Be careful what you wish for

In the run up to the recent spending review most political attention was focused on the proposed cuts to Tax Credits and the damage they would do to the livelihoods of the working poor. In what has been described as everything from a major climb down or U turn to a minor reappraisal, the government has decided not to proceed with some of the changes due to take effect in April 2016.

While this concession is to be welcomed, we shouldn't get carried away by the Chancellor's apparent generosity, his Santa suit is, after all, still hanging in the wardrobe and Rudolf firmly tethered in his stable. The changes announced to come into effect in April 2017 (including removing the family element) are still set to go ahead as are the restrictions that mean new claims will not include a third or subsequent child born after April 2017.

Worse still the reduction in the income rise disregard scheduled for April 2016 will still go ahead. This means that increases in income of more than £2,500 will affect tax credit entitlement and herald a return to the days of massive confusion and anxiety over tax credit overpayments that accompanied the introduction of the scheme and led eventually to changes that meant that increases in income of less than £25,000 p.a. were ignored. This in itself is a massive step backwards.

So, while we should be humbly grateful that the taper will remain at 41% and the threshold will not fall, the actual concessions are far less generous than was first thought, especially when you consider that the same cuts previously also proposed to affect Universal Credit, will still go ahead and catch up with people as they transfer from Tax Credits to Universal Credit. You might say 'you can run but you can't hide'.

The alternative target according to many commentators was Housing Benefit and at first glance this low hanging fruit seems to have escaped plucking. The exclusion of young people from the scheme, which was floated at one point, hasn't taken effect. However, hidden away in the small print there are some worrying changes including limiting social housing rents to Local Housing Allowance levels. In many areas social rents are lower than private rents so this effect will be limited. However, the extension of the measure that limits the rent that a single person under 35 without dependents can claim to that of a single room, will affect a lot of younger single people in social housing. Quite where they will be expected to live remains a mystery, especially if they are unable to work. A significant increase in the money available to local authorities to tackle homeless may just be a coincidence ... then again it may not.

While Tax Credits have escaped the worst of the cuts originally envisaged (for the time being) to say that the spending review marked a great victory for those opposing the cuts is mere journalistic hyperbole. The government is still on target to make its projected savings to the welfare budget by the end of the parliament, just by a slightly different route than originally planned.

For a more detailed look at the changes see Potteries Gold's latest bulletin here.

This entry was posted on November 30, 2015

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