Budget predicted to hit poorest and most vulnerable hardest

The UK’s poorest families will be the worst hit by the government’s emergency Budget to reduce the public sector deficit, experts and sector leaders have warned.

Measures including higher VAT, cuts to welfare benefits and a three-year child benefit freeze have been criticised for undermining the government’s pledge to protect the UK’s poorest and most vulnerable.

Gary Vaux, head of money advice at Hertfordshire Council, said measures which appeared to protect the poorest families, such as increasing personal income tax allowance by £1,000 to £7,475, were an “illusion” when “seen in the context of the overall package of measures”.

“The extra £1,000 will only amount to an extra £4 a week, £3.50 of which low-income families living in rented accommodation and claiming housing benefits will find themselves repaying in housing and council tax payments,” he said.

Larger families will be at a disadvantage, he said, with the introduction of maximum limits on housing benefit – £290 a week for a two-bed property, £340 for a three-bed and £400 for a four-bed or larger – forcing many to move into “substandard” or “overcrowded” accommodation.

Vaux said a similar sting would hit lone parents, who would be expected to look for work when their youngest child turns five, from October 2011. Currently they must seek work, moving from income support to jobseeker’s allowance (JSA), when their youngest child turns 10, a limit due to fall to age seven this October.

However, from 2013 those claiming JSA for more than a year and living in rented accommodation will have to begin paying 10% of their rent under changes to housing benefits announced in the emergency Budget.

Vaux said: “These parents will be hit three times: they will have to start looking for work earlier; will find fewer jobs on offer in the current climate and then if they’re still looking after a year – which many could be – will have to start paying rent. They will be worse off than before.”

He said the measures are unlikely to encourage people to work or reduce child poverty. “The cumulative effect of all the changes creates a disincentive for employment for many people, especially low-income families living in rented accommodation.”

Bob Reitemeier, chief executive of The Children’s Society, said plans to raise VAT from 17.5% to 20%, end payments like the health in pregnancy grant and slash child tax credits for families with a joint income of more than £40,000 would “put pressure on a lot of families already struggling to make ends meet.”

“The freezing of child benefit for three years is a big blow for very vulnerable families,” he added.

Terina Keene, chief executive of the charity Railway Children, said: “Cutting off support for low-income families is dangerously short-termist and unfair as it forces the poorest children to pay the long-term cost of clearing the debts of the richest banks.”

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