George Osborne unveiled cuts to universal child benefits and a cap on benefits for the unemployed at the conservative party conference yesterday. The cuts are revealed as part of the conservative party’s aim to ‘wipe out the £109 billion structural deficit in one parliament’.
Osborne claimed his cap on benefits was “striking a blow for fairness” yesterday acknowledging that the moves will not create savings that will plug the hole of Britain’s £109 billion structural deficit but will rather ensure that it always pays to work. The cap is guided by a simple principle, that unemployed families should not receive more money than an average working family. The median wage after tax currently stands at £26,000 and current estimates puts the average loss by the 50,000 families affected at £93 a week.
Housing benefit is administered after calculation of the families’ total income in cash benefits and as such will be the area that takes the cut after the cap is introduced in 2013. Experts such as Shelter are predicting a mass exodus from southern inner cities as unemployed families lose out on housing benefit. Tory representatives say that this is fair as it is unfair that an unemployed family get to live in a more expensive area when an employed family is unable. In reality this will mean huge pressure on suburbs to provide housing and employment and the uprooting of already disadvantaged children from their schools and local areas. Families will not simply be able to move into cheaper accommodation in the same area but will have to move away from areas like central London and into the cheaper suburbs.
Osborne seems to assume that all of those who don’t work do so because they choose so. This is patently untrue, particularly in a financial climate that has seen many made redundant and competition for jobs fiercer than ever. Larger families, particularly those supporting people out of work due to long term illness, unable to qualify for disability payment, will be the ones to suffer and with cuts to be made to legal aid these families will struggle to get their cases heard.
Whilst the simple and fair guiding principle is one that will resonate with the public after growing weary of supporting those who choose not to work it rides roughshod over links between families and their homes and promises to create strong geographical divides in wealth and class. . Central London and other expensive rental areas promise to become parodic playgrounds of the wealthy, unencumbered by those oh so untidy poor. The central tenant is one that is strong and just and many have called it ‘a crowd pleaser’, but more work need be done to ensure there is gainful employment available and that the genuinely unable aren’t condemned with the unwilling.
Osborne has also announced a cut to universal child benefit that appears targeted at middle class entitlement. Child benefit has always been a symbol that the welfare state was a universal helpmeet, not just designed to help the poor but to increase quality of life for all members of the state. In a controversial move Osborne has declared that 1.2 million higher-rate tax payers will no longer receive child benefit from 2013. Osborne defended the move with the statement that it is difficult to justify taxing people with lower incomes to give to those with higher. The cuts will save the treasury £1 billion per year.
Yvette cooper has called the cut ‘an attack on all families’ and representatives at the TUC have called it a ‘big blow’ to the principles of universal welfare. The cuts will affect any family where one parent is earning over £43,875 per year. There has been outrage at the blind generalism of the move that does not take into account total household income.
This simplistic approach has meant there will be multiple families where one parent earns only slightly over the higher rate boundary and the other does not work who will no longer be eligible for child benefit. Similarly there will be households where both parents earn under £43,875 per year but their combined income is over £80,000 who will still receive tax credit. Osborne has acknowledged there will be ‘anomalies’ of this type but this is the most effective and simple system that preserves the savings the cuts will make. Establishing complex means testing will swallow any savings that the cuts will make through administrative costs. By tying the scheme to tax codes the benefit can be reclaimed by the HMRC if it continues to be claimed by those who are ineligible. Osborne admitted that many of those affected will not be the super-rich and it seems that many who are just over the boundary may be better off taking a pay cut or converting their pay into non-cash benefits in order to preserve their child benefit.
Cut off points are harsh and ‘anomalous’ families, such as the middle class and those with stay at home mothers are being given the short end of the stick. Many critics have called the plans rash and Labour will be quick to seize upon the alarm of the once again squeezed middle. Many want to see cuts and regulation affecting the banks and the super-rich in order to fill the deficit, Osborne played off a cut in child benefits with an attack on benefit scroungers but how many will be appeased? That it ‘always pays to work’ and not taking from the poor to give to the rich are sentiments that many want to see made true but simplistic threatens to be blind to families that don’t fit into these sharply delineated systems.
Image courtesy of The Guardian.