Welfare reform will add to pressure on families

Alison Garnham
Monday, July 11, 2016

Precious little seems certain in post-Brexit-vote Britain. But, depressingly, the facts about poverty are pretty clear, says Alison Garnham

Last week’s official Households Below Average Income data shows UK child poverty is on the rise: 200,000 more kids moved into poverty in 2014-15, taking the total to 3.9 million. That’s at least nine children in every class of 30.

Two-thirds of poor children live in working families (up from 62 per cent). And projections for the future are bleak: independent experts such as the IFS and the Resolution Foundation forecast UK child poverty will surge by 50 per cent or more by 2020.

Given the choices the Government has made on taxes and benefits, the projections should not surprise us. Last year’s summer Budget cuts tore into Universal Credit. And key provisions of the Welfare Reform and Work Act, which received Royal Assent this spring, will strip families of core income.


So what are the Act’s key provisions and when do they come into force?

The Act gave the Secretary of State powers to introduce new benefit cap levels (the Government says it will reduce the cap to £23,000 a year for households in London, £20,000 for those outside London).

The Act also paves the way for tax credits and benefits freezes. Child benefit has been frozen at £20.70 a week (for the first child) and £13.70 (for each additional child) until 5 April 2020. This would mean the real value of child benefit having fallen by around a quarter over the decade.

Other benefits and tax credit amounts are also frozen in cash terms – a freeze that will hit families all the harder if inflation rises as a result of the Brexit vote.

The Act effectively repeals the Child Poverty Act, renaming it the Life Chances Act. It scraps the targets, measures, reporting duties and requirements for national and local child poverty strategies. It also introduces new reporting requirements on full employment, apprenticeships and on life chances (workless households and educational attainment). And the Secretary must publish child poverty statistics, secured through campaigning by CPAG and others.

Other provisions in the Act take effect from April 2017. From 6 April 2017, a maximum of two children in a family will be eligible for child tax credit.

The broadly equivalent restriction to Universal Credit is also expected to take effect on new claims from April 2017 – but, unlike with tax credits, this requires a commencement order before it takes effect. For both tax credits and Universal Credit, ministers have promised to make exceptions for rape victims, multiple births, kinship carers and adopted sibling groups. These exceptions will need to be made by regulation.

The first-child premium in Universal Credit (similar to the family element in tax credits) may go at the same time, although the timing has not yet been indicated.

The cut in support of £30 a week for those in the Work Related Activity Group of the Employment and Support Allowance is expected to take effect in April 2017 – this also requires a commencement order. During the passage of the bill, a number of MPs and commentators expressed concern with this measure. Is it too much to hope that some Conservative leadership contenders, perhaps with an eye to demonstrating their compassionate credentials, pledge not to introduce this cut?

There are other measures in the Act – such as those on social rents – which the Secretary of State can bring into effect, via regulation, when he wants.

Of course, summer Budget cuts or not, Act or no Act, child poverty is not inevitable. And Brexit need not, and must not, mean we lose control of child poverty.

The candidates to be the next Conservative Party leader and our next Prime Minister all say they want to boost opportunity and social mobility. Yet not one so far has faced up to the reality that current policies have driven up child poverty nor that the UK faces the biggest rise in child poverty in a generation.

The next Prime Minister won’t want the legacy of a child poverty crisis. But to avoid it, there will need to be different choices. Re-investing in Universal Credit and reversing the Employment and Support Allowance cuts for people with disabilities would be a good start.

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