Hurting the working through 21 welfare cuts
At the heart of the Government’s plans for welfare reform is the intention to improve the financial reward for moving into and progressing in work. However, as Family Action’s new report “Pushed towards poverty: 21 welfare cuts for low income working households” shows, many of the reforms introduced in last year’s Budget and Comprehensive Spending Review do the reverse, reducing the incentives to work for many households.
For instance, many of the families we work with are couples who work hard to balance their work and childcare responsibilities, and to stay in work of between 16-23 hours per week. Changes to eligibility rules for Working Tax Credits could lead to some of these couples losing up to £3,810 per year in Tax Credit entitlement. Indications suggest that the changes could leave them worse off in than out of work – and potentially push these families into poverty.
For those who are entitled to Working Tax Credit, freezes on the basic and 30 hour elements will effectively reduce the support they receive in work. Inflation is currently high and could rise further – the higher it climbs, the harder the impact of this freeze will hit working families.
The CSR also reduces help for working families with childcare costs by reducing maximum help with childcare costs through the childcare element of Working Tax Credit. This could cost working families up to £30 per week – £1,560 per year. Potential changes to help with childcare costs through the Universal Credit (as discussed in our paper “The Universal Credit: Marginal Returns?“) could risk further reducing help with childcare costs for many families.
In addition, changes to the contributory Employment and Support Allowance could lead to income losses of up to £91.40 per week for couple households where one member is working, and where the other is too ill to work. The changes could lead to households such as this being pushed into poverty.
Family Action agree with the Government that work should pay, and believe that it should be an assured route out of poverty, but are concerned that many of their reforms to the welfare system go in the opposite direction. They need to do more to ensure that welfare cuts don’t penalise low income working families in the near future and that, in the longer term, enough investment is made in the Universal Credit to ensure that it further supports all families in moving into, and progressing in, work.