Centre for Research in Social Policy

School of Social, Political and Geographical Sciences


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For the less well off half of families, budgets continue to take away, not give away

In today’s Budget, Philip Hammond repeated the mantra that the Government wants “to help families cope with the cost of living”, and even acknowledged that short term relief from the assault on living standards needs to parallel long-term investment to improve productivity and housebuilding. But he conspicuously avoided repeating previous references to “just about managing” families as the target for such help, and for those in the bottom half of the income distribution, the assault continues more or less unabated.

Alongside his ambitious long-term plans to improve the housing supply, Mr Hammond offered some modest immediate treats, none of them targeted at low income families.

The most dramatic, the abolition of stamp duty below £300,000 for first time buyers, will save someone buying a home at this price £5,000. For someone on a modest income unable to afford today’s astronomical house prices, it will save nothing.

The increase in the salary at which student loans start to be repaid, from £21,000 to £25,000, will reduce a recent graduate’s payments by £360 a year. For someone who didn’t go to university, it saves nothing.

The increase in the income tax threshold by £350 a year will put £60 in the pockets of most taxpayers, but only £26 for those on Universal Credit, and nothing for those earning too little to pay tax.

Meanwhile, the least well-off half of families are being made systematically worse off because they rely on means-tested support such as tax credits, which are being frozen in cash terms while prices rise by 3% a year. Mr Hammond ignored the widespread calls to reverse the freeze, and did nothing to modify a range of benefit cuts still in the pipeline. My recent analysis showed that even for those on a rising National Living Wage, these cuts typically outweigh projected pay increases, in some cases by a long way. While the NLW continues to rise, it is doing so far more slowly than projected when it was introduced, due to sluggish general wage growth, reducing further its potential to offset cuts in in-work support.

Rather than doing anything to improve entitlements, the Budget helped people on benefits only by partially addressing two problems of the government’s own making. One was to abolish the seven-day waiting period for Universal Credit, and introducing other measures to reduce the problems people face making the transition onto this poorly designed new system. The other was to increase a fund to improve the maximum Housing Benefit payments in some areas where rents are rising rapidly, partly ameliorating its general freeze on these limits. Such measures have been rightly welcomed. But they do not even begin to address the ongoing squeeze on living standards of families who are only just about managing, let alone those who are not managing at all.



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