'Budget locks in poverty producing cuts' say child poverty campaigners

March 19, 2014
  • Lower income families continue to shoulder burden of 'austerity'
  • Family living standards face continued crisis as ‘cost of a child’ rises faster than wages, inflation and family benefits

Responding to the UK Budget Statement today (19th March) John Dickie, the head of the Child Poverty Action Group (CPAG) in Scotland John Dickie said;

“This Budget locks in misguided policies that are already set to push up to 100 000 more children into poverty in Scotland alone. The Chancellors so called 'cap on welfare' introduces a rationing of basic support for children, working families and disabled people. It ties the UK government’s hands on some of the most effective actions it can take to reduce child poverty, locking-in cuts for the poorest families in Scotland and across the UK. What children really need is the same protection that have been given to pensioners".

In response to increases in the personal tax allowance Mr Dickie pointed out;

“Raising the personal tax allowance does little good for many of the lowest paid workers. Many don’t pay tax anyway, while others keep just 15p in every extra pound because in-work benefits like housing benefit get withdrawn. Our call to increase housing benefit earnings disregards, so they get the same full gain as higher earners, have yet again fallen on deaf ears."

The Child Poverty Action Group's disappointment comes after analysis it published yesterday (18/03/14) highlighted the risks of the Chancellor’s new AME spending cap. The analysis, commissioned from the Institute for Social and Economic Research (ISER) at Essex University, the budget announcement on capping Annually Managed Expenditure (AME) could drive up UK child poverty rates.

The ‘AME cap’ sets an annual ceiling on overall spending for working age support through tax credits and benefits for low paid workers, carers, disabled people and single parents.

The analysis shows that:

  • Income transfers from this kind of support are an essential part of preventing high poverty rates in the EU countries with the lowest child poverty.
  • The UK leaves tax credits, social security and family benefits to do much more of the heavy lifting than in other EU countries where progressive taxation and structural factors of the economy play a larger role.

Mr Dickie added;

"All the EU countries with much lower child poverty rates than us use income transfers for poverty prevention. If they can do so much better for their children, then so can we. Instead George Osborne’s budget reveals how the poorest families are the worst affected by the government’s austerity measures. His fiscal strategy could be called ‘The Great Regression’ given how the poorest are so hard hit compared to most of the wealthier half of the population. The legacy this government is set to leave is of rising child poverty and budgets that have made the poor much poorer, whilst actually making many wealthy people even wealthier still.”

For further information or comment contact John Dickie, Head of CPAG in Scotland, on 0141 552 3656 or 07795 340 618

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 poorest to the richest UK households. The following chart 2d from page 11 of the Impact on Households published as part of today’s budget. You can see the full document here: www.gov.uk/government/uploads/system/uploads/attachment_data/file/293738...
  • Chart 2d demonstrates that:
  1. 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.
  2. The poorest are the worst affected: While the richest 10% have had 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. The rich can afford to take a hit; but for the poorest, this means the choice between ‘heating or eating’.
  3. 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”.
  4. 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 dark green bars below the x-axis) with (ii) tax cuts that have mainly benefit the upper half of the income spectrum (the light green bars above he 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.
  5. There are affordable progressive alternative 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.
  • For CPAG in Scotland’s comments on yesterday’s welcome announcement on government support with childcare costs, see our media release.
  • CPAG believe the AME cap could push up child poverty and misses the important need to focus on pre-distribution. 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: www.cpag.org.uk/content/new-analysis-highlights-child-poverty-risks-chan...
  • For information on the large rises in UK child poverty that are projected by the Institute for Fiscal Studies, read their latest analysis published in January 2014: www.ifs.org.uk/bns/bn144.pdf