Did the Budget pass the fairness test from the perspective of women and families?
When we apply the fairness test, our starting point is, rightly, the overall distributional impact according to income level. But gender and family-friendliness are also important factors when deciding whether the Budget passed the fairness test.
The Conservative Manifesto promised to ‘make Britain the most family-friendly country in Europe’. In a recent speech, Nick Clegg declared that the government’s agenda for children and families stands ‘at the heart of our coalition’.  Yet in some ways it looks as if families with children have been singled out to bear the brunt of cutting the deficit and there is no attempt to assess overall how the Budget will or will not contribute to this family-friendly agenda.
Given the role that women continue to play within families, family-friendly must also mean women-friendly. Yet the impact analysis contained in the Budget report doesn’t even mention gender. Has the government simply forgotten the gender equality duty? It was left to Yvette Cooper to commission a rough and ready gender impact analysis from the House of Commons Library and then the Equality and Human Rights Commission to remind the Treasury of its legal obligation to carry out an equality impact assessment. So a clear demand is that the Treasury should now produce this assessment together with an analysis of the Budget’s impact on families with children.
In the absence of such an assessment, I am drawing on Yvette Cooper’s analysis and that of the Women’s Budget Group to highlight some key implications for families, children and women, many of which overlap because of women’s continued caring responsibilities and the role they play as the managers and shock-absorbers of poverty.
Benefits for children
Benefits for children figured prominently in the Budget measures. As signalled by both the Coalition partners in their manifestos, child tax credit is to be cut back ‘to ensure support is targeted on those most in need’. This will be done through a combination of reductions in the family element and an increase in withdrawal rates to 41%. The effect will be to reduce eligibility for families with a household income above £40,000 from April 2011, with further changes in 2012-13. It will also adversely affect marginal deduction rates, increasing the numbers of families on low incomes facing deduction rates of over 90. 70 and 60 per cent (though slightly reducing the numbers facing over 80 per cent). Given that one of the Tories’ priorities has been to improve work incentives, reiterated by George Osborne in his Budget speech, this aggravation of the poverty trap is perverse.
In addition, the baby element will be abolished and the planned infant supplement will not go ahead. Also the treatment of in-year changes in income will be altered yet again, with a phased reduction to £5,000 from £25,000 in the disregard for an increase in income and a new £2,500 disregard for an in-year fall in income. Given the level of fluctuations of income among low earners this is likely to increase insecurity, exacerbate the problems created by over-payments and cause hardship where there is now an under-payment. This could well undermine confidence in the system and adversely affect take-up.
The good news is that the child element of child tax credit will be increased by more than normal indexation in both 2011 and 2012. However, the further bad news is that this is to be paid for by freezing child benefit. This means that, even though child benefit itself mercifully is not to be means-tested despite the rumours, there is a further significant shift in the balance of financial support for children towards means-tested away from universal provision. And I don’t think we can relax about the future of child benefit. There was no unequivocal commitment to its universality in the Budget statement, even if George Osborne did – sort of – acknowledge some of the arguments in its favour.
The decision to freeze child benefit, he stated, ‘strikes the right balance between keeping intact this popular universal benefit while ensuring that everyone, across the income scale, makes a contribution to helping our country reduce its debts.’ But, in fact, he is asking families with children to make an additional contribution. This needs to be understood in the context of the decision to increase personal tax allowances. It is important to remember that child benefit replaced child tax allowances as well as family allowances in the late 1970s and at that point the Tories accepted the argument that it should be seen as the equivalent of a tax allowance for children (even if this wasn’t always reflected in their subsequent actions in government in the 1980s). It does feel like we are going to have to refight the battles of the 1980s to save child benefit.
Furthermore families with children are the losers as a result of the phased abolition of the child trust fund, the restriction of eligibility for the sure start maternity grant to the first child only and the abolition of the health in pregnancy grant.
It is women who will typically bear much if not most of the burden of these cuts. Black and minority ethnic women are particularly vulnerable. And although lower income women will benefit from the increase in child tax credits, the eligibility test for means-tested financial support for children cannot take account of where income is not shared fairly within families and hence of any hidden poverty within families. In contrast, child benefit provides mothers directly with a secure source of income, which is particularly important if they do not have an independent wage.
The Budget report claims that the increases in the child element of child tax credit (CTC) means that ‘this Budget will have no measurable impact on child poverty in the next two years’, during which time Frank Field will make his recommendations. It is an advance on the 1980s that the impact on child poverty is a criterion that the Government takes seriously. However, as Nicola Smith has argued, the claim is ‘dubious’. This is partly because of other cuts, of which more below; but also because of the effects of the interaction between CTC, child benefit and housing benefit. CTC is not disregarded for housing benefit purposes whereas child benefit is. This means that families in receipt of housing benefit are not protected against the freeze in child benefit by the increase in CTC.
Benefits for adults
The living standards of children depend not just on the benefits earmarked for children but also on what happens to the benefits paid to their parents. Adult benefit rates have fallen further and further behind average living standards because of up-rating policy. According to Peter Kenway, they are now worth one-fifth less relative to average earnings than in 1997 and their real value is the same as 25 years ago. This is the context in which we have to assess the change in the index to be used for up-rating benefits in future. The change from the RPI to the CPI will mean a further deterioration in relative living standards at the bottom. The magnitude of the overall effects can be gauged from the amount of money saved (although the figures include public service pensions as well as benefits and tax credits): £1.17 billion in 2011-12 rising to £5.8bn by 2014-15. According to the House of Commons Library analysis, women represent 65% of those directly affected. And again mothers as the managers of poverty within families (and also pregnant women on benefit) will bear much of the burden.
The same applies to the various cuts in housing benefit. According to the House of Commons Library calculations, women represent three-fifths of those directly affected. One of the changes will in effect mean that housing benefit recipients in receipt of jobseekers allowance for more than 12 months will have the value of their JSA cut because housing benefit awards will be reduced to 90% of the initial reward so that claimants will have to make up the difference out of their JSA. This crude stick to beat people back into work will be combined with a further intensification of conditionality for lone parents so that they will be transferred to JSA once their youngest child is aged 5 from 2011-12. Nicola Smith points out that the Budget costings assume that the great majority will remain on benefit, thereby making them a prime target for the 10% housing benefit cut.
According to the House of Common Library women represent half of those who are likely to be affected by the new assessment of disability living allowance. However many more are likely to be indirectly affected as carers because eligibility for carers allowance depends on the person being cared for receiving the middle or higher rate of DLA or attendance allowance and presumably the intention of the new assessment is to reduce the numbers receiving the middle or higher rate. About ¾ of carers allowance recipients are women.
The one benefits change from which women will disproportionately benefit – by just over three to two – is the more generous up-rating formula for the basic state pension and pension credit as from 2011. This is sooner than Labour had proposed and the formula is more generous. However, it’s worth remembering that it was the Thatcher government which broke the link with earnings in the first place,
Taxation and spending
The increase in personal allowances has been presented as key to this being a fair and progressive Budget. But unlike child benefit, it provides no help to those whose incomes are already too low to pay tax. This probably explains why the House of Commons Library estimates that women will reap only 45 per cent of the benefit. However, not surprisingly, they are much less likely to be adversely affected by the freeze on the basic rate limit and changes to capital gains tax. Although the VAT exemptions will mitigate the effect of the VAT rise, it is still likely to impact harshly on lower income families and hence women.
Because the increase in personal allowances is not fully funded, as the Women’s Budget Group points out, the cost will be met through expenditure cuts elsewhere. Typically these will hit families with children and women more than men – both as users of services and workers in them. Although hitherto the recession has hit men’s jobs more than women’s, it is women’s jobs which are at greatest risk from public expenditure cuts. And women tend to make greater use of public services both for themselves and those for whom they care. It is likely to be women’s unpaid labour that has to fill any gaps.
Overall, the House of Commons Library estimates that women will pay roughly 72% of the net cost of the changes in taxes, benefits and tax credits that it analysed. Families with children are also overall losers – in a country which was recently awarded only a C- for family-friendliness by the Family and Parenting Institute. Despite the Budget’s mitigating measures, it does not meet the fairness test from the perspective of women, children and families. And as we face further cuts, benefit recipients are being played off against service users by Osborne – either way women, children and families are likely to be losers.
I suspect that we will look back on this Budget and subsequent expenditure cuts as a watershed as significant as the measures taken in the early years of the Thatcher government.
 Speech on supporting families and children, Barnardo’s, 17 June 2010.
 ‘Women bear brunt of budget cuts’, www.yvettecooper.com
 A Gender Impact Assessment of the Coalition Government Budget, June 2010, UK Women’s Budget Group, June 2010.
 HM Treasury, 2010, Budget 2010, The Stationery Office, p34.
 See endnote 4, table A3, p69.
 See endnote 4.
 N. Smith, ‘Budget claims on child poverty do not stack up’, 25 June 2010
 P. Kenway, ‘Social justice and inequality in the UK: eradicating child poverty?’ in V. Uberoi et al (eds) Options for Britain II, Wiley-Blackwell, 2010.
 See endnote 4, Table 2.1, p41.
 N. Smith, ‘Budget predicts less than 10% of lone parents affected will move into jobs’, 24 June 2010
 See endnote no 3.
 Family and Parenting Institute, The UK Family Friendly Report Card 2010, 2010, www.familyandparenting.org.