increase in the personal allowance announced today; and (2) the total increase to the personal allowance between 2010 and 2014.

 

(1) Household gains from

2013/14- 2014/15

(2) Household gains from

2010/11- 2014/15

annual weekly annual weekly
gain for those not claiming HB or CTB £112 £2.15 £705 £13.56
gain for those who claim only HB £39.20 £0.75 £246.75 £4.75
gain for those who claim only CTB £89.60 £1.72 £564 £10.85
gain for those who claim HB and CTB £16.80 £0.32 £105.75 £2.03
gain for those earning too little to pay tax £0 £0 £0 £0
  • The Chancellors tax and benefit measures impacting in the year 2013-14 are largely regressive as shown by the Treasury’s own chart from the budget document  published today (http://cdn.hm-treasury.gov.uk/budget2013_distributional_analysis.pdf) and reproduced below. It shows that some of the higher income deciles get a net increase in household incomes, whilst all those in the poorest half of the population see income reductions.

HMT assessment of household impacts 2013-14

 

  • Stimulus through the spending power of the poorest families is known to help boost economies. A joint report by the International Labour Organization and the International Institute for Labour Studies reviewing global fiscal stimulus following the global crisis that began in 2008, stated:

“During the crisis, social and cash transfers not only assisted those in need, but by putting cash in the hands of those most likely to spend it, helped to shore up household consumption. For this reason, countries that strengthened the policies towards income transfers managed to recover faster than others.”

(See page 11: http://www.ilo.org/wcmsp5/groups/public/---dgreports/---inst/documents/publication/wcms_194175.pdf)

  • 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, which has over 150 member organisations and is campaigning for public and political commitment to ensure the goal of ending child poverty by 2020 is met.

For further information please contact:

Tim Nichols

CPAG Press Officer

Tel. 020 7812 5216 or 07816 909302 

tnichols@cpag.org.uk

www.cpag.org.uk