‘Welfare cap in chancellor’s budget imposes unnecessary risks on children in poverty’

Vulnerable families will bear the biggest burden of yesterdays budget if the government doesn't act soon, writes Lily Caprani

George Osborne
Chancellor George Osborne. Photo: Nils Jorgensen/Rex Features

The chancellor’s budget this week was a real mixed bag for low income families.

There was some great news about childcare and Universal Credit. Last year the government said that under the new system all but the lowest income working families – those with one or more parents earning under £10,000 a year – would be able to get up to 85% of their childcare costs covered through Universal Credit.

Two-tier system

Worryingly, this left those on the lowest incomes getting a significantly lower rate of 70% of their childcare costs covered. The Children’s Society warned that this not only created a confusing two-tier system, but it also actually provided less support for the families that needed this help the most.

So, it was great to see the government making the change to provide 85% of childcare costs for everyone receiving Universal Credit – including the lowest paid. This will not only create a fairer and simpler system, but crucially, will make a real difference to hundreds of thousands of the UK’s poorest families that are struggling to make work pay because of childcare costs.

Our major concern with the announcement is that the extra £200m needed to fund this is to be found from the wider budget for Universal Credit. It is really important that when the details of this are set out in the next Autumn Statement, the costs of this crucial support are not taken from the pockets of the poorest families.

Personal allowance

On first glance, raising the personal allowance for taxation from £10,000 to £10,500 also appears a very positive move for working families struggling on a low income – meaning they keep more of their pay.

However, many families will see little benefit from this. Some earn under £10,000 (for example, a single mum working 25 hours a week at the national minimum wage of £6.32 per hour brings in just £8,200 per year). And for many other families, even if they are earning in excess of £10,000, this change will show little real benefit.

This is because for the many thousands of working families that depend on housing benefit to top up their earnings, the vast majority of any gain is lost in deductions from their benefit – so they gain on the one hand, but lose on the other.

Cap on welfare spending

A final change that raises real concern for the future, is the government’s plan to apply a new cap on overall welfare spending. It’s intended to control welfare expenditure by limiting the amount that can be spent on most benefits and tax credits together to a fixed annual limit.

But, having a cap on welfare spending makes it harder for policy makers to respond to changing economic circumstances and take necessary action to end child poverty through a fairer welfare system.

By limiting action which would increase this, it transfers the risk of unforeseen rises in living costs – such as costly childcare or rocketing rents – from the treasury to children and families that are struggling make ends meet on low incomes.

Applying an arbitrary cap is not the right approach to bringing down the welfare bill. The best way to bring down welfare spending is better pay, and action to address costs of living. The cost of any inaction in these crucial areas should not be passed on to the poorest children.

The government must do more to make sure the most vulnerable families in our society do not bear the biggest burden.

  • Lily Caprani is director of strategy and policy at The Children’s Society

More from Community Care

One Response to ‘Welfare cap in chancellor’s budget imposes unnecessary risks on children in poverty’

  1. Maggie Smith March 20, 2014 at 1:11 pm #

    In general I thought it was a good Budget. Im not a pensioner, not for a long time. But I think it was about time a Budget reflected on helping those that’s lets remember, though some people think its wrong that a wife has to work part time, I did it and it was hard. But lets remember our pensioners have paid into the system all their lives with monies that was earned from working 2 jobs and going with out. If it was good enough for them, then the ones that don’t contribute but want to take out the pot , got to be prepared themselves. It is hard but if you want to provide for your own family then you will do anything legal, I did anything I could, a job from early morning to the mid afternoon, then 4 evenings a week. You don’t always need child care as family is at hand. If households eliminated the things that are pensioners could not have till an older age or just didn’t have or was able to save for cuz of not having out goings that don’t feed, clean or keep you warm, they would be able to live a lot easier. It just seems now that everyone feels that the start from the bottom and work up is out the window, shame if your friends items are newer ot they have more. Nowadays a lot of the youngsters want it all now and don’t have the money for it. Unfortunately the last government (labour) ran the country nearly to the ground, rewarded the free loaders and punished the people whos money they were using. Computers were around when I was little ok needed a cassette, but we didn’t just buy 1 when ever they came out. It would be a main present and the kids would share it. Not 1 each and don’t get me on to mobile phones. When you here a friend who doesn’t work but her and her husband who also doesn’t work have top range mobiles on contracts and then say they cant afford to pay the small contribution to rates. Oh and they didn’t get a rise. Don’t worry I put her straight. 1, rates before mobiles and 2 did she not realise that most of the working population hasn’t had a rise either. The pension changes are the best a government has bought in for a long time. Yes house prices are higher than when I bought my house. But the Mortgage rates are low and keeps payments down, makes them more affordable. If we can get everyone possible in work and try and get them to do what myself and pensioners grew up with which was to pay bills first then if possible save. They want to spend spend spend nowadays even before they have the money. No jobs are secure and I know it cant be nice when u suddenly lose a job. But its not the governments fault, if u have credited yourself to the hilltops on unnecessary or what we always referred to as luxuries. We will all be pensioners 1 day, so lets make sure that when we get there, were looked after and rewarded.