George Osborne\u2019s scrapping of the tax credit cuts announced last summer is momentous in several ways. But it is by no means the end of his mission to reduce families\u2019 dependence on the state.<\/p>\n
First and foremost, the changes save millions of badly-off working families from some drastic reductions in their incomes next April, typically by well over \u00a31000 a year. The day these cuts were announced in the Summer Budget, I pointed out<\/a> that even people benefiting from the new \u2018National Living Wage\u2019 would lose out by these large amounts; but I did not dream that this argument would cause the cuts to be scrapped. \u00a0It was only when the evidence piled up – my analysis for Joseph Rowntree Foundation<\/a>, alongside reports by the Institute for Fiscal Studies<\/a> and Resolution Foundation<\/a> \u2013 that it persuaded Conservative MPs, amongst others, that the backlash could be disastrous.<\/p>\n So a second important aspect of the reversal is that the evidence got through clearly to politicians, and made a difference \u2013 a rare enough event in social policy these days. The reasons it caused such wobbles are also revealing. \u00a0Unlike many welfare cuts, the 2016 changes to the tax credit allowances and withdrawal rate (a) came in one fell swoop, (b) affected existing recipients not just new ones and (c) were entirely borne by those in work. \u00a0In other words, they would have instantly and drastically hit the pockets of people seen as \u2018deserving\u2019.<\/p>\n This provides a seminal lesson to George Osborne about how not to do welfare cuts. Most of the time, the Government do them differently. \u00a0Both in the past five years and in remaining plans for the next five, support for working and non-working families is being progressively chipped away. \u00a0Some of this happens gradually through failing to uprate benefits, tax credits and disregards with inflation. \u00a0Some is through measures only affecting new claimants \u2013 so eroding our system of social support over time, without directly reducing support for individuals. \u00a0Other measures make selective reductions for people in particular situations \u2013 people with larger families, those with more expensive housing, social tenants deemed to be \u2018underoccupying\u2019 their homes and so subject to the \u2018bedroom tax\u2019. \u00a0These changes all add up over time, without delivering one single blow to be parried by a House of Lords revolt.<\/p>\n As things stand, this march to ever less generous support for people on low incomes continues apace. As the Chancellor has pointed out, the plan to replace tax credits with Universal Credit will mean that not cutting the former will make no difference to what is spent in a few years\u2019 time. \u00a0(The summer Budget\u2019s cuts to UC have not been modified.) \u00a0My post-Budget projections<\/a> of living standards over the current decade remain unchanged, based on the Universal Credit regime in 2020. \u00a0It found, for example, that a working lone parent, who in 2010 had almost what her family needed for a minimum household budget<\/a>, would be nearly 30% short of meeting this budget by 2020. \u00a0Cumulatively, this is not just a squeeze but a drastic assault on the living standards of such families.<\/p>\n A pessimistic view of the Autumn Statement changes, therefore, is that they change only tactics not strategy. In the long term, the Government remains on a mission to reduce means-tested support to families both in and out of work. As has been shown clearly in recent weeks, higher wage floors, while welcome, are nowhere near enough to compensate for these cuts.<\/p>\n A more optimistic view is that commentators, politicians and the public have woken up to the damage that this strategy can do to families struggling on low working incomes. Any future cuts to Universal Credit will be harder to dress up as cuts to \u2018welfare\u2019 for those who do not work, not least because UC merges the in and out of work benefit systems. \u00a0And any future Chancellor will be nervous of the potential backlash from reducing support to working families. If so, echoes of the 2015 tax credit row will have positive effects for many years to come.<\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" George Osborne\u2019s scrapping of the tax credit cuts announced last summer is momentous in several ways. But it is by no means the end of his mission to reduce families\u2019 dependence on the state. First and foremost, the changes save millions of badly-off working families from some drastic reductions in their incomes next April, typically […]<\/p>\n","protected":false},"author":210,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_links_to":"","_links_to_target":""},"categories":[5,15],"tags":[],"class_list":["post-133","post","type-post","status-publish","format-standard","hentry","category-general","category-universal-credit"],"_links":{"self":[{"href":"https:\/\/blog.lboro.ac.uk\/crsp\/wp-json\/wp\/v2\/posts\/133","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blog.lboro.ac.uk\/crsp\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.lboro.ac.uk\/crsp\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.lboro.ac.uk\/crsp\/wp-json\/wp\/v2\/users\/210"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.lboro.ac.uk\/crsp\/wp-json\/wp\/v2\/comments?post=133"}],"version-history":[{"count":0,"href":"https:\/\/blog.lboro.ac.uk\/crsp\/wp-json\/wp\/v2\/posts\/133\/revisions"}],"wp:attachment":[{"href":"https:\/\/blog.lboro.ac.uk\/crsp\/wp-json\/wp\/v2\/media?parent=133"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.lboro.ac.uk\/crsp\/wp-json\/wp\/v2\/categories?post=133"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.lboro.ac.uk\/crsp\/wp-json\/wp\/v2\/tags?post=133"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}