Policy and Politics
Families will suffer in Budget cuts, commentators warn
Unions and charities have warned that families and low-paid public sector workers will be the hardest hit by cuts in tax credits and benefits and the rise in VAT to 20 per cent, announced by George Osborne in the emergency Budget.
The Chancellor's cuts will hit families
In his speech, Mr Osborne said the Budget was ‘tough’ but ‘fair’. He said, ‘I am not going to hide hard choices from the British people or bury them in the small print of the Budget documents.’ He added, ‘In this Budget everyone will be asked to contribute. But in return, everyone will share in the rewards when we succeed.’
Public sector union Unison today called on employers to confirm that local government workers, such as nursery staff, would receive the two-year £250 pay rise promised by the Chancellor for public sector workers earning less than £21,000. Public sector workers earning more than £21,000 a year will have their pay frozen for two years.
Heather Wakefield, Unison head of local government, said, ‘Low paid workers have a right to know whether they will get the £250 promised in yesterday’s Budget. Local government employers have so far failed to make any pay offer, insisting in a pay freeze for all staff – including those on the lowest pay.’
Yesterday the union said that the Budget was a declaration of war on public services and that cuts of 25 per cent to Government department spending would ‘decimate public services’.
Voice, which represents teachers, support staff and childcare professionals, said its lowest paid members would be the worst hit.
General secretary Philip Parkin said, ‘Dedicated teachers, teaching assistants, childcarers and other public sector professionals are being made to pay for the folly, incompetence and greed of politicians and the City.
‘Support staff and childcarers will suffer from the two-year public sector pay freeze. The flat rate payment of £250 for those earning less than £21,000 will do little except compensate them for the increased expenditure that they will incur as a result of the rise in VAT. Voice is particularly concerned about the financial situation of its lower paid members – such as some education support staff and childcare workers.’
Early years organisations warned that families with young children would be the most affected. Dr Katherine Rake, chief executive of the Family and Parenting Institute, said, ‘With the Child Trust Fund being abolished, child tax credits being cut for many ordinary families and child benefit frozen for three years, parents might be forgiven for suspecting they are in the front line for cuts. Each separate announcement on the likes of raising VAT and cutting tax credits might sound manageable for British households. But when considered together as a package, it’s clear this Budget will mean significant pain for families.
‘The poorest families will feel the impact most acutely. But middle-income families will feel the squeeze too especially as many work in the public sector, in schools and hospitals, because of family-friendly working hours.’
Alison Garnham, chief executive of Daycare Trust, urged the Chancellor to rethink the Budget plans. She said, ‘The removal of the baby element of tax credits, the abolition of the Health in Pregnancy Grant, and the decision to limit the Sure Start Grant to a first child only, are cuts that will affect families with the very youngest children. The costs of a child are particularly high in the first year of life and childcare for young children is also at its most expensive. The increased withdrawal rate of tax credits may also have an impact on the amount of help with childcare costs that parents will be entitled to – thus having an impact on parents’ ability to return to paid work.’
‘Helping families in a child’s early years when parents face the double whammy of high costs and reduced earning capacity is money well spent and the Budget changes will affect even parents on average incomes who may face fewer choices about work and care as a result. The decision to reduce their support package is extremely regrettable, and the freezing of child benefit for three years will not help.’
The Trust said that gaps in out-of-school and holiday childcare needed to be addressed urgently with Government investment, now that all parents are expected to return to work when their youngest child starts school.
What the Budget means for families
- The family element of the Child Tax Credit will be withdrawn for families with incomes of more than £40,000 from April 2011, instead of the current £50,000 limit, and the baby element of Child Tax credit will be scrapped in 2011/12.
- Child Benefit will be frozen for the next three years from April 2011, rather than introducing means-testing for the benefit, the Chancellor said.
- The Health in Pregnancy grant will be abolished from April 2011 and the Sure Start maternity grant will be paid for the first child only.
- Lone parents will be expected to work when their first child starts school.
- However, in order to give extra help to families in poverty, Mr Osborne said the child element of the Child Tax Credit would rise by £150 above the consumer price index (CPI) in April 2011.
- The personal allowance threshold will also be raised by £1,000 in April so that people will be able to earn £7,475 before paying tax.
- VAT will rise to 20% from 4 January 2011. Food, children’s clothes, newspaper and books will continue to be exempt from the tax, which Mr Osborne said would generate £13 billion a year by the end of this Parliament.
